Table of Contents
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:
811-22175
ALPS ETF TRUST
(Exact name of registrant as specified in charter)
1290 Broadway, Suite 1100, Denver, Colorado 80203
(Address of principal executive offices) (Zip code)
Erin D. Nelson, Esq.
ALPS ETF Trust
1290 Broadway, Suite 1100
Denver, Colorado 80203
(Name and address of agent for service)
Registrant’s Telephone Number, including Area Code: (303) 623-2577
Date of fiscal year end: November 30
Date of reporting period: December 1, 2012 – November 30, 2013
Table of Contents
Item 1. | Reports to Stockholders. |
Table of Contents
Table of Contents
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CONTENTS
2 | ||||
6 | ||||
7 | ||||
Financial Statements | ||||
8 | ||||
11 | ||||
12 | ||||
13 | ||||
14 | ||||
16 | ||||
23 | ||||
Board Considerations Regarding Approval of Investment Advisory Agreement | 24 | |||
26 |
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Annual | November 30, 2013 |
Table of Contents
![]() | Performance Overview | |
November 30, 2013 (Unaudited) |
FUND DESCRIPTION
The Cohen & Steers Global Realty Majors ETF (the “Fund”) seeks investment results that correspond generally to the performance (before the Fund’s fees and expenses) of an equity index called the Cohen & Steers Global Realty Majors Index (the “Index”). The Shares of the Fund are listed and trade on the NYSE Arca under the ticker symbol “GRI.” The Fund will normally invest substantially all of its assets in the 75 stocks that comprise the Cohen & Steers Global Realty Majors Index. The Fund began trading on May 9, 2008.
The Index is a free-float, market-cap-weighted total return index of selected real estate equity securities maintained by Cohen & Steers. It is quoted intraday on a real-time basis by the Chicago Mercantile Exchange under the symbol GRM. The Index’s free-float market capitalization approach and qualitative screening process emphasize companies that the Cohen & Steers Index Committee believes are leading the securitization of real estate globally.
PERFORMANCE OVERVIEW
Global real estate securities had a modest gain in 2013, as pressure from rising U.S. interest rates offset the benefits of a synchronized recovery in global economic growth. For the 11 months ended November 30, 2013, the Cohen & Steers Global Realty Majors Index advanced 2.0%, significantly underperforming the broad market. Japan meaningfully outgained other Asia Pacific real estate markets, while Europe posted solid returns as the region emerged from recession. U.S. REITs had a negative return, as price-to-earnings multiples contracted amid fears of rising interest rates.
Global equity markets rallied through the first several months of the year, lifted by improvements in U.S. jobs and housing data and signs of stabilization in China’s economy. Risk assets continued to climb in April after the Bank of Japan announced it would pursue aggressive monetary easing in an attempt to stimulate growth and lift the country’s economy out of deflation. At the same time, European sovereign bond yields fell as markets became more confident in the region’s ability to resolve its ongoing fiscal challenges. However, real estate securities encountered headwinds beginning May 22, when the Federal Reserve indicated that it could begin to taper its quantitative-easing* (QE) program, sending U.S. Treasury yields sharply higher. The remainder of the year was largely dominated by the market’s shifting expectations over the timing of QE tapering, as investors focused on the potential implications of higher interest rates on real estate values and borrowing costs globally.
U.S. REITs had a total return of -1.9%, having given back the large gains achieved through May. Despite the volatile interest-rate environment, property values remained relatively stable based on transactions in the private market, supported by strengthening real estate fundamentals and continued demand from private investors. In general, property sectors with greater economic sensitivity outperformed. Hotel REITs were by far the best performers in the U.S., while self storage, shopping center and industrial landlords also did well. By contrast, property sectors with more “bond-like” cash flows suffered the most from interest-rate concerns, including health care REITs and
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Table of Contents
![]() | Performance Overview | |
November 30, 2013 (Unaudited) |
free standing retail owners. The apartment sector struggled amid concerns that rising single-family home purchases and accelerating multi-family supply would hinder cash flow growth.
Most European markets had positive returns amid a recovery in demand, as the drag from fiscal austerity measures faded. The U.K. led the region, benefiting from favorable relative valuations, resilient fundamentals and strong investment demand for London real estate. The Netherlands rebounded after a poor showing in 2012, while France benefited from improving economic conditions in neighboring Spain and Italy, even as the domestic French economy continued to see lackluster growth. In Germany, apartment owner Deutsche Wohnen announced it would acquire rival GSW Immobilien, a deal that would make it one of Europe’s largest listed real estate companies.
In Japan, real estate developers surged along with other Japanese equities in 2013, benefiting from the Bank of Japan’s aggressive policies designed to stimulate economic growth and lift the country out of deflation. Developers were also coming off of extremely low valuations relative to their historical averages. J-REITs fared less well, pressured by the ripple effect of rising U.S. Treasury yields. China-focused landlords also had positive returns, benefiting from the country’s stabilizing economy. Australian real estate stocks generally had gains in local-currency terms, although a series of interest-rate cuts and a decline in commodity prices caused a sharp devaluation in the Australian dollar, hindering net returns for U.S.-dollar-based investors. Hong Kong and Singapore were both affected by U.S. QE tapering concerns. In addition, Hong Kong struggled amid a slowdown in economic growth, although landlords with retail assets were relatively resilient.
For the year ended November 30, 2013, the Fund’s market price increased 0.6% and the Fund’s net asset value (NAV) increased 1.3%.
Average Annual Total Return as of November 30, 2013
1 Year | 3 Year | 5 Year | Since Inception** | |||||||||||||||||
Fund Performance | ||||||||||||||||||||
NAV | 5.60 | % | 9.67 | % | 16.55 | % | 0.16 | % | ||||||||||||
Market Price*** | 5.76 | % | 9.58 | % | 16.65 | % | 0.18 | % | ||||||||||||
Index Performance | ||||||||||||||||||||
Cohen & Steers Global Realty Majors Portfolio Index | 6.41 | % | 10.52 | % | 17.57 | % | 1.00 | % | ||||||||||||
FTSE EPRA/NAREIT Developed Real Estate Index | 8.23 | % | 10.31 | % | 18.18 | % | 1.24 | % | ||||||||||||
S&P 500® Total Return Index | 30.30 | % | 17.73 | % | 17.60 | % | 7.14 | % |
Total Expense Ratio (per the current prospectus) 0.55%.
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For most current month-end performance data please visit www.alpsfunds.com.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of
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Annual | November 30, 2013 |
Table of Contents
![]() | Performance Overview | |
November 30, 2013 (Unaudited) |
fund shares outstanding. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
* | Quantitative easing is an unconventional monetary policy in which a central bank purchases government securities or other securities from the market in order to lower interest rates and increase the money supply. |
** | Fund Inception 5/7/08. |
*** | Market Price is based on the midpoint of the bid/ask spread at 4p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
Cohen & Steers Global Realty Majors® Portfolio Index: A free-float adjusted, modified market capitalization-weighted index of global real estate equities. The modified market capitalization weighting approach and qualitative screening process emphasize those companies that, in the opinion of the Cohen & Steers investment committee, are leading the securitization of real estate globally.
FTSE EPRA/NAREIT Developed Real Estate Index: An unmanaged market-weighted total return index that consists of many companies from developed markets whose floats are larger than $100 million and which derive more than half of their revenue from property-related activities.
S&P 500® Index: The Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.
An investor cannot invest directly in an index.
GROWTH OF $10K as of November 30, 2013
Comparison of Change in Value of $10,000 Investment in Cohen & Steers Global Realty Majors ETF and Cohen & Steers Global Realty Majors Index.
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
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Table of Contents
![]() | Performance Overview | |
November 30, 2013 (Unaudited) |
TOP 10 HOLDINGS (as a % of Net Assets)* as of November 30, 2013
Mitsui Fudosan Co., Ltd. | 4.33 | % | ||
Mitsubishi Estate Co., Ltd. | 4.11 | |||
Simon Property Group, Inc. | 3.98 | |||
Unibail-Rodamco | 3.85 | |||
Sumitomo Realty & Development Co., Ltd. | 3.42 | |||
Public Storage | 3.35 |
Sun Hung Kai Properties, Ltd. | 2.97 | % | ||
ProLogis | 2.88 | |||
Westfield Group | 2.87 | |||
Equity Residential | 2.63 | |||
Percent of Net Assets in Top Ten Holdings: | 34.39 | % |
* Future holdings are subject to change.
GEOGRAPHIC BREAKDOWN**†
United States | 46.45 | % | ||
Japan | 15.16 | |||
Hong Kong | 11.81 | |||
Australia | 7.46 | |||
United Kingdom | 5.94 | |||
France | 5.08 | |||
Singapore | 3.73 | |||
Canada | 1.82 |
Germany | 0.83 | % | ||
Netherlands | 0.65 | |||
Brazil | 0.57 | |||
Switzerland | 0.50 |
** % of Total Investments.
† | Future breakdown are subject to change. |
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Annual | November 30, 2013 |
Table of Contents
![]() | Disclosure of Fund Expenses | |
For the period ended November 30, 2013 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, and (2) ongoing costs, including management fees and other Fund expenses. These examples are 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 funds. It is based on an investment of $1,000 invested at the beginning of the (six month) period and held through November 30, 2013.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred 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 first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second line 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 costs were included, your costs would have been higher.
Beginning Account Value 6/1/13 | Ending Account Value 11/30/13 | Expense Ratio(a) | Expenses Paid During Period 6/1/13 - 11/30/13(b) | |||||||||||||||||
Actual | $ | 1,000.00 | $ | 974.30 | 0.55 | % | $ | 2.72 | ||||||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.31 | 0.55 | % | $ | 2.79 |
(a) | Annualized, based on the Fund’s most recent fiscal half year expenses. |
(b) | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (183), then divided by 365. |
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Table of Contents
![]() | Report of Independent Registered Public Accounting Firm | |
To the Board of Trustees and Shareholders of ALPS ETF Trust:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Cohen & Steers Global Realty Majors ETF, one of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2013, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Cohen & Steers Global Realty Majors ETF of the ALPS ETF Trust as of November 30, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP |
Denver, Colorado |
January 27, 2014 |
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Annual | November 30, 2013 |
Table of Contents
![]() | Schedule of Investments | |
November 30, 2013 |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.63%) | ||||||||
Australia (7.45%) | ||||||||
Dexus Property Group | 771,984 | $ | 734,319 | |||||
Goodman Group | 248,253 | 1,093,705 | ||||||
GPT Group | 267,427 | 871,463 | ||||||
Mirvac Group | 599,354 | 927,455 | ||||||
Stockland Trust Group | 378,405 | 1,326,105 | ||||||
Westfield Group | 327,483 | 3,100,149 | ||||||
|
| |||||||
8,053,196 | ||||||||
|
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Brazil (0.57%) | ||||||||
BR Malls Participacoes SA | 75,000 | 614,330 | ||||||
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Canada (1.82%) | ||||||||
Boardwalk Real Estate Investment Trust | 6,386 | 355,496 | ||||||
Dundee Real Estate Investment Trust | 17,660 | 465,371 | ||||||
RioCan Real Estate Investment Trust | 49,458 | 1,146,906 | ||||||
|
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1,967,773 | ||||||||
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France (5.06%) | ||||||||
Gecina SA | 4,305 | 565,545 | ||||||
Klepierre | 16,009 | 743,305 | ||||||
Unibail-Rodamco | 15,937 | 4,167,562 | ||||||
|
| |||||||
5,476,412 | ||||||||
|
| |||||||
Germany (0.82%) | ||||||||
Deutsche EuroShop AG | 7,479 | 332,162 | ||||||
Deutsche Wohnen AG | 27,723 | 557,330 | ||||||
|
| |||||||
889,492 | ||||||||
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Hong Kong (11.79%) | ||||||||
China Overseas Land & Investment, Ltd. | 629,000 | 1,955,344 | ||||||
China Resources Land, Ltd. | 305,500 | 841,326 | ||||||
Hang Lung Properties, Ltd. | 373,000 | 1,253,349 | ||||||
Hongkong Land Holdings, Ltd. | 192,100 | 1,135,311 | ||||||
The Link Real Estate Investment Trust | 380,164 | 1,863,417 | ||||||
Sun Hung Kai Properties, Ltd. | 250,000 | 3,210,234 | ||||||
Swire Properties, Ltd. | 172,800 | 464,735 | ||||||
The Wharf Holdings, Ltd. | 243,700 | 2,025,974 | ||||||
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12,749,690 | ||||||||
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Japan (15.13%) | ||||||||
Japan Real Estate Investment Corp. | 97 | 1,024,491 | ||||||
Japan Retail Fund Investment Corp. | 357 | 703,929 | ||||||
Mitsubishi Estate Co., Ltd. | 160,000 | 4,441,798 | ||||||
Mitsui Fudosan Co., Ltd. | 138,000 | 4,681,049 | ||||||
Nippon Building Fund, Inc. | 113 | 1,328,049 |
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An ALPS Advisors Solution | www.alpsfunds.com | 866.513.5856 |
Table of Contents
![]() | Schedule of Investments | |
November 30, 2013 |
Security Description | Shares | Value | ||||||
Japan (continued) | ||||||||
Nomura Real Estate Holdings, Inc. | 20,700 | $ | 487,772 | |||||
Sumitomo Realty & Development Co., Ltd. | 78,000 | 3,696,520 | ||||||
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16,363,608 | ||||||||
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Netherlands (0.65%) | ||||||||
Corio N.V. | 16,178 | 701,690 | ||||||
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Singapore (3.72%) | ||||||||
Ascendas Real Estate Investment Trust | 335,066 | 592,777 | ||||||
CapitaLand, Ltd. | 412,000 | 994,828 | ||||||
CapitaMall Trust | 426,347 | 660,832 | ||||||
City Developments, Ltd. | 76,000 | 604,439 | ||||||
Global Logistic Properties, Ltd. | 499,000 | 1,173,088 | ||||||
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4,025,964 | ||||||||
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Switzerland (0.50%) | ||||||||
PSP Swiss Property AG | 6,341 | 543,924 | ||||||
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United Kingdom (5.93%) | ||||||||
British Land Co. Plc | 163,485 | 1,634,502 | ||||||
Derwent London Plc | 14,064 | 557,608 | ||||||
Hammerson Plc | 116,725 | 975,048 | ||||||
Intu Properties Plc | 109,642 | 576,440 | ||||||
Land Securities Group Plc | 128,015 | 1,996,274 | ||||||
Segro Plc | 121,684 | 666,034 | ||||||
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6,405,906 | ||||||||
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United States (46.19%) | ||||||||
Alexandria Real Estate Equities, Inc. | 11,779 | 745,140 | ||||||
American Campus Communities, Inc. | 17,134 | 555,656 | ||||||
AvalonBay Communities, Inc. | 19,952 | 2,365,509 | ||||||
Boston Properties, Inc. | 25,020 | 2,489,240 | ||||||
Camden Property Trust | 13,938 | 807,289 | ||||||
ChinaCast Education Corp.* | 28,275 | 427,400 | ||||||
Digital Realty Trust, Inc. | 21,076 | 995,630 | ||||||
Douglas Emmett, Inc. | 21,214 | 487,498 | ||||||
Equity Residential | 55,122 | 2,840,988 | ||||||
Essex Property Trust, Inc. | 6,289 | 954,733 | ||||||
Federal Realty Investment Trust | 10,730 | 1,110,770 | ||||||
General Growth Properties, Inc. | 90,917 | 1,886,528 | ||||||
Gulfport Energy Corp.* | 56,434 | 537,440 | ||||||
HCP REIT, Inc. | 74,743 | 2,748,300 | ||||||
Health Care REIT, Inc. | 47,078 | 2,635,897 | ||||||
Highwoods Properties, Inc. | 14,900 | 535,208 | ||||||
Host Hotels & Resorts, Inc. | 123,335 | 2,270,597 | ||||||
Icad, Inc.* | 5,624 | 515,906 |
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Annual | November 30, 2013 |
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![]() | Schedule of Investments | |
November 30, 2013 |
Security Description | Shares | Value | ||||||||
United States (continued) | ||||||||||
Kimco Realty Corp. | 67,101 | $ | 1,383,623 | |||||||
Liberty Property Trust | 23,534 | 762,266 | ||||||||
The Macerich Co. | 23,048 | 1,312,353 | ||||||||
ProLogis | 81,984 | 3,109,653 | ||||||||
Public Storage | 23,702 | 3,619,295 | ||||||||
Realty Income Corp. | 32,193 | 1,226,875 | ||||||||
Regency Centers Corp. | 15,026 | 703,818 | ||||||||
Simon Property Group, Inc. | 28,755 | 4,308,937 | ||||||||
SL Green Realty Corp. | 15,012 | 1,358,136 | ||||||||
Tanger Factory Outlet Centers | 15,448 | 510,865 | ||||||||
UDR, Inc. | 41,077 | 955,862 | ||||||||
Ventas, Inc. | 48,223 | 2,740,513 | ||||||||
Vornado Realty Trust | 28,629 | 2,517,348 | ||||||||
Weingarten Realty Investors | 18,371 | 524,308 | ||||||||
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49,943,581 | ||||||||||
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TOTAL COMMON STOCKS | 107,735,566 | |||||||||
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7 Day Yield | Shares | Value | ||||||||
SHORT TERM INVESTMENTS (0.17%) | ||||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(a) | 187,462 | 187,462 | |||||||
|
| |||||||||
TOTAL SHORT TERM INVESTMENTS | 187,462 | |||||||||
|
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TOTAL INVESTMENTS (99.80%) | $ | 107,923,028 | ||||||||
NET OTHER ASSETS AND LIABILITIES (0.20%) | 213,579 | |||||||||
|
| |||||||||
NET ASSETS (100.00%) | $ | 108,136,607 | ||||||||
|
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* | Non-income producing security. |
(a) | Less than 0.0005% |
Common Abbreviations:
AG - | Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e., owned by shareholders. | |
Ltd. - | Limited. | |
N.V. - | Naamloze Vennootschap is the Dutch term for a public limited liability corporation. | |
Plc - | Public Limited Company. | |
REIT - | Real Estate Investment Trust. | |
SA - | Generally designated corporations in various countries, mostly those employing the civil law. |
10 | See Notes to Financial Statements.
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Table of Contents
![]() | Statement of Assets & Liabilities | |
November 30, 2013 |
ASSETS: | ||||
Investments, at value | $ | 107,923,028 | ||
Cash | 33,306 | |||
Foreign currency, at value (Cost $24,454) | 23,773 | |||
Foreign tax reclaims | 21,162 | |||
Dividends and interest receivable | 218,131 | |||
Total Assets | 108,219,400 | |||
LIABILITIES: | ||||
Payable for investments purchased | 33,319 | |||
Payable to adviser | 49,474 | |||
Total Liabilities | 82,793 | |||
NET ASSETS | $ | 108,136,607 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 104,298,525 | ||
Accumulated net investment loss | (2,360,139 | ) | ||
Accumulated net realized loss on investments and foreign currency transactions | (3,689,997 | ) | ||
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | 9,888,218 | |||
NET ASSETS | $ | 108,136,607 | ||
INVESTMENTS, AT COST | $ | 98,033,264 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 108,136,607 | ||
Shares of beneficial interest outstanding (Unlimited number of shares, par value $0.01 per share) | 2,750,000 | |||
Net Asset Value, offering and redemption price per share | $ | 39.32 |
See Notes to Financial Statements.
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Annual | November 30, 2013 |
Table of Contents
![]() | Statement of Operations | |
For the Year Ended November 30, 2013 |
INVESTMENT INCOME: | ||||
Dividends(a) | $ | 2,878,196 | ||
| ||||
Total Investment Income | 2,878,196 | |||
| ||||
EXPENSES: | ||||
Investment adviser fees | 553,149 | |||
| ||||
Total Expenses | 553,149 | |||
| ||||
NET INVESTMENT INCOME | 2,325,047 | |||
| ||||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized loss on investments | (30,422 | ) | ||
Net realized loss on foreign currency transactions | (23,397 | ) | ||
Net change in unrealized appreciation on investments | 340,584 | |||
Net change in unrealized appreciation on translation of assets and liabilities denominated in foreign currencies | 117 | |||
| ||||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 286,882 | |||
| ||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 2,611,929 | ||
|
(a) | Net of foreign tax withholding $142,727. |
12 | See Notes to Financial Statements. | |
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Table of Contents
![]() | Statements of Changes in Net Assets | |
For the Year Ended | For the Year Ended | |||||||
| ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 2,325,047 | $ | 1,557,853 | ||||
Net realized gain on investments and foreign currency transactions | (53,819 | ) | 1,515,849 | |||||
Net change in unrealized appreciation/(depreciation) on investments and translation of assets and liabilities denominated in foreign currencies | 340,701 | 9,937,032 | ||||||
| ||||||||
Net increase in net assets resulting from operations | 2,611,929 | 13,010,734 | ||||||
| ||||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (4,134,510 | ) | (1,417,294 | ) | ||||
From tax return of capital | (517,416 | ) | – | |||||
| ||||||||
Total distributions | (4,651,926 | ) | (1,417,294 | ) | ||||
| ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 45,371,748 | 18,618,717 | ||||||
Cost of shares redeemed | (6,453,407 | ) | (9,371,914 | ) | ||||
| ||||||||
Net increase from share transactions | 38,918,341 | 9,246,803 | ||||||
| ||||||||
Net increase in net assets | 36,878,344 | 20,840,243 | ||||||
| ||||||||
NET ASSETS: | ||||||||
Beginning of year | 71,258,263 | 50,418,020 | ||||||
| ||||||||
End of year* | $ | 108,136,607 | $ | 71,258,263 | ||||
| ||||||||
* Including accumulated net investment loss of: | $ | (2,360,139 | ) | $ | (314,538 | ) | ||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 1,800,000 | 1,550,000 | ||||||
Shares sold | 1,100,000 | 500,000 | ||||||
Shares redeemed | (150,000 | ) | (250,000 | ) | ||||
| ||||||||
Shares outstanding, end of period | 2,750,000 | 1,800,000 | ||||||
|
See Notes to Financial Statements. |
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For the Year Ended November 30, 2013 | ||||
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NET ASSETVALUE, BEGINNING OF PERIOD | $ | 39.59 | ||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||
Net investment income | 0.94 | (b) | ||
Net realized and unrealized gain/(loss) | 1.25 | |||
| ||||
Total from investment operations | 2.19 | |||
| ||||
DISTRIBUTIONS: | ||||
From net investment income | (2.27 | ) | ||
From tax return of capital | (0.19 | ) | ||
| ||||
Total distributions | (2.46 | ) | ||
| ||||
NET INCREASE/(DECREASE) IN NET ASSET VALUE | (0.27 | ) | ||
| ||||
NET ASSET VALUE, END OF YEAR | $ | 39.32 | ||
| ||||
TOTAL RETURN(c) | 5.60 | % | ||
RATIOS/ SUPPLEMENTAL DATA: | ||||
Net assets, end of period (000s) | $ | 108,137 | ||
RATIOS TO AVERAGE NET ASSETS | ||||
Expenses | 0.55 | % | ||
Net investment income | 2.31 | % | ||
PORTFOLIO TURNOVER RATE(e) | 10 | % |
(a) | Effective March 7, 2011, the Board approved changing the fiscal year end of the Fund from December 31 to November 30. |
(b) | Based on average shares outstanding during the period. |
(c) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(d) | Annualized. |
(e) | Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. |
14 | See Notes to Financial Statements.
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Financial Highlights | ||
For a Share Outstanding Throughout the Periods Presented |
For the Year Ended November 30, 2012 | For the Period January 1, 2011 to November 30, 2011(a) | For the Year Ended December 31, 2010 | For the Year Ended December 31, 2009 | For the Period May 7, 2008 (Inception) to December 31, 2008 | ||||||||||||||
|
| |||||||||||||||||
$ | 32.53 | $ | 35.52 | $ | 31.35 | $ | 25.06 | $ | 50.00 | |||||||||
0.91 | (b) | 0.97 | (b) | 1.43 | (b) | 0.98 | 0.47 | |||||||||||
6.97 | (2.87 | ) | 4.68 | 7.00 | (24.92 | ) | ||||||||||||
|
| |||||||||||||||||
7.88 | (1.90 | ) | 6.11 | 7.98 | (24.45 | ) | ||||||||||||
|
| |||||||||||||||||
(0.82 | ) | (1.09 | ) | (1.94 | ) | (1.69 | ) | (0.49 | ) | |||||||||
– | – | – | – | – | ||||||||||||||
|
| |||||||||||||||||
(0.82 | ) | (1.09 | ) | (1.94 | ) | (1.69 | ) | (0.49 | ) | |||||||||
|
| |||||||||||||||||
7.06 | (2.99 | ) | 4.17 | 6.29 | (24.94 | ) | ||||||||||||
|
| |||||||||||||||||
$ | 39.59 | $ | 32.53 | $ | 35.52 | $ | 31.35 | $ | 25.06 | |||||||||
|
| |||||||||||||||||
24.50 | % | (5.53 | )% | 19.91 | % | 32.51 | % | (48.90 | )% | |||||||||
$ | 71,258 | $ | 50,418 | $ | 42,626 | $ | 12,603 | $ | 5,063 | |||||||||
0.55 | % | 0.55 | %(d) | 0.55 | % | 0.55 | % | 0.55 | %(d) | |||||||||
2.47 | % | 3.02 | %(d) | 4.33 | % | 3.24 | % | 3.49 | %(d) | |||||||||
4 | % | 15 | % | 14 | % | 18 | % | 18 | % |
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![]() | Notes to Financial Statements | |
November 30, 2013 |
1. | ORGANIZATION |
The ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of November 30, 2013, the Trust consists of nineteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains solely to the Cohen & Steers Global Realty Majors ETF (the “Fund”). The investment objective of the Fund is to seek investment results that correspond generally to the performance, before the Fund’s fees and expenses, of an index called the Cohen & Steers Global Realty Majors Index.
The Fund’s Shares (“Shares”) are listed on the New York Stock Exchange (“NYSE”) Arca. The Fund issues and redeems Shares at Net Asset Value (“NAV”) in blocks of 50,000 Shares, each of which is called a “Creation Unit.” Creation Units are issued and redeemed principally in-kind for securities included in a specified index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
2. | SIGNIFICANT ACCOUNTING POLICIES |
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates.
A. Portfolio Valuation
The Fund’s NAV is determined daily, as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the National Association of Securities Dealers Automated Quotation (“NASDAQ”) exchange are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and asked prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ.
The Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Fund may be valued in good faith by or under the direction of the
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November 30, 2013 |
Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the closing sale prices on the applicable exchange and fair value prices may not reflect the actual value of a security. A variety of factors may be considered in determining the fair value of such securities.
B. Foreign Securities
The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible reevaluation of currencies, the inability to repatriate foreign currency, less complete financial information about companies and possible future adverse political and economic developments.
Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.
C. Foreign Currency Translation
The books and records of the Fund are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. The portion of realized and unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed and is included in realized and unrealized gains or losses on investments, when applicable.
D. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
E. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid quarterly or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually.
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![]() | Notes to Financial Statements | |
November 30, 2013 |
F. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations.
For the year ended November 30, 2013, permanent book and tax differences resulting primarily from differing treatment of foreign currency, investments in passive foreign investment companies, investments in real estate investment trusts and in-kind transactions were identified and reclassified among the components of the Fund’s net assets as follows:
Undistributed Net Investment Loss | Accumulated Net Realized Loss | Paid-in Capital | ||
$ (236,138) | $ (174,031) | $ 410,169 |
Net investment income and net realized (loss), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification.
Under the Regulated Investment Company Modernization Act of 2010 (“the Modernization Act”), net capital losses recognized in tax years beginning after December 22, 2010 may be carried forward indefinitely, and the character of the losses is retained as short-term and/or long-term. Under the law in effect prior to the Modernization Act, net capital losses were carried forward for eight years and treated as short-term. As a transition rule, the Modernization Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term losses rather than being considered all short-term as under previous law.
At November 30, 2013, the Fund had available for tax purposes unused pre-enactment capital loss carryforwards as follows:
Year of Expiration | ||||||
2016 | 2017 | 2018 | Total | |||
$ 176,692 | $ 809,982 | $ 187,815 | $ 1,174,489 |
At November 30, 2013, the Fund had available for tax purposes unused post-enactment capital loss carryforwards as follows:
ST | LT | |||||
$ 599,088 | $ 549,984 |
Distributions from net investment income and capital gains are determined in accordance with income tax regulations, which may differ from U.S. GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterization of distributions made by the Fund.
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![]() | Notes to Financial Statements | |
November 30, 2013 |
The tax character of the distributions paid was as follows:
For the Year Ended November 30, 2013 | For the Year Ended November 30, 2012 | |||||||||
Distributions paid from: | ||||||||||
Ordinary income | $ | 4,134,510 | $ | 1,417,294 | ||||||
Tax return of capital | $ | 517,416 | $ | – | ||||||
Total | $ | 4,651,926 | $ | 1,417,294 |
As of November 30, 2013, the components of distributable earnings on a tax basis for the Fund were as follows:
Undistributed net investment income | $ | – | |||||
Accumulated net realized loss on investments and foreign currency transactions | (2,323,561 | ) | |||||
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | 6,161,643 | ||||||
Total | $ | 3,838,082 | |||||
As of November 30, 2013, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Cost of investment for income tax purposes | $ | 101,759,839 | |||||
Gross Appreciation (excess of value over tax cost) | $ | 10,712,964 | |||||
Gross Depreciation (excess of tax cost over value) | (4,549,775 | ) | |||||
Net Depreciation of Foreign Currency Derivatives | (1,546 | ) | |||||
Net Unrealized Appreciation | $ | 6,161,643 | |||||
The differences between book-basis and tax-basis are primarily due to Passive Foreign Investment Company (“PFIC”) adjustments and the deferral of losses due to wash sales.
G. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies.
The Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
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![]() | Notes to Financial Statements | |
November 30, 2013 |
As of and during the year ended November 30, 2013, the fund did not have a liability for any unrecognized tax benefits. The fund files U.S. federal, state, and local tax returns as required. The fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is generally three years after the filing of the tax return Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
H. Fair Value Measurements
The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Fund’s investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy.
Investments in open-end mutual funds are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; | |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
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![]() | Notes to Financial Statements | |
November 30, 2013 |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value the Fund’s investments November 30, 2013:
Investments in Securities at Value* | Level 1- Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3- Significant Unobservable Inputs | Total | ||||||||||||
| ||||||||||||||||
Common Stocks | $ | 107,735,566 | $ | – | $ | – | $ | 107,735,566 | ||||||||
Short Term Investments | 187,462 | – | – | 187,462 | ||||||||||||
| ||||||||||||||||
TOTAL | $ | 107,923,028 | $ | – | $ | – | $ | 107,923,028 | ||||||||
|
* | For a detailed geographical breakdown, see the accompanying Schedule of Investments. |
The Fund recognizes transfers between levels as of the end of the fiscal year. For the year ended November 30, 2013, the Fund did not have any transfers between Level 1 and Level 2 securities. The Fund did not have any securities which used significant unobservable inputs (Level 3) in determining fair value.
3. | INVESTMENT ADVISORY FEE AND |
OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Investment Adviser”) acts as the Fund’s investment adviser pursuant to an Advisory Agreement with the Trust on behalf of the Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Fund pays the Investment Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.55% of the Fund’s average daily net assets. From time to time, the Investment Adviser may waive all or a portion of its fee.
Out of the unitary management fee, the Investment Adviser pays substantially all expenses of the Fund, including the licensing fee of the Index provider, and the cost of transfer agency, custody, fund administration, legal, audit and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Fund’s business. In addition, the Investment Adviser’s unitary management fee is designed to compensate the Investment Adviser for providing services for the Fund.
ALPS Fund Services, Inc. (“ALPS”), an affiliate of the Investment Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Investment Adviser, any subadviser or any of their affiliates (“Independent Trustees”) is paid a quarterly retainer of $5,000, $3,750 for each regularly scheduled Board meeting attended and $1,500 for each special meeting held outside of regularly scheduled meetings.
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![]() | Notes to Financial Statements | |
November 30, 2013 |
4. | PURCHASES AND SALES OF SECURITIES |
For the year ended November 30, 2013, the cost of purchases and proceeds from sales of investment securities, excluding in-kind transactions and short-term investments, were as follows:
Purchases | Sales | |
$ 11,482,259 | $ 10,005,522 |
For the year ended November 30, 2013, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Purchases | Sales | |
$ 38,390,962 | $ 3,234,065 |
Gains on in-kind transactions are not considered taxable for federal income tax purposes.
5. | CAPITAL SHARE TRANSACTIONS |
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 shares. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Fund. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the net asset value per unit 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 AP or as a result of other market circumstances.
6. | INDEMNIFICATIONS |
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
7. | NEW ACCOUNTING PRONOUNCEMENTS |
In June 2013, the FASB issued ASU No. 2013-08, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The FASB standard identifies characteristics a company must assess to determine whether it is considered an investment company for financial reporting purposes. This ASU is effective for fiscal years beginning after December 15, 2013. The Fund is currently reviewing the requirements and believes the adoption of this ASU will not have a material impact on its financial statements.
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![]() | Additional Information | |
November 30, 2013 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
A description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies and information regarding how the Fund voted proxies related to portfolio securities during the most recent 12-month period ended June 30th is available without charge, (1) on the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov; (2) upon request, by calling (toll-free) 1-866-513-5856; and (3) on the Trust’s website located at http://www.alpsfunds.com.
PORTFOLIO HOLDINGS
The Trust will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q will be available (1) on the SEC’s website at http://www.sec.gov; (2) by calling (toll-free) 1-866-513-5856; (3) on the Trust’s website located at http://www.alpsfunds. com; and (4) for review and copying at the SEC’s Public Reference Room (“PRR”) in Washington D.C. Information regarding the operation of the PRR may be obtained by calling (toll-free) 1-800-732-0330.
TAX DESIGNATIONS
Pursuant to Section 853(c) of the Internal Revenue Code, the Fund designates the following:
Foreign Taxes Paid | Foreign Source Income | |||
Cohen and Steers Global Realty Majors ETF | $ 107,635 | $ 1,645,354 |
The Fund designate the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2012:
Qualified Dividend Income | Dividend Received Deduction | |||
Cohen and Steers Global Realty Majors ETF | 5.08% | 0.00% |
In early 2013, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2012 via Form 1099. The Fund will notify shareholders in early 2014 of amounts paid to them by the Funds, if any, during the calendar year 2013.
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![]() | Board Considerations Regarding Approval of Investment Advisory Agreement | |
November 31, 2013 (Unaudited) |
At an in-person meeting held on June 10, 2013, the Board of Trustees of the Trust (the “Board”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve the continuance of the Advisory Agreement between the Trust and ALPS Advisors, Inc. (the “Adviser”) with respect to the Cohen & Steers Global Realty Majors ETF (“GRI”). The Independent Trustees also met separately to consider the Advisory Agreement.
In evaluating whether to approve the Advisory Agreement for GRI, the Board considered numerous factors, as described below.
With respect to the nature, extent and quality of the services provided by the Adviser under the Advisory Agreement, representatives from the Adviser presented the Adviser’s materials regarding consideration of renewal of the Advisory Agreement. The Independent Trustees noted that included in the Board materials were responses by the Adviser to a questionnaire drafted by legal counsel to the Trust to assist the Board in evaluating whether to renew the Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the functions performed by the Adviser, information describing the Adviser’s organization, the background and experience of the persons responsible for the day-to-day management of GRI and financial information regarding the Adviser. The Board reviewed information on the performance of GRI and the performance of its benchmark index, and evaluated the correlation and tracking error between the underlying index and GRI’s performance. Based on its review, the Board found that the nature and extent of services provided to GRI under the Advisory Agreement were appropriate and that the quality was satisfactory.
The Independent Trustees noted the services provided by the Adviser for the annual advisory fee of 0.55% of GRI’s average daily net assets. The Independent Trustees noted that the advisory fees for GRI were unitary fees pursuant to which the Adviser assumes all expenses of GRI (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than payments under the Advisory Agreement, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
The Independent Trustees reviewed the comparative fee information, including data from Lipper Analytical Services (“Lipper”). The Independent Trustees noted that Lipper’s report contained information regarding investment performance, comparisons of cost and expense structures of GRI with other funds’ cost and expense structures, as well as comparisons of GRI’s performance with the performance during similar periods of members of a peer group identified pursuant to Lipper’s methodology. The Independent Trustees noted that the advisory fee rate for GRI was higher than others in its Lipper peer group but that GRI’s total expense ratio was at the median of its peer group. The Independent Trustees also considered information provided by the Adviser about the costs and profitability of the Adviser in respect of GRI. Based on the foregoing and the other information available to them, the Independent Trustees concluded that the advisory fee for GRI was reasonable under the circumstances and in light of the quality of services provided.
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![]() | Board Considerations Regarding Approval of Investment Advisory Agreement | |
November 31, 2013 (Unaudited) |
The Independent Trustees also considered other benefits that may be realized by the Adviser from its relationship with GRI and concluded that the advisory fee was reasonable taking into account any such benefits. The Independent Trustees noted the relatively small size of GRI and considered whether there have been economies of scale with respect to management of GRI, whether GRI has appropriately benefited from any economies of scale, and whether the fee is reasonable in relation to GRI’s assets and any economies of scale that may exist. The Independent Trustees concluded that the Adviser was not realizing any economies of scale.
Based on consideration of all factors deemed relevant, the Independent Trustees determined that approval of the Advisory Agreement was in the best interests of GRI and its shareholders. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
In voting to approve the Advisory Agreement, the Trustees, including the Independent Trustees, concluded that the terms of the Advisory Agreement are reasonable and fair in light of the services performed, the fees paid by certain other funds, expenses incurred and such other matters as the Trustees considered relevant in the exercise of their reasonable business judgment.
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![]() | Trustees and Officers | |
November 30, 2013 (Unaudited) |
INDEPENDENT TRUSTEES
Name, Address and Year of Birth of Trustee* | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5Years | Number of Portfolios in Fund Complex Overseen by Trustees*** | Other Directorships Held by Trustees | |||||
Mary K. Anstine, 1940 | Trustee | Since March 2008 | Ms. Anstine was President/ Chief Executive Officer of HealthONE Alliance, Denver, Colorado, and former Executive Vice President of First Interstate Bank of Denver. Ms. Anstine is also Trustee/ Director of the following: AV Hunter Trust; Colorado Up- lift Board. Ms. Anstine was formerly a Director of the Trust Bank of Colorado (later purchased and now known as Northern Trust Bank), HealthONE and Denver Area Council of the Boy Scouts of America and a member of the American Bankers Association Trust Executive Committee. | 41 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder, Chief Operations Officer and Chief Financial Officer of Green Alpha Advisors, LLC. Prior to joining Green Alpha Advisors, Mr. Deems was CFO and Treasurer of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC, a private investment fund, and Sutton Place Management, LLC, an administrative ser- vices company, from 2004 to June 2007. Prior to this, Mr. Deems served as Controller of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC and Sutton Place Management, LLC. | 41 | Mr. Deems is a Trustee of Financial Investors Trust (30 funds); ALPS Variable Investment Trust (7 funds); and Reaves Utility Income Fund. |
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November 30, 2013 (Unaudited) |
INDEPENDENT TRUSTEES Continued
Name, Address and Year of Birth of Trustee* | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5Years | Number of Portfolios in Fund Complex Overseen by Trustees*** | Other Directorships Held by Trustees | |||||
Rick A. Pederson, 1952 | Trustee | Since March 2008 | Mr. Pederson is President, Foundation Properties, Inc. (a real estate investment management company), 1994 - present; Advisory Committee, Bow River Capital Partners (private equity management), 2003 - present; Advisor, Pauls Corporation (real estate in- vestment management and development), 2008 - present; Chairman, Ross Consulting Group (real estate consulting services) 1983-2013; Advisory Board, Neenan Company (construction services) 2002-present; Board Member, Urban Land Conservancy (a not-for-profit organization), 2004 – present; Director, National Western Stock Show (not-for-profit organization). | 22 | Mr. Pederson is Trustee of West- core Trust (12 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
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November 30, 2013 (Unaudited) |
INTERESTED TRUSTEE
Name, Address and Year of Birth | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5Years | Number of Portfolios in Fund Complex Overseen by Trustees*** | Other Directorships Held by Trustees | |||||
Thomas A. Carter, 1966 | Trustee and President | Since March 2008 | Mr. Carter joined ALPS Fund Services, Inc. (“ALPS”) in 1994 and is currently President and Director of ALPS Advisors, Inc. (“AAI”), ALPS Distributors, Inc. (“ADI”) and ALPS Portfolio Solutions Distributors, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”). Because of his position with AHI, ALPS, ADI, APSD and AAI, Mr. Carter is deemed an affiliate of the Fund as defined under the 1940 Act. Before joining ALPS, Mr. Carter was with Deloitte & Touché LLP, where he worked with a diverse group of clients, primarily within the financial services industry. Mr. Carter is a Certified Public Accountant and received his Bachelor of Science in Accounting from the University of Colorado at Boulder. | 29 | Mr. Carter is a Trustee of ALPS Variable Investment Trust (7 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
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November 30, 2013 (Unaudited) |
OFFICERS
Name, Address and Year of Birth of Officer* | Position(s) Held with Trust | Length of Time Served** | Principal Occupation(s) During Past 5 Years | |||
Melanie Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars currently serves as a Deputy Chief Compliance Officer with ALPS. Prior to joining ALPS in September 2009, Ms. Zimdars served as Principal Financial Officer, Treasurer and Secretary for the Wasatch Funds from February 2007 to December 2008. From November 2006 to February 2007, she served as Assistant Treasurer for the Wasatch Funds and served as a Senior Compliance Officer for Wasatch Advisors, Inc. since 2005. Because of her position with ALPS, Ms. Zimdars is deemed an affiliate of the Trust as defined under the 1940 Act. Ms. Zimdars is also the CCO of ALPS Variable Investment Trust, Liberty All-Star Growth Fund, Inc., Liberty All-Star Equity Fund and BPV Family of Funds. | |||
Patrick D. Buchanan, 1972 | Treasurer | Since June 2012 | Mr. Buchanan is Vice President of AAI. Mr. Buchanan joined ALPS in 2007 and because of his position with AAI, he is deemed an affiliate of the Trust, as defined under the 1940 Act. Mr. Buchanan is also Treasurer of ALPS Variable Investment Trust and the Principal Real Estate Income Fund. | |||
William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer, AAI (since 2006); President of the Liberty All-Star Funds (since April 1999); Senior Vice President (2005-2006), Banc of America Investment Advisors, Inc. Because of his position with AAI, Mr. Parmentier is deemed an affiliate of the Trust as defined under the 1940 Act. | |||
Erin D. Nelson, 1977 | Secretary | Since October 2013 | Ms. Nelson is Vice President and Assistant General Counsel of AAI, ALPS Fund Services, Inc., ALPS Distributors, Inc., and ALPS Portfolio Solutions Distributor, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson has served as Secretary of the Clough Global Allocation Fund since 2004, Clough Global Equity Fund since 2005, Clough Global Opportunities Fund since 2006, Liberty All-Star Equity Fund since 2013 and Liberty All-Star Growth Fund since 2013. Ms. Nelson received her Bachelor of Arts in Political Science, magna cum laude, from the University of New Hampshire and Juris Doctorate from the University of Denver. | |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Senior Paralegal. Prior to joining ALPS, Ms. Craig was Legal Manager at Janus Capital Management LLC and served as Assistant Secretary of Janus Investment Fund, Janus Adviser Series and Janus Aspen Series. Because of her position with ALPS, Ms. Craig is deemed an affiliate of the Trust as defined under the 1940 Act. |
* | The business address of each Officer is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Officer began serving the Trust. Each Officer serves an indefinite term, until his successor is elected. |
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Table of Contents
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CONTENTS
2 | ||
6 | ||
7 | ||
Financial Statements | ||
8 | ||
9 | ||
10 | ||
11 | ||
13 | ||
14 | ||
21 | ||
Board Considerations Regarding Approval of Investment Advisory Agreement | 22 | |
24 |
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ALPS Equal Sector Weight ETF | Performance Overview | |||||
November 30, 2013 (Unaudited) |
PERFORMANCE OVERVIEW
For the fiscal year ended November 30, 2013 the Fund generated a total return of 28.41%. Over the same time period the S&P 500 gained 30.30%. Low volatility continued easing by the Fed and strong corporate earnings pushed the market higher and for the 2nd year in a row every sector of the market posted a positive return with four sectors gaining more than 35%. The market continued to be led by early cycle sectors, as Consumer Discretionary and Industrials stocks advanced 40.2% and 38.7%, respectively. Financials (+ 38.7%) and Healthcare (+39.9%) each had their best years since 1997.
Energy and Materials stocks posted nearly identical returns during the year, gaining 24.0% each. Weak commodity prices and worries about global demand kept these stocks from keeping pace with the broader market. The defensive leaning Consumer Staples sector ranked 7th (+22.9%) overall and was weighed down by Tobacco and Beverage stocks. The Technology sector had a roller coaster year and was heavily impacted by the poor relative performance of Apple and Telecom stocks AT&T and Verizon. The Tech sector ended the year with a gain of 21.5%, ranking it 8th among all sectors. The worst performing sector of the year was Utilities (+12.0%), which was negatively impacted by rising rate fears and stretched valuations.
Compared to the S&P 500 the fund benefited from being underweight the Technology sector, as well as its slight overweights in the Industrials and Health Care sectors. The Fund was negatively impacted by its overweight in Utilities sector and its underweight to Financials. Overall, the Fund’s sector weights relative to the S&P 500 resulted in positive out-performance above the index in 2 of the 9 sectors.
Annual Report | November 30, 2013 | 2
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ALPS Equal Sector Weight ETF | Performance Overview | |
November 30, 2013 (Unaudited) |
FUND DESCRIPTION
The Fund seeks investment results that replicate as closely as possible, before fees and expenses, the performance of the Banc of America Securities – Merrill Lynch Equal Sector Weight Index (the “Underlying Index”). The Fund’s investment objective is not fundamental and may be changed by the Board of Trustees without shareholder approval.
PRIMARY INVESTMENT STRATEGIES
The Adviser will seek to match the performance of the Underlying Index. The Underlying Index is an index of indexes comprised in equal proportions of the nine Select Sector SPDR Indexes (“The Underlying Sector Indexes”). In order to track the securities in the Underlying Index, the Fund will use a “fund of funds” approach, and seek to achieve its investment objective by investing at least 90% of its total assets in the shares of Select Sector SPDR exchange-traded funds (each, an “Underlying Sector ETF” and collectively the “Underlying Sector ETFs”) that track the Underlying Sector indexes of which the Underlying Index is comprised.
PERFORMANCE as of November 30, 2013
Average Annual Total Return | 1 Year | 3 Year | Since Inception Annualized* | |||
ALPS Equal Sector Weight ETF | ||||||
NAV (Net Asset Value) | 28.41% | 16.75% | 19.22% | |||
Market Price** | 28.42% | 16.76% | 19.28% | |||
Bank of America Securities-Merrill Lynch Equal Sector Weight Index | 26.22% | 14.70% | 17.16% | |||
S&P 500® Total Return Index | 30.30% | 17.73% | 19.69% |
Total Expense Ratio (per the current Prospectus) 0.55%
Performance data quoted represents past performance. Past performance does not guarantee future results. Current performance may be higher or lower than actual data quoted. Call 1.866.675.2639 or visit www.alpsfunds.com for current month end performance. 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.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
* | The Fund commenced Investment Operations on July 6, 2009 with an Inception Date, the first day of trading on the Exchange, of July 7, 2009. |
** | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
Banc of America Securities Merrill Lynch Equal Sector Weight Index: a U.S. equity index comprised, in equal weights, of nine sub-indices, and is a price-return index.
S&P 500® Index: the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.
An investor cannot invest directly in an index.
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ALPS Equal Sector Weight ETF | Performance Overview | |||||
November 30, 2013 (Unaudited) |
The following table shows the sector weights of both the Fund and the S&P 500® as of November 30, 2013:
SECTOR WEIGHTING COMPARISON^ as of November 30, 2013
EQL* | S&P 500® | |||
Healthcare (XLV) | 11.3% | 13.2% | ||
Financials (XLF) | 11.1 | 16.3 | ||
Consumer Discretionary (XLY) | 11.4 | 12.6 | ||
Technology (XLK) | 11.3 | 20.3 | ||
Consumer Staples (XLP) | 11.1 | 10.1 | ||
Industrials (XLI) | 11.3 | 10.8 | ||
Energy (XLE) | 10.8 | 10.3 | ||
Materials (XLB) | 11.0 | 3.4 | ||
Utilities (XLU) | 10.7 | 3.0 |
Source: S&P 500®
^ | Sector weights subject to change. |
* | Percentages based on Total Investments. |
Annual Report | November 30, 2013 | 4 |
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ALPS Equal Sector Weight ETF | Performance Overview | |
November 30, 2013 (Unaudited) |
SECTOR AllOCATION as of November 30, 2013
Sector weights and allocations subject to change.
GROWTH OF $10,000 as of November 30, 2013
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
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ALPS Equal Sector Weight ETF | Disclosure of Fund Expenses | |||||
For the Six Months Ended November 30, 2013 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, and (2) ongoing costs, including management fees and other Fund expenses. These examples are 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 funds. The example is based on an investment of $1,000 invested at the beginning of the (six month) period and held through November 30, 2013.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred 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 first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning Account Value 6/1/13 | Ending Account Value 11/30/13 | Expense Ratio(a) | Expenses Paid During Period 6/01/13- 11/30/13(b) | |||||
Actual | $1,000.00 | $1,110.70 | 0.34% | $1.80 | ||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,023.36 | 0.34% | $1.72 |
(a) | Annualized, based on the Fund’s most recent fiscal half year expenses. |
(b) | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (183), then divided by 365. |
Annual Report | November 30, 2013 | 6 |
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Report of Independent Registered Public Accounting Firm | ||
To the Board of Trustees and Shareholders of ALPS ETF Trust:
We have audited the accompanying statement of assets and liabilities, including the statement of investments, of ALPS Equal Sector Weight ETF, one of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2013, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position ALPS Equal Sector Weight ETF of the ALPS ETF Trust as of November 30, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 27, 2014
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ALPS Equal Sector Weight ETF | Statement of Investments | |||||
November 30, 2013 |
Security Description | Shares | Value | ||||||||||
EXCHANGE TRADED FUNDS (99.90%) | ||||||||||||
Consumer Discretionary (11.35%) | ||||||||||||
Consumer Discretionary Select Sector SPDR® Fund | 190,678 | $ | 12,508,477 | |||||||||
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Consumer Staples (11.06%) | ||||||||||||
Consumer Staples Select Sector SPDR® Fund | 283,548 | 12,195,399 | ||||||||||
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Energy (10.83%) | ||||||||||||
Energy Select Sector SPDR® Fund | 138,186 | 11,944,798 | ||||||||||
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Financials (11.10%) | ||||||||||||
Financial Select Sector SPDR® Fund | 569,653 | 12,236,146 | ||||||||||
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Healthcare (11.30%) | ||||||||||||
Health Care Select Sector SPDR® Fund | 225,555 | 12,464,169 | ||||||||||
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Industrials (11.31%) | ||||||||||||
Industrial Select Sector SPDR® Fund | 247,479 | 12,472,942 | ||||||||||
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Materials (10.96%) | ||||||||||||
Materials Select Sector SPDR® Fund | 272,461 | 12,080,921 | ||||||||||
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Technology (11.30%) | ||||||||||||
Technology Select Sector SPDR® Fund | 359,068 | 12,456,069 | ||||||||||
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Utilities (10.69%) | ||||||||||||
Utilities Select Sector SPDR® Fund | 309,786 | 11,781,162 | ||||||||||
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TOTAL EXCHANGE TRADED FUNDS | ||||||||||||
(Cost $85,440,303) | 110,140,083 | |||||||||||
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7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (0.12%) | ||||||||||||
Dreyfus Treasury Prime | ||||||||||||
Cash Management, | ||||||||||||
Institutional Class | 0.000%(a) | 135,362 | 135,362 | |||||||||
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TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $135,362) | 135,362 | |||||||||||
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TOTAL INVESTMENTS (100.02%) | ||||||||||||
(Cost $85,575,665) | $ | 110,275,445 | ||||||||||
NET LIABILITIES LESS OTHER ASSETS (-0.02%) | (30,497 | ) | ||||||||||
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NET ASSETS (100.00%) | $ | 110,244,948 | ||||||||||
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(a) | Less than 0.0005%. |
Common Abbreviations:
SPDR® - Standard & Poor’s Depositary Receipts
See Notes to Financial Statements.
Annual Report | November 30, 2013 | 8
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ALPS Equal Sector Weight ETF | Statement of Assets and Liabilities | |
November 30, 2013 |
ASSETS: | ||||
Investments, at value | $ | 110,275,445 | ||
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Total Assets | 110,275,445 | |||
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LIABILITIES: | ||||
Payable to adviser | 30,497 | |||
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Total Liabilities | 30,497 | |||
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NET ASSETS | $ | 110,244,948 | ||
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NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 85,737,569 | ||
Undistributed net investment income | 7,029 | |||
Accumulated net realized gain on investments | (199,430) | |||
Net unrealized appreciation on investments | 24,699,780 | |||
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NET ASSETS | $ | 110,244,948 | ||
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INVESTMENTS, AT COST | $ | 85,575,665 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 110,244,948 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 2,200,000 | |||
Net Asset Value, offering and redemption price per share | $ | 50.11 |
See Notes to Financial Statements.
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ALPS Equal Sector Weight ETF | Statement of Operations | |||||
For the Year Ended November 30, 2013 |
INVESTMENT INCOME: | ||||
Dividends | $ | 2,038,178 | ||
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Total investment income | 2,038,178 | |||
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EXPENSES: | ||||
Investment adviser fees | 352,010 | |||
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Total expenses before reimbursement | 352,010 | |||
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Less fees waived/reimbursed by investment adviser | (28,537 | ) | ||
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NET EXPENSES | 323,473 | |||
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NET INVESTMENT INCOME | 1,714,705 | |||
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REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized gain on investments | 3,556,274 | |||
Net change in unrealized appreciation on investments | 17,868,704 | |||
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NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 21,424,978 | |||
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NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 23,139,683 | ||
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See Notes to Financial Statements.
Annual Report | November 30, 2013 | 10
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ALPS Equal Sector Weight ETF | Statements of Changes in Net Assets |
For the Year Ended November 30, 2013 | For the Year Ended November 30, 2012 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,714,705 | $ | 1,365,947 | ||||
Net realized gain on investments | 3,556,274 | 3,927,820 | ||||||
Net change in unrealized appreciation on investments | 17,868,704 | 4,202,695 | ||||||
Net increase in net assets resulting from operations | 23,139,683 | 9,496,462 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (1,707,676 | ) | (1,375,473 | ) | ||||
From tax return of capital | – | (41,418 | ) | |||||
Total distributions | (1,707,676 | ) | (1,416,891 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 31,053,389 | 30,174,030 | ||||||
Cost of shares redeemed | (17,832,225 | ) | (24,753,246 | ) | ||||
Net increase from share transactions | 13,221,164 | 5,420,784 | ||||||
Net increase in net assets | 34,653,171 | 13,500,355 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 75,591,777 | 62,091,422 | ||||||
End of year* | $ | 110,244,948 | $ | 75,591,777 | ||||
* Including undistributed net investment income of: | $ | 7,029 | $ | – | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 1,900,000 | 1,750,000 | ||||||
Shares sold | 700,000 | 800,000 | ||||||
Shares redeemed | (400,000 | ) | (650,000 | ) | ||||
Shares outstanding, end of year | 2,200,000 | 1,900,000 | ||||||
See Notes to Financial Statements.
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ALPS Equal Sector Weight ETF | ||||||
For the Year Ended November 30, 2013 | ||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 39.79 | ||
INCOME FROM OPERATIONS: | ||||
Net investment income | 0.81 | (b) | ||
Net realized and unrealized gain | 10.35 | |||
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Total from investment operations | 11.16 | |||
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DISTRIBUTIONS: | ||||
From net investment income | (0.84 | ) | ||
From net realized gains | – | |||
From tax return of capital | – | |||
| ||||
Total distributions | (0.84 | ) | ||
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NET INCREASE IN NET ASSET VALUE | 10.32 | |||
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NET ASSET VALUE, END OF PERIOD | $ | 50.11 | ||
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TOTAL RETURN(c) | 28.41 | % | ||
RATIOS/SUPPLEMENTAL DATA: | ||||
Net assets, end of year (in 000s) | $ | 110,245 | ||
RATIOS TO AVERAGE NET ASSETS: | ||||
Expenses excluding reimbursement/waiver | 0.37 | % | ||
Expenses including reimbursement/waiver | 0.34 | % | ||
Net investment income excluding reimbursement/waiver | 1.77 | % | ||
Net investment income including reimbursement/waiver | 1.80 | % | ||
PORTFOLIO TURNOVER RATE(e) | 2 | % |
(a) | Effective March 7, 2011, the Board approved changing the fiscal year end of the Fund from December 31 to November 30. |
(b) | Based on average shares outstanding during the period. |
(c) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at actual reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(d) | Annualized. |
(e) | Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. |
See Notes to Financial Statements.
Annual Report | November 30, 2013 | 12
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Financial Highlights | ||
For a Share Outstanding Throughout the Periods Presented |
For the Year Ended November 30, 2012 | For the Period January 1, 2011 to November 30, 2011(a) | For the Year Ended December 31, 2010 | For the Period July 7, 2009 (Inception) to December 31, 2009 | |||||||||||
$ | 35.48 | $ | 35.34 | $ | 31.13 | $ | 25.04 | |||||||
0.69 | (b) | 0.41 | (b) | 0.68 | (b) | 0.31 | ||||||||
4.35 | 0.18 | 4.14 | 6.10 | |||||||||||
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5.04 | 0.59 | 4.82 | 6.41 | |||||||||||
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(0.71 | ) | (0.45 | ) | (0.61 | ) | (0.31 | ) | |||||||
– | – | – | (0.01 | ) | ||||||||||
(0.02 | ) | – | – | – | ||||||||||
|
| |||||||||||||
(0.73 | ) | (0.45 | ) | (0.61 | ) | (0.32 | ) | |||||||
|
| |||||||||||||
4.31 | 0.14 | 4.21 | 6.09 | |||||||||||
|
| |||||||||||||
$ | 39.79 | $ | 35.48 | $ | 35.34 | $ | 31.13 | |||||||
|
| |||||||||||||
14.35 | % | 1.67 | % | 15.67 | % | 25.60 | % | |||||||
$ | 75,592 | $ | 62,091 | $ | 53,012 | $ | 14,008 | |||||||
0.37 | % | 0.37 | %(d) | 0.37 | % | 0.37 | %(d) | |||||||
0.34 | % | 0.34 | %(d) | 0.34 | % | 0.34 | %(d) | |||||||
1.76 | % | 1.22 | %(d) | 2.11 | % | 2.57 | %(d) | |||||||
1.79 | % | 1.25 | %(d) | 2.14 | % | 2.60 | %(d) | |||||||
4 | % | 4 | % | 7 | % | 4 | % |
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ALPS Equal Sector Weight ETF | Notes to Financial Statements | |||||
November 30, 2013 |
1. ORGANIZATION
The ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of November 30, 2013, the Trust consists of nineteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains solely to the ALPS Equal Sector Weight ETF (the “Fund”), which commenced on July 7, 2009. The investment objective of the Fund is to seek investment results that replicate as closely as possible, before fees and expenses, the performance of the Bank of America Securities-Merrill Lynch Equal Sector Weight Index.
The Fund’s Shares (“Shares”) are listed on the New York Stock Exchange (“NYSE”) Arca. The Fund issues and redeems Shares at Net Asset Value (“NAV”) in blocks of 50,000 Shares each of which is called a “Creation Unit.” Creation Units are issued and redeemed principally in-kind for securities included in a specified index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates.
A. Portfolio Valuation
The Fund’s NAV is determined daily, as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the National Association of Securities Dealers Automated Quotation (“NASDAQ”) exchange are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and asked prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ.
The Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the
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Fund may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the closing sale prices on the applicable exchange and fair value prices may not reflect the actual value of a security. A variety of factors may be considered in determining the fair value of such securities.
B. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
C. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid quarterly or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually.
D. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations.
For the year ended November 30, 2013, permanent book and tax differences resulting primarily from in-kind transactions were identified and reclassified among the components of the Fund’s net assets as follows:
Undistributed Net Investment Income | Accumulated Net Realized Loss | Paid-in Capital | ||||||
$ – | $ | (3,547,988 | ) | $ | 3,547,988 |
Net investment income and net realized gain, as disclosed on the Statement of Operations, and net assets were not affected by these reclassifications.
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ALPS Equal Sector Weight ETF | Notes to Financial Statements | |||||
November 30, 2013 |
At November 30, 2013, the Fund had available for tax purposes unused post-enactment capital loss carryforwards as follows:
Short-Term | Long-Term | |
$ 1,561 | $ 28,345 |
Distributions from net investment income and capital gains are determined in accordance with income tax regulations, which may differ from U.S GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterization of distributions made by the Fund.
The tax character of the distributions paid was as follows:
Year Ended November 30, 2013 | Year Ended November 30, 2012 | |||||||
Distributions paid from: | ||||||||
Ordinary Income | $ | 1,707,676 | $ | 1,375,473 | ||||
Return of Capital | $ | – | $ | 41,418 | ||||
Total | $ | 1,707,676 | $ | 1,416,891 | ||||
As of November 30, 2013, the components of distributable earnings on a tax basis for the Fund were as follows:
Undistributed Net Investment Income | $ | 7,029 | ||||
Accumulated Capital Losses | (29,906 | ) | ||||
Net Unrealized Appreciation on Investments | 24,530,256 | |||||
Total | $ | 24,507,379 | ||||
As of November 30, 2013, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Cost of investments for income tax purposes | $ | 85,745,189 | ||||
Gross Appreciation (excess of value over tax cost) | $ | 24,530,256 | ||||
Gross Depreciation (tax cost over value) | – | |||||
Net Unrealized Appreciation | $ | 24,530,256 | ||||
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales.
E. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. The Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns
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to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the year ended November 30, 2013, the fund did not have a liability for any unrecognized tax benefits. The fund files U.S. federal, state, and local tax returns as required. The fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is generally three years after the filing of the tax return Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
F. Fair Value Measurements
The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Fund’s investments by major category are as follows:
Exchange Traded Funds, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy.
Investments in open-end mutual funds are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:
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ALPS Equal Sector Weight ETF | Notes to Financial Statements | |||||
November 30, 2013 |
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; | |||
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and | |||
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of inputs used to value the Fund’s investments at November 30, 2013:
Investments in Securities at Value* | Level 1 – Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||
Exchange Traded Funds | $ 110,140,083 | $ – | $ – | $110,140,083 | ||||
Short Term Investments | 135,362 | – | – | 135,362 | ||||
TOTAL | $ 110,275,445 | $ – | $ – | $110,275,445 | ||||
* | For detailed descriptions of the sectors, see the accompanying Statement of Investments. |
The Fund recognizes transfers between levels as of the end of the period. For the year ended November 30, 2013, the Fund did not have any transfers between Level 1 and Level 2 securities. The Fund did not have any securities which used significant unobservable inputs (Level 3) in determining fair value.
3. INVESTMENT ADVISORY FEE AND OTHER
AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Investment Adviser”) acts as the Fund’s investment adviser pursuant to an Advisory Agreement with the Trust on behalf of the Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Fund pays the Investment Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.37% of the Fund’s average daily net assets. ALPS Portfolio Solutions Distributor, Inc. (“APSD”) is both the distributor for the Fund as well as the Select Sector SPDR exchange traded funds (“Underlying Sector ETFs”) that the Fund invests in. As required by exemptive relief obtained by the Underlying Sector ETFs, the Investment Adviser will reimburse the Fund an amount equal to the distribution fee received by APSD
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November 30, 2013 |
from the Underlying Sector ETFs attributable to the Fund’s investment in the Underlying Sector ETFs, for so long as APSD acts as the distributor to the Fund and the Underlying Sector ETFs. From time to time, the Investment Adviser may waive all or a portion of its fee.
Out of the unitary management fee, the Investment Adviser pays substantially all expenses of the Fund, including the licensing fee of the Index provider, and the cost of transfer agency, custody, fund administration, legal, audit, trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Fund’s business. In addition, the Investment Adviser’s unitary management fee is designed to compensate the Investment Adviser for providing services for the Fund.
ALPS Fund Services, Inc. (“ALPS”), an affiliate of the Investment Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Investment Adviser, or any of its affiliates (“Independent Trustees”) is paid a quarterly retainer of $5,000, $3,750 for each regularly scheduled Board meeting attended and $1,500 for each special meeting held outside of regularly scheduled meetings.
4. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 2013, the cost of purchases and proceeds from sales of investment securities, excluding short-term investments and in-kind transactions, were as follows:
Purchases | Sales | |
$ 4,197,608 | $ 2,254,427 |
For the year ended November 30, 2013, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Purchases | Sales | |
$ 24,449,701 | $ 13,266,510 |
Gains on in-kind transactions are generally not considered taxable gains for federal income tax purposes.
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Fund. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the net asset value per unit 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 AP or as a result of other market circumstances.
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ALPS Equal Sector Weight ETF | Notes to Financial Statements | |||||
November 30, 2013 |
6. INDEMNIFICATIONS
Under the Trust’s organizational documents, its Trustees and Officers are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
7. NEW ACCOUNTING PRONOUNCEMENTS
In June 2013, the FASB issued ASU No. 2013-08, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The FASB standard identifies characteristics a company must assess to determine whether it is considered an investment company for financial reporting purposes. This ASU is effective for fiscal years beginning after December 15, 2013. The Fund is currently reviewing the requirements and believes the adoption of this ASU will not have a material impact on its financial statements.
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ALPS Equal Sector Weight ETF | Additional Information | |
November 30, 2013 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
A description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies and information regarding how the Fund voted proxies related to portfolio securities during the most recent 12-month period ended June 30th is available without charge, (1) on the Securities and Exchange Commission’s (“SEC”) website at http://www. sec.gov; (2) upon request, by calling (toll-free) 1-866-513-5856; and (3) on the Trust’s website located at http://www.alpsfunds.com.
PORTFOLIO HOLDINGS
The Trust will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q will be available (1) on the SEC’s website at http://www.sec.gov; (2) by calling (toll-free) 1-866-513-5856; (3) on the Trust’s website located at http://www.alpsfunds.com; and (4) for review and copying at the SEC’s Public Reference Room (“PRR”) in Washington D.C. Information regarding the operation of the PRR may be obtained by calling (toll-free) 1-800-732-0330.
TAX DESIGNATIONS
The Fund designates the following as a percentage of taxable ordinary income distributions for the calendar year ended December 31, 2012:
Qualified Dividend Income: | 100.00 | % | ||
Dividend Received Deduction: | 100.00 | % |
In early 2013, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2012 via Form 1099. The Fund will notify shareholders in early 2014 of amounts paid to them by the Funds, if any, during the calendar year 2013.
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Board Considerations Regarding Approval of Investment Advisory Agreement | ||||||
November 30, 2013 (Unaudited) |
At an in-person meeting held on June 10, 2013, the Board of Trustees of the Trust (the “Board”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve the continuance of the Advisory Agreement between the Trust and ALPS Advisors, Inc. (the “Adviser”) with respect to the ALPS Equal Sector Weight ETF (“EQL”). The Independent Trustees also met separately to consider the Advisory Agreement.
In evaluating whether to approve the Advisory Agreement for EQL, the Board considered numerous factors, as described below.
With respect to the nature, extent and quality of the services provided by the Adviser under the Advisory Agreement, representatives from the Adviser presented the Adviser’s materials regarding consideration of renewal of the Advisory Agreement. The Independent Trustees noted that included in the Board materials were responses by the Adviser to a questionnaire drafted by legal counsel to Trust to assist the Board in evaluating whether to renew the Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the functions performed by the Adviser, information describing the Adviser’s organization, the background and experience of the persons responsible for the day-to-day management of EQL and financial information regarding the Adviser. The Board reviewed information on the performance of EQL and the performance of its benchmark index, and evaluated the correlation and tracking error between the underlying index and EQL’s performance. Based on its review, the Board found that the nature and extent of services provided to EQL under the Advisory Agreement were appropriate and that the quality was satisfactory.
The Independent Trustees noted the services provided by the Adviser for the annual advisory fee of 0.37% of EQL’s average daily net assets. The Independent Trustees noted that the advisory fees for EQL were unitary fees pursuant to which the Adviser assumes all expenses of EQL (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than payments under the Advisory Agreement, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses. The Independent Trustees also noted that ALPS Distributors, Inc. (“ADI”), an affiliate of ALPS Portfolio Solutions Distributor, Inc. (“APSD”), the Trust’s principal underwriter, serves as the distributor to the Underlying Sector ETFs, as that term is defined in EQL’s prospectus, and in such capacity receives a distribution fee from the Underlying Sector ETFs. The Independent Trustees noted that the Adviser has agreed to reimburse EQL an amount equal to the distribution fee received by ADI from the Underlying Sector ETFs attributable to EQL’s investment in the Underlying Sector ETFs, for so long as for so long as APSD acts as distributor to EQL or ADI, or an affiliate, acts as distributor to the Underlying Sector ETFs.
The Independent Trustees reviewed the comparative fee information, including data from Lipper Analytical Services (“Lipper”). The Independent Trustees noted that Lipper’s report contained information regarding investment performance, comparisons of cost and expense structures of EQL with other funds’ cost and expense structures, as well as comparisons of EQL’s performance with the performance during similar periods of members of an
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objectively identified peer group and related matters. The Independent Trustees noted that the advisory fee rate for EQL was higher than others in its Lipper peer group. In evaluating the comparative data, the Independent Trustees took into account, among other things, the Advisers view that, due to the differences between EQL and other funds in its Lipper peer group, the comparative data was of limited utility. The Independent Trustees also considered information provided by the Adviser about the costs and profitability of the Adviser in respect of EQL. Based on the foregoing and the other information available to them, the Independent Trustees concluded that the advisory fee for EQL was reasonable under the circumstances and in light of the quality of services provided.
The Independent Trustees also considered other benefits that may be realized by the Adviser from its relationship with EQL and concluded that the advisory fee was reasonable taking into account any such benefits. The Independent Trustees noted the relatively small size of EQL and considered whether there have been economies of scale with respect to management of EQL, whether EQL has appropriately benefited from any economies of scale, and whether the fee is reasonable in relation to ELQ’s assets and any economies of scale that may exist. The Independent Trustees concluded that the Adviser was not realizing any economies of scale.
Based on consideration of all factors deemed relevant, the Independent Trustees determined that approval of the Advisory Agreement was in the best interests of EQL and its shareholders. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
In voting to approve the Advisory Agreement, the Trustees, including the Independent Trustees, concluded that the terms of the Advisory Agreement are reasonable and fair in light of the services performed, the fees paid by certain other funds, expenses incurred and such other matters as the Trustees considered relevant in the exercise of their reasonable business judgment.
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ALPS Equal Sector Weight ETF | Trustees & Officers | |||||
November 30, 2013 (Unaudited) |
INDEPENDENT TRUSTEES
Name, Address and Year of Birth of Trustee* | Position(s) with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of in Fund | Other Directorships Held by Trustees | |||||
Mary K. Anstine, 1940 | Trustee | Since March 2008 | Ms. Anstine was President/Chief Executive Officer of HealthONE Alliance, Denver, Colorado, and former Executive Vice President of First Interstate Bank of Denver. Ms. Anstine is also Trustee/ Director of the following: AV Hunter Trust; Colorado Uplift Board. Ms. Anstine was formerly a Director of the Trust Bank of Colorado (later purchased and now known as Northern Trust Bank), HealthONE and Denver Area Council of the Boy Scouts of America and a member of the American Bankers Association Trust Executive Committee. | 41 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co- Founder, Chief Operations Officer and Chief Financial Officer of Green Alpha Advisors, LLC. Prior to joining Green Alpha Advisors, Mr. Deems was CFO and Treasurer of Forward Management, LLC, ReFlow Manage- ment Co., LLC, ReFlow Fund, LLC, a private investment fund, and Sutton Place Management, LLC, an administrative services company, from 2004 to June 2007. Prior to this, Mr. Deems served as Controller of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC and Sutton Place Management, LLC. | 41 | Mr. Deems is a Trustee of Financial Investors Trust (30 funds); ALPS Variable Investment Trust (7 funds); and Reaves Utility Income Fund. |
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ALPS Equal Sector Weight ETF | Trustees & Officers | |
November 30, 2013 (Unaudited) |
INDEPENDENT TRUSTEES Continued
Name, Address and Year of Birth of Trustee* | Position(s) with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of in Fund | Other Directorships Held by Trustees | |||||
Rick A. Pederson, 1952 | Trustee | Since March 2008 | Mr. Pederson is President, Foundation Properties, Inc. (a real estate investment management company), 1994 - present; Advisory Committee, Bow River Capital Partners (private equity management), 2003 - present; Advisor, Pauls Corporation (real estate investment management and development), 2008 - present; Chairman, Ross Consulting Group (real estate consulting services) 1983-2013; Advisory Board, Neenan Company (construction services) 2002-present; Board Member, Urban Land Conservancy (a not-for-profit organization), 2004 – present; Director, National Western Stock Show (not-for-profit organization). | 22 | Mr. Pederson is Trustee of Westcore Trust (12 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
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ALPS Equal Sector Weight ETF | Trustees & Officers | |||||
November 30, 2013 (Unaudited) |
INTERESTED TRUSTEE
Name, Address and Year of Birth of Management Trustee* | Position(s) with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustees*** | Other Directorships Held by Trustees | |||||
Thomas A. Carter, 1966 | Trustee and President | Since March 2008 | Mr. Carter joined ALPS Fund Services, Inc. (“ALPS”) in 1994 and is currently President and Director of ALPS Advisors, Inc. (“AAI”), ALPS Distributors, Inc. (“ADI”) and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”). Because of his position with AHI, ALPS, ADI, APSD and AAI, Mr. Carter is deemed an affiliate of the Fund as defined under the 1940 Act. Before joining ALPS, Mr. Carter was with Deloitte & Touché LLP, where he worked with a diverse group of clients, primarily within the financial services industry. Mr. Carter is a Certified Public Accountant and received his Bachelor of Science in Accounting from the University of Colorado at Boulder. | 29 | Mr. Carter is a Trustee of ALPS Varfiable Investment Trust (7 funds) and Princial Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services |
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ALPS Equal Sector Weight ETF | Trustees & Officers | |
November 30, 2013 (Unaudited) |
OFFICERS
Name, Address and Year of Birth of Officer* | Position(s) with Trust | Length of Time Served** | Principal Occupation(s) During Past 5 Years | |||
Melanie Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars currently serves as a Deputy Chief Compliance Officer with ALPS. Prior to joining ALPS in September 2009, Ms. Zimdars served as Principal Financial Officer, Treasurer and Secretary for the Wasatch Funds from February 2007 to December 2008. From November 2006 to February 2007, she served as Assistant Treasurer for the Wasatch Funds and served as a Senior Compliance Officer for Wasatch Advisors, Inc. since 2005. Because of her position with ALPS, Ms. Zimdars is deemed an affiliate of the Trust as defined under the 1940 Act. Ms. Zimdars is also the CCO of ALPS Variable Investment Trust, Liberty All-Star Growth Fund, Inc., Liberty All-Star Equity Fund and BPV Family of Funds. | |||
Patrick D. Buchanan, 1972
| Treasurer | Since June 2012
| Mr. Buchanan is Vice President of AAI. Mr. Buchanan joined ALPS in 2007 and because of his position with AAI, he is deemed an affiliate of the Trust as defined under the 1940 Act. Mr. Buchanan is also Treasurer of ALPS Variable Investment Trust and the Principal Real Estate Income Fund.
| |||
William Parmentier, 1952
| Vice President
| Since March 2008
| Mr. Parmentier is Chief Investment Officer, AAI (since 2006); President of the Liberty All-Star Funds (since April 1999); Senior Vice President (2005-2006), Banc of America Investment Advisors, Inc. Because of his position with AAI, Mr. Parmentier is deemed an affiliate of the Trust as defined under the 1940 Act.
| |||
Erin D. Nelson, 1977 | Secretary | Since October 2013 | Ms. Nelson is Vice President and Assistant General Counsel of AAI, ALPS Fund Services, Inc., ALPS Distributors, Inc., and ALPS Portfolio Solutions Distributor, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson has served as Secretary of the Clough Global Allocation Fund since 2004, Clough Global Equity Fund since 2005, Clough Global Opportunities Fund since 2006, Liberty All-Star Equity Fund since 2013 and Liberty All-Star Growth Fund since 2013. Ms. Nelson received her Bachelor of Arts in Political Science, magna cum laude, from the University of New Hampshire and Juris Doctorate from the University of Denver. | |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Senior Paralegal. Prior to joining ALPS, Ms. Craig was Legal Manager at Janus Capital Management LLC and served as Assistant Secretary of Janus Investment Fund, Janus Adviser Series and Janus Aspen Series. Because of her position with ALPS, Ms. Craig is deemed an affiliate of the Trust as defined under the 1940 Act. |
* | The business address of each Officer is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Officer began serving the Trust. Each Officer serves an indefinite term, until his successor is elected. |
| 27 | ALPS Equal Sector Weight ETF | www.alpsfunds.com |
Table of Contents
Table of Contents
Table of Contents
![]() | ![]() | |||
CONTENTS
2 |
3 |
4 |
5 |
8 |
9 |
10 |
11 |
12 |
17 |
Board Considerations Regarding Approval of Investment Advisory Agreement | 18 |
19 |
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Table of Contents
![]() | ![]() | PERFORMANCE OVERVIEW | ||
JEFFERIES | TR/J CRB GLOBAL COMMODITY EQUITY INDEX FUND | November 30, 2013 (Unaudited) |
The Jefferies | TR/J CRB Global commodity equity index fund is an exchange Traded fund (“ETF”), which provides exposure to the equity securities of a global universe of listed companies engaged in the production and distribution of commodities and commodity-related products and services in the agriculture, base/industrial metals, energy and precious metals sectors. The ETF seeks investment results that replicate as closely as possible, before fees and expenses, the price and yield performance of the Thomson Reuters/Jefferies CRB in-The-Ground Global Commodity Equity Index.
For the year ended November 30, 2013, the ETF’s market price decreased 0.57% and its net asset value (“NAV”) decreased 0.78%. over the same time period the ETF’s benchmark was up 0.05%.
TOP 10 HOLDINGS^ (% of Total Investments) |
| |||
Monsanto Co. | 8.0 | % | ||
Exxon Mobil Corp. | 5.2 | % | ||
Syngenta AG | 4.8 | % | ||
Deere & Co. | 4.3 | % | ||
Potash Corp. of Saskatchewan, Inc. | 3.6 | % | ||
Archer-Daniels-Midland Co. | 3.4 | % | ||
Chevron Corp. | 3.0 | % | ||
Uralkali, GDR | 2.0 | % | ||
Rio Tinto Plc | 1.9 | % | ||
BP Plc | 1.9 | % | ||
Total % of Top 10 Holdings | 38.1 | % |
^ Future holdings are subject to change
COUNTRY ALLOCATION (% of Total Investments) |
| |||
United States | 43.4 | % | ||
Canada | 12.5 | % | ||
United Kingdom | 7.4 | % | ||
Russia | 6.7 | % | ||
Switzerland | 5.1 | % | ||
Brazil | 2.7 | % | ||
Netherlands | 1.9 | % | ||
Australia | 1.6 | % | ||
France | 1.6 | % | ||
Japan | 1.5 | % | ||
Other | 15.6 | % |
AVERAGE ANNUAL TOTAL RETURN as of 11.30.13
1 Year | 3 Year | Since Inception* Annualized | ||||
Jefferies TR/J CRB Global Commodity Equity Index Fund | ||||||
NAV | -0.78% | 0.06% | 3.32% | |||
Market Price** | -0.57% | 0.05% | 3.15% | |||
Thomson Reuters/Jefferies CRB In-The-Ground Global Commodity Equity Index | 0.05% | 0.75% | 4.09% | |||
S&P GSCI Commodity Index | -3.71% | 1.59% | 2.69% | |||
S&P 500® Index | 30.30% | 17.73% | 15.74% |
Total Expense Ratio (per the current prospectus) 0.65%
* The Fund commenced Investment Operations on September 18, 2009 with an Inception Date, the first day of trading on the Exchange, of September 21, 2009.
** Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times.
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit WWW.ALPSFUNDS.COM.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
Thomson Reuters/Jefferies CRB In-The-Ground Global Commodity Equity Index: measures the performance of equity securities of companies engaged in the production and distribution of certain commodities and commodity-related products. S&P GSCI Commodity Index: A composite index of commodity sector returns which represents a broadly diversified, unleveraged, long-only position in commodity futures. S&P 500® Index: the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices. Index return does not represent fund return. An investor can not invest directly in an index.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT as of 11.30.13
Comparison of Change in Value of a hypothetical $10,000 investment in the Jefferies | TR/J CRB Global Commodity Equity Index Fund.
![]() | The chart represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
2 | Annual Report | November 30, 2013 | ||
Table of Contents
![]() | ![]() | DISCLOSURE OF FUND EXPENSES | ||
For the Year Ended November 30, 2013 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, and (2) ongoing costs, including management fees and other Fund expenses. These examples are 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 funds. The example is based on an investment of $1,000 invested at the beginning of the (six month) period and held through November 30, 2013.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred 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 first table under the heading entitled “Expenses Paid During the Period” to estimate the expenses attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second 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 costs were included, your costs would have been higher.
Beginning Account Value 06/01/13 | Ending Account Value | Expense Ratio(a) | Expenses Paid During the Period 11/30/13(b) | |||||||||||||||||
Jefferies | TR/J CRB Global Commodity Equity Index Fund | ||||||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,012.10 | 0.65 | % | $ | 3.28 | ||||||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.81 | 0.65 | % | $ | 3.29 |
(a) | The Fund’s expense ratio has been based on the Fund’s most recent fiscal half-year expenses. |
(b) | The example in the table above is equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (183), then divided by 365. |
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Table of Contents
![]() | ![]() | REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
To the Board of Trustees and Shareholders of ALPS ETF Trust:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Jefferies | TR/J Global CRB Global Commodity Equity Index Fund, one of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2013, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods presented. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2013, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Jefferies | TR/J Global CRB Global Commodity Equity Index Fund of the ALPS ETF Trust as of November 30, 2013, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 27, 2014
4 | Annual Report | November 30, 2013 | ||
Table of Contents
![]() | ![]() | SCHEDULE OF INVESTMENTS | ||
JEFFERIES | TR/J CRB GLOBAL COMMODITY EQUITY INDEX FUND | November 30, 2013 |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.48%) |
| |||||||
Australia (1.59%) | ||||||||
Fortescue Metals Group, Ltd. | 27,312 | $ | 141,209 | |||||
Iluka Resources, Ltd. | 7,300 | 58,275 | ||||||
Incitec Pivot, Ltd. | 133,418 | 314,539 | ||||||
Newcrest Mining, Ltd. | 31,771 | 222,392 | ||||||
Nufarm, Ltd. | 18,390 | 81,856 | ||||||
Woodside Petroleum, Ltd. | 5,032 | 171,306 | ||||||
|
| |||||||
989,577 | ||||||||
|
| |||||||
Bermuda (1.50%) | ||||||||
Bunge, Ltd. | 11,300 | 905,356 | ||||||
Sinofert Holdings, Ltd. | 158,000 | 27,106 | ||||||
|
| |||||||
932,462 | ||||||||
|
| |||||||
Brazil (2.72%) | ||||||||
Companhia Siderurgica Nacional SA, ADR | 26,893 | 140,382 | ||||||
Gerdau SA, ADR | 21,097 | 163,291 | ||||||
Petroleo Brasileiro SA, ADR | 29,328 | 467,488 | ||||||
Vale SA, ADR | 60,042 | 919,843 | ||||||
|
| |||||||
1,691,004 | ||||||||
|
| |||||||
Canada (12.47%) | ||||||||
Agnico-Eagle Mines, Ltd. | 7,264 | 198,050 | ||||||
Agrium, Inc. | 12,057 | 1,084,909 | ||||||
Barrick Gold Corp. | 41,822 | 693,130 | ||||||
Canadian Natural Resources, Ltd. | 8,187 | 266,441 | ||||||
Detour Gold Corp.* | 5,731 | 22,276 | ||||||
Eldorado Gold Corp. | 29,693 | 178,289 | ||||||
EnCana Corp. | 6,122 | 117,076 | ||||||
First Quantum Minerals, Ltd. | 10,739 | 179,093 | ||||||
Goldcorp, Inc. | 33,951 | 755,674 | ||||||
IAMGOLD Corp. | 15,535 | 67,985 | ||||||
Kinross Gold Corp. | 47,886 | 224,885 | ||||||
New Gold, Inc.* | 20,442 | 106,005 | ||||||
Osisko Mining Corp.* | 18,154 | 73,979 | ||||||
Pan American Silver Corp. | 6,200 | 66,169 | ||||||
Potash Corp. of Saskatchewan, Inc. | 70,691 | 2,214,104 | ||||||
Silver Wheaton Corp. | 14,813 | 309,211 | ||||||
Suncor Energy, Inc. | 11,864 | 406,651 | ||||||
Teck Resources, Ltd., Class B | 8,514 | 204,887 | ||||||
TransCanada Corp. | 5,584 | 246,210 | ||||||
Turquoise Hill Resources, Ltd.* | 15,616 | 63,784 | ||||||
Yamana Gold, Inc. | 31,468 | 282,236 | ||||||
|
| |||||||
7,761,044 | ||||||||
|
| |||||||
Cayman Islands (0.00%)(a) | ||||||||
Chaoda Modern Agriculture Holdings, Ltd.* | 348,000 | 449 | ||||||
|
| |||||||
Chile (1.17%) | ||||||||
Enersis SA | 20,030 | 482,011 | ||||||
Sociedad Quimica y Minera de Chile SA, Sponsored ADR | 9,919 | 248,074 | ||||||
|
| |||||||
730,085 | ||||||||
|
|
Security Description | Shares | Value | ||||||
China (1.02%) | ||||||||
China BlueChemical, Ltd., Class H | 126,000 | $ | 85,489 | |||||
China Petroleum & Chemical Corp., Class H | 188,137 | 161,623 | ||||||
China Shenhua Energy Co., Ltd., Class H | 28,216 | 95,721 | ||||||
Jiangxi Copper Co., Ltd., Class H | 22,000 | 42,680 | ||||||
PetroChina Co., Ltd., Class H | 162,119 | 191,761 | ||||||
Zijin Mining Group Co., Ltd., Class H | 251,000 | 58,278 | ||||||
|
| |||||||
635,552 | ||||||||
|
| |||||||
France (1.57%) | ||||||||
Total SA | 16,097 | 975,413 | ||||||
|
| |||||||
Germany (0.92%) | ||||||||
K+S AG | 14,163 | 396,250 | ||||||
ThyssenKrupp AG* | 6,808 | 178,216 | ||||||
|
| |||||||
574,466 | ||||||||
|
| |||||||
Hong Kong (0.54%) | ||||||||
China Agri-Industries Holdings, Ltd. | 158,000 | 80,706 | ||||||
CNOOC, Ltd. | 125,987 | 258,067 | ||||||
|
| |||||||
338,773 | ||||||||
|
| |||||||
India (0.81%) | ||||||||
Reliance Industries, Ltd., Sponsored GDR(b) | 12,696 | 347,109 | ||||||
Sesa Sterlite, Ltd. | 13,638 | 157,519 | ||||||
|
| |||||||
504,628 | ||||||||
|
| |||||||
Israel (0.72%) | ||||||||
Israel Chemicals, Ltd. | 35,169 | 299,765 | ||||||
The Israel Corp., Ltd.* | 288 | 148,089 | ||||||
|
| |||||||
447,854 | ||||||||
|
| |||||||
Japan (1.54%) | ||||||||
INPEX Corp. | 6,600 | 76,537 | ||||||
JFE Holdings, Inc. | 9,300 | 208,977 | ||||||
Kobe Steel, Ltd.* | 45,000 | 77,310 | ||||||
Nippon Steel & Sumitomo Metal Corp. | 146,000 | 473,151 | ||||||
Sumitomo Metal Mining Co., Ltd. | 9,000 | 119,742 | ||||||
|
| |||||||
955,717 | ||||||||
|
| |||||||
Jersey (1.06%) | ||||||||
Glencore International Plc | 66,562 | 337,477 | ||||||
Polymetal International Plc | 6,924 | 60,445 | ||||||
Randgold Resources, Ltd. | 3,654 | 259,851 | ||||||
|
| |||||||
657,773 | ||||||||
|
| |||||||
Luxembourg (0.50%) | ||||||||
ArcelorMittal New York Registered Shares | 18,056 | 311,099 | ||||||
|
|
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Table of Contents
![]() | ![]() | SCHEDULE OF INVESTMENTS | ||
JEFFERIES | TR/J CRB GLOBAL COMMODITY EQUITY INDEX FUND | November 30, 2013 |
Security Description | Shares | Value | ||||||
Malaysia (1.44%) | ||||||||
Genting Plantations BHD | 15,900 | $ | 54,266 | |||||
IOI Corp., BHD | 230,600 | 403,532 | ||||||
Kuala Lumpur Kepong BHD | 32,320 | 246,687 | ||||||
PPB Group BHD | 41,100 | 189,496 | ||||||
|
| |||||||
893,981 | ||||||||
|
| |||||||
Mauritius (0.39%) | ||||||||
Golden Agri-Resources, Ltd. | 527,000 | 241,483 | ||||||
|
| |||||||
Mexico (0.54%) | ||||||||
Grupo Mexico SAB de CV, Series B | 68,884 | 202,481 | ||||||
Industrias Penoles SAB de CV | 5,299 | 134,479 | ||||||
|
| |||||||
336,960 | ||||||||
|
| |||||||
Netherlands (1.90%) | ||||||||
Nutreco NV | 5,540 | 265,957 | ||||||
Schlumberger, Ltd. | 10,377 | 917,534 | ||||||
|
| |||||||
1,183,491 | ||||||||
|
| |||||||
Norway (1.03%) | ||||||||
Norsk Hydro ASA | 14,596 | 62,369 | ||||||
Yara International ASA | 13,190 | 575,448 | ||||||
|
| |||||||
637,817 | ||||||||
|
| |||||||
Peru (0.22%) | ||||||||
Companhia de Minas Buenaventura SA, ADR | 11,563 | 136,443 | ||||||
|
| |||||||
Russia (6.67%) | ||||||||
Gazprom OAO, ADR | 93,437 | 806,361 | ||||||
LUKOIL OAO, Sponsored ADR | 6,716 | 416,392 | ||||||
Mechel Steel Group, Sponsored ADR* | 7,639 | 16,042 | ||||||
MMC Norilsk Nickel JSC, ADR | 29,158 | 439,703 | ||||||
NovaTek OAO, Sponsored GDR(c) | 2,401 | 315,731 | ||||||
Phosagro OAO, GDR(c) | 31,887 | 313,290 | ||||||
Rosneft Oil Co., GDR(c) | 83,592 | 600,191 | ||||||
Severstal OAO, GDR(c) | 3,230 | 29,555 | ||||||
Uralkali, GDR(c) | 48,183 | 1,212,284 | ||||||
|
| |||||||
4,149,549 | ||||||||
|
| |||||||
Singapore (0.95%) | ||||||||
Olam International, Ltd. | 117,000 | 143,587 | ||||||
Wilmar International, Ltd. | 159,000 | 446,013 | ||||||
|
| |||||||
589,600 | ||||||||
|
| |||||||
South Africa (1.33%) | ||||||||
Anglo Platinum, Ltd.* | 2,064 | 81,642 | ||||||
AngloGold Ashanti, Ltd., Sponsored ADR | 16,118 | 219,044 | ||||||
Gold Fields, Ltd. | 27,237 | 108,860 | ||||||
Harmony Gold Mining Co., Ltd. | 6,433 | 18,614 | ||||||
Impala Platinum Holdings, Ltd. | 17,976 | 208,639 | ||||||
Kumba Iron Ore, Ltd. | 631 | 24,643 |
Security Description | Shares | Value | ||||||
South Africa continued | ||||||||
Sasol, Ltd. | 3,334 | $ | 164,961 | |||||
|
| |||||||
826,403 | ||||||||
|
| |||||||
South Korea (0.64%) | ||||||||
POSCO | 1,289 | 398,892 | ||||||
|
| |||||||
Spain (0.33%) | ||||||||
Repsol YPF SA | 7,749 | 203,533 | ||||||
|
| |||||||
Switzerland (5.05%) | ||||||||
Syngenta AG | 7,653 | 3,005,812 | ||||||
Transocean, Ltd. | 2,659 | 133,960 | ||||||
|
| |||||||
3,139,772 | ||||||||
|
| |||||||
Taiwan (0.47%) | ||||||||
China Steel Corp. | 196,638 | 169,103 | ||||||
Taiwan Fertilizer Co., Ltd. | 52,400 | 122,174 | ||||||
|
| |||||||
291,277 | ||||||||
|
| |||||||
United Kingdom (7.36%) | ||||||||
Anglo American Plc | 22,569 | 498,185 | ||||||
Antofagasta Plc | 6,378 | 82,865 | ||||||
BG Group Plc | 25,517 | 521,296 | ||||||
BP Plc | 148,469 | 1,170,979 | ||||||
Lonmin Plc* | 17,652 | 90,379 | ||||||
Rio Tinto Plc | 22,649 | 1,208,740 | ||||||
Royal Dutch Shell Plc, Class A | 30,174 | 1,009,640 | ||||||
|
| |||||||
4,582,084 | ||||||||
|
| |||||||
United States (43.03%) | ||||||||
AGCO Corp. | 7,426 | 432,787 | ||||||
Alcoa, Inc. | 19,717 | 189,480 | ||||||
Allegheny Technologies, Inc. | 2,059 | 68,400 | ||||||
Allied Nevada Gold Corp.* | 4,114 | 13,659 | ||||||
American Vanguard Corp. | 2,032 | 58,379 | ||||||
Anadarko Petroleum Corp. | 3,950 | 350,839 | ||||||
Apache Corp. | 3,047 | 278,770 | ||||||
Archer-Daniels-Midland Co. | 52,866 | 2,127,857 | ||||||
Baker Hughes, Inc. | 3,505 | 199,645 | ||||||
Blount International, Inc.* | 37,150 | 1,130,068 | ||||||
Cabot Oil & Gas Corp. | 3,174 | 109,344 | ||||||
Cameron International Corp.* | 1,810 | 100,256 | ||||||
CF Industries Holdings, Inc. | 4,684 | 1,018,208 | ||||||
Chesapeake Energy Corp. | 4,657 | 125,134 | ||||||
Chevron Corp. | 15,197 | 1,860,721 | ||||||
Clear Channel Outdoor Holdings, Inc. | 7,300 | 147,986 | ||||||
Cliffs Natural Resources, Inc. | 2,808 | 70,228 | ||||||
Coeur Mining, Inc.* | 4,192 | 46,196 | ||||||
ConocoPhillips | 9,588 | 698,006 | ||||||
Deere & Co. | 31,355 | 2,641,345 | ||||||
Devon Energy Corp. | 3,011 | 182,527 | ||||||
Ensco Plc, Class A | 1,822 | 107,644 | ||||||
EOG Resources, Inc. | 2,157 | 355,905 | ||||||
Exxon Mobil Corp. | 34,635 | 3,237,680 |
6 | Annual Report | November 30, 2013 | ||
Table of Contents
![]() | ![]() | SCHEDULE OF INVESTMENTS | ||
JEFFERIES | TR/J CRB GLOBAL COMMODITY EQUITY INDEX FUND | November 30, 2013 |
Security Description | Shares | Value | ||||||
United States continued |
| |||||||
Freeport-McMoRan Copper & Gold, Inc. | 18,860 | $ | 654,253 | |||||
Halliburton Co. | 6,781 | 357,223 | ||||||
Hecla Mining Co. | 14,276 | 42,114 | ||||||
Hess Corp. | 2,277 | 184,733 | ||||||
Ingredion, Inc. | 6,328 | 437,644 | ||||||
Intrepid Potash, Inc. | 4,423 | 68,335 | ||||||
Kinder Morgan, Inc. | 5,218 | 185,448 | ||||||
Marathon Oil Corp. | 5,574 | 200,887 | ||||||
Monsanto Co. | 43,579 | 4,938,808 | ||||||
The Mosaic Co. | 22,699 | 1,087,282 | ||||||
National Oilwell Varco, Inc. | 3,383 | 275,715 | ||||||
Newmont Mining Corp. | 20,585 | 511,126 | ||||||
Noble Energy, Inc. | 2,802 | 196,812 | ||||||
Nucor Corp. | 5,805 | 296,403 | ||||||
Occidental Petroleum Corp. | 6,318 | 599,957 | ||||||
Pioneer Natural Resources Co. | 1,096 | 194,814 | ||||||
Royal Gold, Inc. | 2,642 | 119,128 | ||||||
Seaboard Corp. | 23 | 64,975 | ||||||
Southern Copper Corp. | 2,846 | 71,435 | ||||||
Southwestern Energy Co.* | 2,831 | 109,446 | ||||||
Spectra Energy Corp. | 5,231 | 175,500 | ||||||
United States Steel Corp. | 2,637 | 70,698 | ||||||
Valero Energy Corp. | 4,225 | 193,167 | ||||||
The Williams Co., Inc. | 5,361 | 188,814 | ||||||
|
| |||||||
26,775,781 | ||||||||
|
| |||||||
TOTAL COMMON STOCKS (Cost $71,028,991) |
| 61,892,962 | ||||||
|
| |||||||
7 Day Yield | Shares | Value | ||||||
SHORT TERM INVESTMENTS (0.29%) |
| |||||||
Dreyfus Treasury Prime Cash Management, Institutional Class 0.000%(d) | 182,119 | 182,119 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $182,119) |
| 182,119 | ||||||
|
| |||||||
TOTAL INVESTMENTS (99.77%) (Cost $71,211,110) |
| 62,075,081 | ||||||
NET OTHER ASSETS AND LIABILITIES (0.23%) |
| 141,549 | ||||||
|
| |||||||
NET ASSETS (100.00%) |
| $ | 62,216,630 | |||||
|
|
* | Non-income producing security. |
(a) | Less than 0.005% of Net Assets. |
(b) | Security exempt from registration under Rule 144A of the Securities Act of 1933. This security may be resold in transactions exempt from registration, normally to qualified institutional buyers. At period end, the market value of this security restricted under Rule 144A was $347,109, representing 0.56% of the Fund’s net assets. |
(c) | These securities initially sold to other parties pursuant to Regulation S under the 1933 Act and subsequently resold to the Fund. At the period end, the aggregate market values of these securities were $2,471,051, representing 3.97% of the Fund’s net assets. |
(d) | Less than 0.0005%. |
Common Abbreviations:
ADR - | American Depositary Receipt. | |
AG - | Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e., owned by shareholders. | |
ASA - | Allmennaksjeselskap is the Norwegian term for public limited company. | |
BHD - | Berhad (in Malaysia; equivalent to Public Limited Company). | |
GDR - | Global Depository Receipt. | |
JSC - | Joint Stock Company. | |
Ltd. - | Limited. | |
NV - | Naamloze Vennootschap is the Dutch term for a public limited liability corporation. | |
OAO - | Otkytoe Aktsionernoe Obshchestvo (open Joint Stock Corporation) is a Russian term for a stock-based corporation. | |
Plc - | Public Limited Company. | |
SA - | Generally designated corporations in various countries, mostly those employing the civil law. |
SAB de CV - A variable capital company.
See Notes to Financial Statements.
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![]() | ![]() | STATEMENT OF ASSETS & LIABILITIES | ||
JEFFERIES | TR/J CRB GLOBAL COMMODITY EQUITY INDEX FUND | November 30, 2013 |
ASSETS: | ||||
Investments, at value | $ | 62,075,081 | ||
Foreign currency, at value (Cost $15,663) | 15,593 | |||
Foreign tax reclaims | 49,352 | |||
Dividends receivable | 115,271 | |||
Total Assets | 62,255,297 | |||
LIABILITIES: | ||||
Payable for investments purchased | 4,682 | |||
Payable to adviser | 33,505 | |||
Overdraft payable | 480 | |||
Total Liabilities | 38,667 | |||
NET ASSETS | $ | 62,216,630 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 78,522,096 | ||
Undistributed net investment income | 157,616 | |||
Accumulated net realized loss on investments and foreign currency transactions | (7,329,905 | ) | ||
Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies | (9,133,177 | ) | ||
NET ASSETS | $ | 62,216,630 | ||
INVESTMENTS, AT COST | $ | 71,211,110 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 62,216,630 | ||
Shares of beneficial interest outstanding (Unlimited number of shares, par value $0.01 per share) | 1,450,020 | |||
Net Asset Value, offering and redemption price per share | $ | 42.91 |
See Notes to Financial Statements.
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![]() | ![]() | STATEMENT OF OPERATIONS | ||
JEFFERIES | TR/J CRB GLOBAL COMMODITY EQUITY INDEX FUND |
For the Year Ended | ||||
INVESTMENT INCOME: | ||||
Dividends(a) | $ | 1,738,018 | ||
Total Investment Income | 1,738,018 | |||
EXPENSES: | ||||
Investment adviser fee | 449,391 | |||
Total Expenses | 449,391 | |||
NET INVESTMENT INCOME | 1,288,627 | |||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized loss on investments | (1,609,199) | |||
Net realized loss on foreign currency transactions | (7,832) | |||
Net change in unrealized depreciation on investments | (54,768) | |||
Net change in unrealized appreciation on translation of assets and liabilities denominated in foreign currencies | 998 | |||
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (1,670,801) | |||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (382,174) | ||
(a) | Net of foreign tax withholdings of $131,142. |
See Notes to Financial Statements.
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![]() | ![]() | STATEMENTS OF CHANGES IN NET ASSETS | ||
JEFFERIES | TR/J CRB GLOBAL COMMODITY EQUITY INDEX FUND |
For the Year Ended November 30, 2013 | For the Year Ended November 30, 2012 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,288,627 | $ | 1,339,773 | ||||
Net realized loss on investments and foreign currency transactions | (1,617,031 | ) | (1,686,119 | ) | ||||
Net change in unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies | (53,770 | ) | (397,803 | ) | ||||
Net decrease in net assets resulting from operations | (382,174 | ) | (744,149 | ) | ||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (1,333,070 | ) | (1,276,823 | ) | ||||
Total distributions | (1,333,070 | ) | (1,276,823 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | – | 9,514,413 | ||||||
Cost of shares redeemed | (13,267,466 | ) | (21,833,445 | ) | ||||
Net decrease from share transactions | (13,267,466 | ) | (12,319,032 | ) | ||||
Net decrease in net assets | (14,982,710 | ) | (14,340,004 | ) | ||||
NET ASSETS: | ||||||||
Beginning of year | 77,199,340 | 91,539,344 | ||||||
End of year * | $ | 62,216,630 | $ | 77,199,340 | ||||
*Including undistributed net investment income of: | $ | 157,616 | $ | 250,841 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 1,750,020 | 2,050,017 | ||||||
Shares sold | 0 | 200,003 | ||||||
Shares redeemed | (300,000 | ) | (500,000 | ) | ||||
Shares outstanding, end of year | 1,450,020 | 1,750,020 | ||||||
See Notes to Financial Statements.
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![]() | ![]() | FINANCIAL HIGHLIGHTS | ||
JEFFERIES | TR/J CRB GLOBAL COMMODITY EQUITY INDEX FUND For a Share Outstanding Throughout the Periods Presented |
For the Year Ended 2013 | For the Year Ended 2012 | For the Period January 1, 2011 to November 30, 2011(a) | For the Year Ended December 31, 2010 | For the Period Ended 2009 (inception) through 2009 | ||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 44.11 | $ | 44.65 | $ | 49.33 | $ | 42.82 | $ | 39.74 | ||||||||||
INCOME/(LOSS) FROM INVESTMENTOPERATIONS: | ||||||||||||||||||||
Net investment income | 0.81 | (b) | 0.71 | (b) | 0.58 | (b) | 0.46 | (b) | 0.12 | |||||||||||
Net realized and unrealized gain/(loss) | (1.17 | ) | (0.57 | ) | (4.78 | ) | 6.54 | 3.08 | ||||||||||||
Total from investment operations | (0.36 | ) | 0.14 | (4.20 | ) | 7.00 | 3.20 | |||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||
From net investment income | (0.84 | ) | (0.68 | ) | (0.48 | ) | (0.49 | ) | (0.12 | ) | ||||||||||
Total distributions | (0.84 | ) | (0.68 | ) | (0.48 | ) | (0.49 | ) | (0.12 | ) | ||||||||||
NET INCREASE/(DECREASE) IN NET ASSET VALUE | (1.20 | ) | (0.54 | ) | (4.68 | ) | 6.51 | 3.08 | ||||||||||||
NET ASSET VALUE, END OF YEAR | $ | 42.91 | $ | 44.11 | $ | 44.65 | $ | 49.33 | $ | 42.82 | ||||||||||
TOTAL RETURN(c) | (0.78 | )% | 0.35 | % | (8.56 | )% | 16.60 | % | 8.06 | % | ||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||
Net assets, end of year (000s) | $ | 62,217 | $ | 77,199 | $ | 91,539 | $ | 111,001 | $ | 70,658 | ||||||||||
RATIOS TO AVERAGE NET ASSETS | ||||||||||||||||||||
Expenses | 0.65 | % | 0.65 | % | 0.65 | %(d) | 0.65 | % | 0.65 | %(d) | ||||||||||
Net investment income | 1.86 | % | 1.61 | % | 1.29 | %(d) | 1.09 | % | 1.53 | %(d) | ||||||||||
PORTFOLIO TURNOVER RATE(e) | 20 | % | 13 | % | 10 | % | 18 | % | 7 | % |
(a) | Effective March 7, 2011, the Board approved changing the fiscal year end of the Fund from December 31 to November 30. |
(b) | Based on average shares outstanding during the period. |
(c) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at actual reinvestment prices. Total return calculated for a period less than one year is not annualized. |
(d) | Annualized. |
(e) | Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. . |
See Notes to Financial Statements.
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![]() | ![]() | NOTES TO FINANCIAL STATEMENTS | ||
November 30, 2013 |
1. ORGANIZATION
The ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). As of November 30, 2013, the Trust consists of nineteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the Jefferies | TR/J CRB Global Commodity Equity Index Fund (the “Fund”). The investment objective of the Fund is to seek investment results that replicate as closely as possible, before fees and expenses, the price and yield of the Thomson Reuters/Jefferies CRB In-The-Ground Global Commodity Equity Index.
The Fund’s Shares (“Shares”) are listed on the New York Stock Exchange (“NYSE”) Arca. The Fund issues and redeems Shares, at net asset value (“NAV”) in blocks of 50,000 Shares, each of which is called a “Creation Unit.” Creation Units are issued and redeemed principally in-kind for securities included in a specified index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates.
A. Portfolio Valuation
The Fund’s NAV is determined daily, as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the National Association of Securities Dealers Automated Quotation (“NASDAQ”) exchange are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and asked prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the closing bid prices.
The Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Fund may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the closing sale prices on the applicable exchange and fair value prices may not reflect the actual value of a security. A variety of factors may be considered in determining the fair value of such securities.
B. Foreign Securities
The Fund may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible reevaluation of currencies, the inability to repatriate foreign currency, less complete financial information about companies and possible future adverse political and economic developments.
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![]() | ![]() | NOTES TO FINANCIAL STATEMENTS | ||
November 30, 2013 |
Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.
C. Foreign Currency Translation
The books and records of the Fund are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. The portion of realized and unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed and is included in realized and unrealized gains or losses on investments, when applicable.
D. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
E. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid quarterly or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually.
F. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP . Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations.
For the year ended November 30, 2013, permanent book and tax differences resulting primarily from differing treatment of foreign currency and in-kind transactions were identified and reclassified among the components of the Fund’s net assets as follows:
Undistributed Net Investment | Accumulated Net Realized Loss | Paid-in Capital | ||||||||||
Jefferies | TR/J CRB Global Commodity Equity Index Fund | $ | (48,782 | ) | $ | (927,195 | ) | $ | 975,977 |
Under the Regulated Investment Company Modernization Act of 2010 (“the Modernization Act”), net capital losses recognized in tax years beginning after December 22, 2010 may be carried forward indefinitely, and the character of the losses is retained as short-term and/or long-term. Under the law in effect prior to the Modernization Act, net capital losses were carried forward for eight years and treated as short-term. As a transition rule, the Modernization Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term losses rather than being considered all short-term as under previous law.
At November 30, 2013, the Fund had available for tax purposes unused pre-enactment capital loss carryforwards as follows:
Expiring November 30, 2018 | ||
Jefferies | TR/J CRB Global Commodity Equity Index Fund | $ 734,357 |
At November 30, 2013, the Fund had available for tax purposes unused post-enactment capital loss carryforwards as follows:
Short-Term | Long-Term | |||
Jefferies | TR/J CRB Global Commodity Equity Index Fund | $ 1,671,009 | $ 4,489,109 |
Distributions from net investment income and capital gains are determined in accordance with income tax regulations, which may differ from U.S. GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterization of distributions made by the Fund.
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![]() | ![]() | NOTES TO FINANCIAL STATEMENTS | ||
November 30, 2013 |
The tax character of the distributions paid was as follows:
Year Ended November 30, 2013 Distributions paid from: Ordinary Income | Year Ended November 30, 2012 Distributions paid from: Ordinary Income | |||||||
Jefferies | TR/J CRB Global Commodity Equity Index Fund | $ | 1,333,070 | $ | 1,276,823 |
As of November 30, 2013, the components of distributable earnings on a tax basis for the Fund were as follows:
Jefferies | TR/J CRB Global Commodity Equity Index Fund | ||||
Undistributed net investment income | $ | 163,603 | ||
Accumulated capital losses | (6,894,475 | ) | ||
Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies | (9,574,594 | ) | ||
| ||||
Total | $ | (16,305,466 | ) | |
|
As of November 30, 2013, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Jefferies | TR/J CRB Global Commodity Equity Index Fund | ||||
Cost of investments for income tax purposes | $ | 71,652,527 | ||
| ||||
Gross Appreciation (excess of value over tax cost) | $ | 5,897,167 | ||
Gross Depreciation (excess of tax cost over value) | (15,474,613 | ) | ||
Net unrealized appreciation of foreign currency | 2,852 | |||
| ||||
Net Unrealized Depreciation | $ | (9,574,594 | ) | |
|
The differences between book-basis and tax-basis are due to the deferral of losses from wash sales and Passive Foreign Investment Company (“PFIC”) adjustments.
G. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies.
The Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the year ended November 30, 2013, the fund did not have a liability for any unrecognized tax benefits. The fund files U.S. federal, state, and local tax returns as required. The fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is generally three years after the filing of the tax return Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
H. Fair Value Measurements
The Fund discloses the classification of fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
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![]() | ![]() | NOTES TO FINANCIAL STATEMENTS | ||
November 30, 2013 |
Valuation techniques used to value the Fund’s investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy.
Investments in open-end mutual funds are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; | |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and | |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value the Funds investments at November 30, 2013:
Investments in Securities at Value* | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant | Total | ||||||||||||
| ||||||||||||||||
Common Stocks | ||||||||||||||||
Cayman Islands | $ | – | $ | 449 | $ | – | $ | 449 | ||||||||
Other | 61,892,513 | – | – | 61,892,513 | ||||||||||||
Short Term Investments | 182,119 | – | – | 182,119 | ||||||||||||
| ||||||||||||||||
TOTAL | $ | 62,074,632 | $ | 449 | $ | – | $ | 62,075,081 | ||||||||
|
* | For detailed country descriptions, see the accompanying Schedule of Investments. |
The Fund recognizes transfers between levels as of the end of the fiscal year. For the year ended November 30, 2013, the Fund did not have any transfers between Level 1 and Level 2 securities. The Fund did not have any securities which used significant unobservable inputs (Level 3) in determining fair value.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Investment Adviser”) acts as the Fund’s investment adviser pursuant to an advisory agreement with the Trust on behalf of the Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Fund pays the Investment Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.65% of the Fund’s average daily net assets. From time to time, the Investment Adviser may waive all or a portion of its fee.
Out of the unitary management fee, the Investment Adviser pays substantially all expenses of the Fund, including the licensing fee of the Index provider, and the cost of transfer agency, custody, fund administration, legal, audit, trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Fund’s business. In addition, the Investment Adviser’s unitary management fee is designed to compensate the Investment Adviser for providing services for the Fund.
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![]() | ![]() | NOTES TO FINANCIAL STATEMENTS | ||
November 30, 2013 |
ALPS Fund Services, Inc. (“ALPS”), an affiliate of the Investment Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Investment Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) is paid a quarterly retainer of $5,000, $3,750 for each regularly scheduled Board meeting attended and $1,500 for each special meeting held outside of regularly scheduled meetings.
4. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 2013, the cost of purchases and proceeds from sales of investment securities, excluding short-term investments and in-kind transactions, were as follows:
Purchases | Sales | |||
Jefferies | TR/J CRB Global Commodity Equity Index Fund | $ 13,853,144 | $ 14,254,171 |
For the year ended November 30, 2013, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Purchases | Sales | |||
Jefferies | TR/J CRB Global Commodity Equity Index Fund | $ 0 | $ 12,885,785 |
Gains on in-kind transactions are not considered taxable for federal income tax purposes.
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Fund. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the net asset value per unit 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 AP or as a result of other market circumstances.
6. INDEMNIFICATIONS
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
7. NEW ACCOUNTING PRONOUNCEMENTS
In June 2013, the FASB issued ASU No. 2013-08, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The FASB standard identifies characteristics a company must assess to determine whether it is considered an investment company for financial reporting purposes. This ASU is effective for fiscal years beginning after December 15, 2013. The Fund is currently reviewing the requirements and believes the adoption of this ASU will not have a material impact on its financial statements.
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![]() | ![]() | ADDITIONAL INFORMATION | ||
November 30, 2013 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
A description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies and information regarding how the Fund voted proxies related to portfolio securities during the most recent 12-month period ended June 30th is available without charge, (1) on the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov; (2) upon request, by calling (toll-free) 1-866-513-5856; and (3) on the Trust’s website located at http://www.alpsfunds.com.
PORTFOLIO HOLDINGS
The Trust will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q will be available (1) on the SEC’s website at http://www.sec.gov; (2) by calling (toll-free) 1-866-513-5856; (3) on the Trust’s website located at http://www.alpsfunds.com; and (4) for review and copying at the SEC’s Public Reference Room (“PRR”) in Washington D.C. Information regarding the operation of the PRR may be obtained by calling (toll-free) 1-800-732-0330.
TAX DESIGNATIONS
Pursuant to Section 853(c) of the Internal Revenue Code, the Fund designates the following:
Foreign Taxes Paid | Foreign Source Income | |||||||
Jefferies TR/J CRB Global Commodity Equity Index Fund | $ | 120,533 | $ | 1,261,879 |
The Fund designates the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2012:
Qualified Dividend Income | Qualified Received Deduction | |||
Jefferies TR/J CRB Global Commodity Equity Index Fund | 100.00% | 48.49% |
In early 2013, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2012 via Form 1099. The Fund will notify shareholders in early 2014 of amounts paid to them by the Funds, if any, during the calendar year 2013.
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![]() | ![]() | BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT | ||
November 30, 2013 (Unaudited) |
At an in-person meeting held on June 10, 2013, the Board of Trustees of the Trust (the “Board”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve the continuance of the Advisory Agreement between the Trust and ALPS Advisors, Inc. (the “Adviser”) with respect to the Jefferies | TR/J CRB Global Commodity Equity Index Fund (“CRBQ”). The Independent Trustees also met separately to consider the Advisory Agreement.
In evaluating whether to approve the Advisory Agreement for CRBQ, the Board considered numerous factors, as described below.
With respect to the nature, extent and quality of the services provided by the Adviser under the Advisory Agreement, representatives from the Adviser presented the Adviser’s materials regarding consideration of renewal of the Advisory Agreement. The Independent Trustees noted that include in the Board materials were responses by the Adviser to a questionnaire drafted by legal counsel to the Trust to assist the Board in evaluating whether to renew the Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the functions performed by the Adviser, information describing the Adviser’s organization, the background and experience of the persons responsible for the day-to-day management of CRBQ and financial information regarding the Adviser. The Board reviewed information on the performance of CRBQ and the performance of its benchmark index, and evaluated the correlation and tracking error between the underlying index and CRBQ’s performance. Based on its review, the Board found that the nature and extent of services provided to CRBQ under the Advisory Agreement were appropriate and that the quality was satisfactory.
The Independent Trustees noted the services provided by the Adviser for the annual advisory fee of 0.65% of CRBQ’s average daily net assets. The Independent Trustees noted that the advisory fees for CRBQ were unitary fees pursuant to which the Adviser assumes all expenses of CRBQ (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than payments under the Advisory Agreement, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
The Independent Trustees reviewed the comparative fee information, including data from Lipper Analytical Services (“Lipper”). The Independent Trustees noted that Lipper’s report contained comparisons of cost and expense structures of CRBQ with other funds’ cost and expense structures, as well as comparisons of CRBQ’s performance with the performance during similar periods of members of a peer group identified pursuant to Lipper’s methodology. The Independent Trustees noted that the advisory fee rate for CRBQ was higher than others in its Lipper peer group but that CRBQ’s total expense ratio was only slightly higher than the peer group median. The Independent Trustees also considered information provided by the Adviser about the costs and profitability of the Adviser in respect of CRBQ. Based on the foregoing and the other information available to them, the Independent Trustees concluded that the advisory fee for CRBQ was reasonable under the circumstances and in light of the quality of services provided.
The Independent Trustees also considered other benefits that may be realized by the Adviser from its relationship with CRBQ and concluded that the advisory fee was reasonable taking into account any such benefits. The Independent Trustees noted the relatively small size of CRBQ and considered whether there have been economies of scale with respect to management of CRBQ, whether CRBQ has appropriately benefited from any economies of scale, and whether the fee is reasonable in relation to CRBQ’s assets and any economies of scale that may exist. The Independent Trustees concluded that the Adviser was not realizing any economies of scale.
Based on consideration of all factors deemed relevant, the Independent Trustees determined that approval of the Advisory Agreement was in the best interests of CRBQ and its shareholders. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
In voting to approve the Advisory Agreement, the Trustees, including the Independent Trustees, concluded that the terms of the Advisory Agreement are reasonable and fair in light of the services performed, the fees paid by certain other funds, expenses incurred and such other matters as the Trustees considered relevant in the exercise of their reasonable business judgment.
18 | Annual Report | November 30, 2013 | ||
Table of Contents
![]() | ![]() | TRUSTEES & OFFICERS | ||
November 30, 2013 (Unaudited) |
INDEPENDENT TRUSTEES
Name, Address and Year of Birth of Trustee* | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Trustees*** | Other Directorships Held by Trustees | |||||
Mary K. Anstine, 1940 | Trustee | Since March 2008 | Ms. Anstine was President/Chief Executive Officer of HealthONE Alliance, Denver, Colorado, and former Executive Vice President of First Interstate Bank of Denver. Ms. Anstine is also Trustee/Director of the following: AV Hunter Trust; Colorado Uplift Board. Ms. Anstine was formerly a Director of the Trust Bank of Colorado (later purchased and now known as Northern Trust Bank), HealthONE and Denver Area Council of the Boy Scouts of America and a member of the American Bankers Association Trust Executive Committee. | 41 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder, Chief Operations Officer and Chief Financial Officer of Green Alpha Advisors, LLC. Prior to joining Green Alpha Advisors, Mr. Deems was CFO and Treasurer of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC, a private investment fund, and Sutton Place Management, LLC, an administrative services company, from 2004 to June 2007. Prior to this, Mr. Deems served as Controller of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC and Sutton Place Management, LLC. | 41 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); and Reaves Utility Income Fund. | |||||
Rick A. Pederson, 1952 | Trustee | Since March 2008 | Mr. Pederson is President, Foundation Properties, Inc. (a real estate investment management company), 1994 – present; Advisory Committee, Bow River Capital Partners (private equity management), 2003 – present; Advisor, Pauls Corporation (real estate investment management and development), 2008 – present; Chairman, Ross Consulting Group (real estate consulting services) 1983 – 2013; Advisory Board, Neenan Company (construction services) 2002 – present; Board Member, Urban Land Conservancy (a not- for-profit organization), 2004 – present; Director, National Western Stock Show (not-for-profit organization). | 22 | Mr. Pederson is Trustee of Westcore Trust (12 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
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Table of Contents
![]() | ![]() | TRUSTEES & OFFICERS | ||
November 30, 2013 (Unaudited) |
INTERESTED TRUSTEE
Name, Address and Year of Birth of Management Trustee* | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by | Other Directorships Held by Trustees | |||||
Thomas A. Carter, 1966 | Trustee and President | Since March 2008 | Mr. Carter joined ALPS Fund Services, Inc. (“ALPS”) in 1994 and is currently President and Director of ALPS Advisors, Inc. (“AAI”), ALPS Distributors, Inc. (“ADI”) and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”). Because of his position with AHI, ALPS, ADI, APSD and AAI, Mr. Carter is deemed an affiliate of the Fund as defined under the 1940 Act. Before joining ALPS, Mr. Carter was with Deloitte & Touché LLP, where he worked with a diverse group of clients, primarily within the financial services industry. Mr. Carter is a Certified Public Accountant and received his Bachelor of Science in Accounting from the University of Colorado at Boulder. | 29 | Mr. Carter is a Trustee of ALPS Variable Investment Trust (7 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
20 | Annual Report | November 30, 2013 | ||
Table of Contents
![]() | ![]() | TRUSTEES & OFFICERS | ||
November 30, 2013 (Unaudited) |
OFFICERS
Name, Address and Year of Birth of Officer* | Position(s) Held with Trust | Length of Time Served** | Principal Occupation(s) During Past 5 Years | |||
Melanie Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars currently serves as a Deputy Chief Compliance Officer with ALPS. Prior to joining ALPS in September 2009, Ms. Zimdars served as Principal Financial Officer, Treasurer and Secretary for the Wasatch Funds from February 2007 to December 2008. From November 2006 to February 2007, she served as Assistant Treasurer for the Wasatch Funds and served as a Senior Compliance Officer for Wasatch Advisors, Inc. since 2005. Because of her position with ALPS, Ms. Zimdars is deemed an affiliate of the Trust as defined under the 1940 Act. Ms. Zimdars is also the CCO of ALPS Variable Investment Trust, Liberty All-Star Growth Fund, Inc., Liberty All-Star Equity Fund and BPV Family of Funds.
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William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer, AAI (since 2006); President of the Liberty All-Star Funds (since April 1999); Senior Vice President (2005 – 2006), Banc of America Investment Advisors, Inc. Because of his position with AAI, Mr. Parmentier is deemed an affiliate of the Trust as defined under the 1940 Act.
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Patrick D. Buchanan, 1972 | Treasurer | Since June 2012 | Mr. Buchanan is Vice President of AAI. Mr. Buchanan joined ALPS in 2007 and because of his position with AAI, he is deemed an affiliate of the Trust as defined under the 1940 Act. Mr. Buchanan is also Treasurer of ALPS Variable Investment Trust and the Principal Real Estate Income Fund.
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Erin D. Nelson, 1977 | Secretary | Since October 2013 | Ms. Nelson is Vice President and Assistant General Counsel of AAI, ALPS Fund Services, Inc., ALPS Distributors, Inc., and ALPS Portfolio Solutions Distributor, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson has served as Secretary of the Clough Global Allocation Fund since 2004, Clough Global Equity Fund since 2005, Clough Global Opportunities Fund since 2006, Liberty All-Star Equity Fund since 2013 and Liberty All-Star Growth Fund since 2013. Ms. Nelson received her Bachelor of Arts in Political Science, magna cum laude, from the University of New Hampshire and Juris Doctorate from the University of Denver.
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Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Senior Paralegal. Prior to joining ALPS, Ms. Craig was Legal Manager at Janus Capital Management LLC and served as Assistant Secretary of Janus Investment Fund, Janus Adviser Series and Janus Aspen Series. Because of her position with ALPS, Ms. Craig is deemed an affiliate of the Trust as defined under the 1940 Act.
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* | The business address of each Officer is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Officer began serving the Trust. Each Officer serves an indefinite term, until his successor is elected. |
www.alpsfunds.com | 21 | |||
Table of Contents
Table of Contents
Table of Contents
Alerian Exchange Traded Funds | Table of Contents | |||
Performance Overview | ||||
2 | ||||
5 | ||||
8 | ||||
9 | ||||
Financial Statements | ||||
Alerian MLP ETF | ||||
10 | ||||
12 | ||||
13 | ||||
14 | ||||
16 | ||||
Alerian Energy Infrastructure ETF | ||||
18 | ||||
20 | ||||
21 | ||||
22 | ||||
23 | ||||
24 | ||||
36 | ||||
Board Considerations Regarding Approval of Investment Advisory Agreement | ||||
37 | ||||
39 | ||||
41 |
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Annual | November 30, 2013 |
Table of Contents
Performance Overview | ||||
November 30, 2013 (Unaudited) |
Fund Description
The Alerian MLP ETF (the “Fund”) seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of its underlying index, the Alerian MLP Infrastructure Index (the “Index”). The Shares of the Fund are listed and trade on the New York Stock Exchange (“NYSE”) Arca under the ticker symbol AMLP. The Fund generally will invest in all of the securities that comprise the Index in proportion to their weightings in the Index.
The Index is a rules based, modified capitalization weighted, float-adjusted index intended to give investors a means of tracking the overall performance of the United States energy infrastructure Master Limited Partnership (“MLP”) asset class. The Index is comprised of 25 energy infrastructure MLPs that earn a majority of their cash flow from the transportation and storage of energy commodities.
Performance Overview
During the twelve month period from November 30, 2012 to November 30, 2013, the Alerian MLP Infrastructure Index (AMZI) gained 24.4% on a total return basis. The index yield during this period averaged 5.7%.
During December 2012, indecision surrounding the fiscal cliff and potential tax law changes impacted MLP performance negatively by 3.3%. However, such effects were more than reversed in January when the AMZI gained +12.9% on a total return basis. Since then, MLPs have performed fairly steadily, except for a short period when the Federal Reserve announced in May that it would begin tapering its bond buying program.
Despite macroeconomic factors influencing MLP performance, the underlying distributions of index constituents continued to grow during the past year. Distributions paid to Fund holders increased from $0.256 per share in November 2012 to $0.274 per share by November 2013, representing a 7% year-over-year increase.
In 2013, MLPs announced and put into service several infrastructure assets addressing takeaway needs from various areas experiencing dramatic production growth. In the Marcellus Shale in the Northeast, natural gas pipelines were expanded, connecting lines were built to larger trunklines, and a handful of pipelines transporting natural gas liquids are either under construction or being proposed. In the Bakken Shale in North Dakota, MLPs are at the forefront of the crude-by-rail trend, constructing loading and unloading terminals along major rail lines. Moving crude via rail has allowed producers the flexibility to ship Bakken crude to favorably priced markets across the US including California, the Midwest, and the Gulf Coast.
Further down south in Mont Belvieu, Texas, many MLPs continue to build out fractionation plants and expand pipelines that carry natural gas liquids to petrochemical plants along the Gulf Coast. In addition, MLPs have emerged as the leading operators of liquefied petroleum gas (LPG) export facilities along the Gulf Coast. The oversupply of natural gas liquids domestically plus an increased demand for propane and butane overseas has created favorable opportunities for MLPs to expand and built out additional export docks and ancillary facilities.
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Table of Contents
Alerian MLP ETF | Performance Overview | |||
November 30, 2013 (Unaudited) |
An energy revolution is taking place in the United States through directional drilling and hydraulic fracturing, and recoverable oil and gas reserves are at levels not seen in decades. Industry executives and analysts estimate that the US will be net energy independent sometime in the next 10 years (Source: Internal Energy Agency 2013). The MLP-owned energy infrastructure assets, including pipelines, storage facilities, and processing plants, are the means by which the reserves and production in supply basins make their way to demand centers.
With toll-road business models anchored by inflation-indexed tariff increases and billions of dollars of infrastructure opportunities over the next few decades, we believe MLPs continue to represent a compelling investment opportunity for investors seeking attractive risk-adjusted returns.
Alerian MLP ETF Performance as of November 30, 2013
1 Year | 3 Year | Since Inception Annualized* | ||||
NAV | 15.16% | 10.27% | 11.80% | |||
Market Price** | 15.09% | 10.27% | 11.80% | |||
Alerian MLP Infrastructure Index | 24.41% | 16.92% | 19.27% |
Total Expense Ratio (per the current prospectus) 4.85%.
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For most current month-end performance data please visit www.alpsfunds.com.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
* | The Fund commenced Investment Operations on August 24, 2010 with an Inception Date, the first day of trading on the Exchange, of August 25, 2010. |
** | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
The Alerian MLP Infrastructure Index is comprised of 25 midstream energy Master Limited Partnerships.
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Annual | November 30, 2013 |
Table of Contents
Alerian MLP ETF | Performance Overview | |||
November 30, 2013 (Unaudited) |
Top 10 Holdings* as of November 30, 2013
Enterprise Products Partners LP | 9.7% | |||
Kinder Morgan Energy Partners LP | 9.2% | |||
Magellan Midstream Partners LP | 7.8% | |||
Energy Transfer Partners LP | 7.1% | |||
Plains All American Pipeline LP | 6.8% | |||
MarkWest Energy Partners LP | 6.6% |
ONEOK Partners LP | 4.7% | |||
Williams Partners LP | 4.7% | |||
Buckeye Partners LP | 4.5% | |||
Enbridge Energy Partners LP | 4.2% | |||
Percent of Total Investments in | 65.3% | |||
* % of Total Investments.
Holdings are subject to change. |
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Growth of $10k as of November 30, 2013
Comparison of Change in Value of $10,000 Investment in Alerian MLP ETF and Alerian MLP Infrastructure Index.
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
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Table of Contents
Performance Overview | ||||
November 30, 2013 (Unaudited) |
Fund Description
The Alerian Energy Infrastructure ETF (NYSE: ENFR) delivers exposure to the Alerian Energy Infrastructure Index (CME: AMEI), a composite of 30 core North American energy infrastructure companies that engage in the transportation, storage, and processing of energy commodities. Index constituents belong to one of five categories US MLP affiliates (30%), energy infrastructure MLPs (25%), Canadian energy infrastructure companies (20%), US energy infrastructure companies (15%), and Canadian MLP affiliates (10%).
Performance Overview
During the period from November 1, 2013 to November 30, 2013, the Alerian Energy Infrastructure Index (AMEI) fell 0.4% on a total return basis and yielded 3.9% on average. Performance of the Fund’s holdings was impacted by overall weakness in the equity markets as well as year-end tax loss selling. Additionally, third quarter results for a number of the index’s constituents fell short of analyst expectations, which also resulted in analysts tempering their estimates for 2014.
That said, index constituents continued to announce additional growth projects and increases to their near term (2014-2015) and long-term (beyond 2015) capital investment programs. Notably, over $3 billion of pipeline projects supporting the Fort Hills oil sands project in Canada were announced. Other announced projects include additional diluent transportation capacity to Canada as well as natural gas liquid (NGL) takeaway pipelines from the Marcellus.
An energy revolution is taking place in North America through directional drilling and hydraulic fracturing, and recoverable oil and gas reserves are at levels not seen in decades. The energy infrastructure assets, including pipelines, storage facilities, and processing plants, owned by the constituents in the Alerian Energy Infrastructure Index are the means by which the reserves and production in supply basins make their way to demand centers.
With toll-road business models anchored by inflation-indexed tariff increases and billions of dollars of infrastructure opportunities over the next few decades, we believe energy infrastructure companies continue to represent a compelling investment opportunity for investors.
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Annual | November 30, 2013 |
Table of Contents
Alerian Energy Infrastructure ETF | Performance Overview | |||
November 30, 2013 (Unaudited) |
Alerian Energy Infrastructure ETF Performance as of November 30, 2013
Since Inception* | ||
NAV | -0.56% | |
Market Price** | -0.40% | |
Alerian Energy Infrastructure Index | -0.38% |
Total Expense Ratio (per the current prospectus) 0.65%.
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For most current month-end performance data please visit www.alpsfunds.com.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
* | The Fund commenced Investment Operations on November 1, 2013. Total return for a period of less than one year is not annualized. |
** | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
The Alerian Energy Infrastructure Index is comprised of 30 equity securities of issuers headquartered or incorporated in the United States and Canada that engage in the transportation, storage, and processing of energy commodities.
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Table of Contents
Alerian Energy Infrastructure ETF | Performance Overview | |||
November 30, 2013 (Unaudited) |
Top 10 Holdings* as of November 30, 2013
Crosstex Energy, Inc. | 6.6% | |||
SemGroup Corp. | 4.7% | |||
Targa Resources Corp. | 4.5% | |||
ONEOK, Inc. | 4.5% | |||
TransCanada Corp. | 4.5% | |||
Enbridge, Inc. | 4.4% |
Spectra Energy Corp. | 4.1% | |||
Kinder Morgan, Inc. | 4.0% | |||
The Williams Cos., Inc. | 4.0% | |||
Magellan Midstream Partners LP | 3.9% | |||
Percent of Total Investments in | 45.2% | |||
* % of Total Investments.
Holdings are subject to change. |
Growth of $10k as of November 30, 2013
Comparison of Change in Value of $10,000 Investment in Alerian Energy Infrastructure ETF and Alerian Energy Infrastructure Index.
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
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Annual | November 30, 2013 |
Table of Contents
Alerian Exchange Traded Funds | Disclosure of Fund Expenses | |||
November 30, 2013 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Funds, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, and (2) ongoing costs, including management fees and other Fund expenses. These examples are 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 funds. It is based on an investment of $1,000 invested at the beginning of the (six month) period and held though November 30, 2013.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred 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 first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second line 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 costs were included, your costs would have been higher.
Beginning Account Value 6/1/13 | Ending Account Value 11/30/13 | Expense Ratio(a) | Expenses Paid During Period 6/1/13 - 11/30/13(b) | |||||||||||||
Alerian MLP ETF | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,048.50 | 0.85% | $ | 4.36 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,020.81 | 0.85% | $ | 4.31 | |||||||||
Alerian Energy Infrastructure ETF | ||||||||||||||||
Actual(c) | $ | 1,000.00 | $ | 994.40 | 0.65% | $ | 0.53 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,021.81 | 0.65% | $ | 3.29 |
(a) | The Fund’s expense ratios have been based on the Fund’s most recent fiscal half-year expenses (excluding current and net deferred tax expenses/benefits and franchise tax expense). |
(b) | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (183), then divided by 365. |
(c) | The actual expenses paid during the period is based on the commencement of operations on November 1, 2013. |
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Table of Contents
Alerian Exchange Traded Funds | Report of Independent Registered Public Accounting Firm | |||
To the Board of Trustees and Shareholders of ALPS ETF Trust:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of Alerian MLP ETF and Alerian Energy Infrastructure ETF, two of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2013, and the related statement of operations for the year then ended, the statement of changes in net assets for each of the two years in the period then ended, and the financial highlights for the periods presented for the Alerian MLP ETF, and the related statements of operations, changes in net assets, and the financial highlights for the period November 1, 2013 (commencement of operations) to November 30, 2013 for the Alerian Energy Infrastructure ETF. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2013, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Alerian MLP ETF and Alerian Energy Infrastructure ETF of the ALPS ETF Trust as of November 30, 2013, the results of their operations, the changes in their net assets, and the financials highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 27, 2014
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Annual | November 30, 2013 |
Table of Contents
Alerian MLP ETF | Schedule of Investments | |||
November 30, 2013 |
Security Description | Shares | Value | ||||||
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Master Limited Partnerships Shares (108.79%) | ||||||||
Gathering & Processing (30.73%) | ||||||||
Access Midstream Partners LP | 4,431,619 | $ | 248,924,039 | |||||
Atlas Pipeline Partners LP | 3,904,048 | 136,485,518 | ||||||
DCP Midstream Partners LP | 3,699,562 | 178,244,897 | ||||||
MarkWest Energy Partners LP | 7,656,526 | 528,836,251 | ||||||
PVR Partners LP | 5,223,356 | 129,016,893 | ||||||
Regency Energy Partners LP | 8,259,180 | 201,358,808 | ||||||
Targa Resources Partners LP | 5,014,034 | 255,966,436 | ||||||
Western Gas Partners LP | 3,326,398 | 211,825,025 | ||||||
Williams Partners LP | 7,366,116 | 378,544,701 | ||||||
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2,269,202,568 | ||||||||
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Natural Gas Transportation (32.72%) | ||||||||
Boardwalk Pipeline Partners LP | 6,351,359 | 167,294,796 | ||||||
El Paso Pipeline Partners LP | 6,881,378 | 286,127,697 | ||||||
Energy Transfer Partners LP | 10,533,254 | 570,481,037 | ||||||
Enterprise Products Partners LP | 12,384,027 | 779,822,180 | ||||||
ONEOK Partners LP | 7,110,437 | 380,835,006 | ||||||
Spectra Energy Partners LP | 2,484,378 | 111,697,635 | ||||||
TC Pipelines LP | 2,444,660 | 119,788,340 | ||||||
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| |||||||
2,416,046,691 | ||||||||
|
| |||||||
Petroleum Transportation (45.34%) | ||||||||
Buckeye Partners LP | 5,368,667 | 365,552,536 | ||||||
Enbridge Energy Partners LP | 11,225,104 | 337,763,379 | ||||||
Genesis Energy LP | 3,739,495 | 194,005,001 | ||||||
Kinder Morgan Energy Partners LP | 9,057,487 | 742,442,209 | ||||||
Magellan Midstream Partners LP | 10,065,515 | 625,471,102 | ||||||
NuStar Energy LP | 3,522,057 | 187,901,741 | ||||||
Plains All American Pipeline LP | 10,599,985 | 546,641,227 | ||||||
Sunoco Logistics Partners LP | 3,792,371 | 268,424,019 | ||||||
Tesoro Logistics LP | 1,565,126 | 80,212,708 | ||||||
|
| |||||||
3,348,413,922 | ||||||||
|
| |||||||
Total Master Limited Partnerships Shares (Cost $6,221,229,117) | 8,033,663,181 | |||||||
|
|
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Alerian MLP ETF | Schedule of Investments | |||
November 30, 2013 |
Security Description | 7 Day Yield | Shares | Value | |||||||||
| ||||||||||||
Short Term Investments (0.01%) | ||||||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(a) | 1,032,779 | $ | 1,032,779 | ||||||||
|
| |||||||||||
Total Short Term Investments | 1,032,779 | |||||||||||
|
| |||||||||||
Total Investments (108.80%) | 8,034,695,960 | |||||||||||
Net Liabilities Less Other Assets (-8.80%) |
| (650,011,347) | ||||||||||
|
| |||||||||||
Net Assets (100.00%) | $ | 7,384,684,613 | ||||||||||
|
| |||||||||||
(a) Less than 0.00005%.
Common Abbreviations:
LP - Limited Partnerships. |
See Notes to Financial Statements.
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Table of Contents
Alerian MLP ETF | Statement of Assets & Liabilities | |||
November 30, 2013 |
ASSETS: | ||||
Investments, at value | $ | 8,034,695,960 | ||
Receivable for securities sold | 14,028 | |||
Receivable for shares sold | 13,983 | |||
Income tax receivable | 5,547,683 | |||
Total Assets | 8,040,271,654 | |||
LIABILITIES: | ||||
Overdraft payable | 130,294 | |||
Franchise tax payable | 828,516 | |||
Deferred tax liability | 649,588,551 | |||
Payable to adviser | 5,039,680 | |||
Total Liabilities | 655,587,041 | |||
NET ASSETS | $ | 7,384,684,613 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 6,294,024,849 | ||
Distributions in excess of net investment loss, net of income taxes | (56,770,164 | ) | ||
Accumulated net realized gain on investments, net of income taxes | 7,729,255 | |||
Net unrealized appreciation on investments, net of income taxes | 1,139,700,673 | |||
NET ASSETS | $ | 7,384,684,613 | ||
INVESTMENTS, AT COST | $ | 6,222,261,896 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 7,384,684,613 | ||
Shares of beneficial interest outstanding | 417,561,799 | |||
Net Asset Value, offering and redemption price per share | $ | 17.69 |
See Notes to Financial Statements.
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Alerian MLP ETF | Statement of Operations | |||
For the Year Ended November 30, 2013 |
INVESTMENT INCOME: | ||||
Distributions from master limited partnerships | $ | 382,134,121 | ||
Less return of capital distributions | (382,134,121 | ) | ||
Total Investment Income | – | |||
EXPENSES: | ||||
Franchise tax expense | 947,740 | |||
Investment adviser fee | 51,567,615 | |||
Total Expenses | 52,515,355 | |||
NET INVESTMENT LOSS, BEFORE INCOME TAXES | (52,515,355 | ) | ||
Deferred income tax benefit | 19,380,288 | |||
NET INVESTMENT LOSS | (33,135,067 | ) | ||
REALIZED AND UNREALIZED GAIN/(LOSS): | ||||
Net realized loss on investments,before income taxes | (21,462,628 | ) | ||
Current income tax expense | (327,042 | ) | ||
Deferred income tax benefit | 8,444,231 | |||
Net realized loss on investments | (13,345,439 | ) | ||
Net change in unrealized appreciation on investments, before income taxes | 1,336,321,384 | |||
Deferred income tax expense | (494,589,986 | ) | ||
Net change in unrealized appreciation on investments | 841,731,398 | |||
NET REALIZED AND UNREALIZED GAIN | 828,385,959 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 795,250,892 | ||
See Notes to Financial Statements.
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Table of Contents
Alerian MLP ETF | Statements of Changes in Net Assets | |||
For the Year Ended November 30, 2013 | For the Year Ended November 30, 2012 | |||||||
OPERATIONS: | ||||||||
Net investment loss | $ | (33,135,067 | ) | $ | (17,666,906 | ) | ||
Net realized gain/(loss) on investments | (13,345,439 | ) | 17,955,611 | |||||
Net change in unrealized appreciation on investments | 841,731,398 | 216,274,212 | ||||||
Net increase in net assets resulting from operations | 795,250,892 | 216,562,917 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net realized gains | – | (660,911 | ) | |||||
From tax return of capital | (383,931,834 | ) | (209,317,584 | ) | ||||
Total distributions | (383,931,834 | ) | (209,978,495 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 2,828,412,621 | 2,788,664,270 | ||||||
Issued to shareholders in reinvestment distributions | 2,121,281 | – | ||||||
Cost of shares redeemed | (323,983,737 | ) | (41,820,413 | ) | ||||
Net increase from share transactions | 2,506,550,165 | 2,746,843,857 | ||||||
Net increase in net assets | 2,917,869,223 | 2,753,428,279 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 4,466,815,390 | 1,713,387,111 | ||||||
End of year* | $ | 7,384,684,613 | $ | 4,466,815,390 | ||||
*Including distributions in excess of net investment loss, net of income taxes of: | $ | (56,770,164 | ) | $ | (23,635,097 | ) | ||
OTHER INFORMATION: | ||||||||
SHARE TRANSACTIONS: | ||||||||
Beginning shares | 273,740,266 | 107,276,019 | ||||||
Shares sold | 162,250,000 | 169,164,247 | ||||||
Distributions reinvested | 121,533 | – | ||||||
Shares redeemed | (18,550,000 | ) | (2,700,000 | ) | ||||
Shares outstanding, end of year | 417,561,799 | 273,740,266 | ||||||
See Notes to Financial Statements.
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Intentionally Left Blank
Table of Contents
NET ASSET VALUE, BEGINNING OF PERIOD |
INCOME/(LOSS) FROM OPERATIONS: |
Net investment loss (b) |
Net realized and unrealized gain on investments |
Total from investment operations |
DISTRIBUTIONS: |
From net realized gains |
From tax return of capital |
Total distributions |
NET INCREASE/(DECREASE) IN NET ASSET VALUE |
NET ASSET VALUE, END OF YEAR |
TOTAL RETURN(d) |
RATIOS/SUPPLEMENTAL DATA: |
Net assets, end of period (in 000s) |
RATIOS TO AVERAGE NET ASSETS: |
Expenses (excluding net current and deferred tax expenses/benefits and franchise tax expense) |
Expenses (including net current and deferred tax expenses/benefits)(e) |
Expenses (including current and deferred tax expenses/benefits)(g) |
Net investment loss (excluding deferred tax expenses/benefits and franchise tax expense) |
Net investment loss (including deferred tax expenses/benefits) |
PORTFOLIO TURNOVER RATE(h) |
(a) | Effective March 7, 2011, the Board approved changing the fiscal year-end of the Fund from December 31 to November 30. |
(b) | Based on average shares outstanding during the period. |
(c) | Less than ($0.005) per share. |
(d) | Total return is calculated assuming an initial investment made at the net assets value at the beginning of the period and redemption at the net asset value on the last day of the period, and assuming all distributions are reinvested at actual reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(e) | Includes amount of current and deferred taxes/benefits for all components of the Statement of Operations. |
(f) | Annualized. |
(g) | Includes amount of current and deferred tax benefit associated with net investment loss. |
(h) | Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. |
See Notes to Financial Statements.
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Financial Highlights |
For a Share Outstanding Throughout the Periods Presented |
For the Year Ended November 30, 2013 | For the Year Ended November 30, 2012 | For the Period January 1, 2011 to November 30, 2011(a) | For the Period August 25, 2010 (Inception) to December 31, 2010 | |||||||||||||||||||
$ | 16.32 | $ | 15.97 | $ | 16.05 | $ | 15.00 | |||||||||||||||
(0.09 | ) | (0.09 | ) | (0.08 | ) | (0.03 | ) | |||||||||||||||
2.53 | 1.44 | 1.00 | 1.33 | |||||||||||||||||||
2.44 | 1.35 | 0.92 | 1.30 | |||||||||||||||||||
– | (0.00 | )(b)(c) | (0.14 | )(b) | – | |||||||||||||||||
(1.07 | ) | (1.00 | ) | (0.86 | ) | (0.25 | ) | |||||||||||||||
(1.07 | ) | (1.00 | ) | (1.00 | ) | (0.25 | ) | |||||||||||||||
1.37 | 0.35 | (0.08 | ) | 1.05 | ||||||||||||||||||
$ | 17.69 | $ | 16.32 | $ | 15.97 | $ | 16.05 | |||||||||||||||
15.16 | % | 8.62 | % | 5.93 | % | 8.66 | % | |||||||||||||||
$ | 7,384,685 | $ | 4,466,815 | $ | 1,713,387 | $ | 611,467 | |||||||||||||||
0.85 | % | 0.85 | % | 0.85 | %(f) | 0.85 | %(f) | |||||||||||||||
8.56 | % | 4.85 | % | 4.86 | %(f) | 13.56 | %(f) | |||||||||||||||
0.55 | % | 0.54 | % | 0.53 | %(f) | 0.52 | %(f) | |||||||||||||||
(0.85 | )% | (0.85 | %) | (0.85 | %)(f) | (0.85 | %)(f) | |||||||||||||||
(0.55 | )% | (0.54 | %) | (0.53 | %)(f) | (0.52 | %)(f) | |||||||||||||||
12 | % | 12 | % | 10 | % | 12 | % |
|
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Table of Contents
Alerian Energy Infrastructure ETF | Schedule of Investments | |||
November 30, 2013 |
Security Description | Shares | Value | ||||||
| ||||||||
Canadian Infrastructure (18.89%) | ||||||||
Energy (13.74%) | ||||||||
AltaGas, Ltd. | 2,797 | $ | 102,082 | |||||
Gibson Energy, Inc. | 4,059 | 98,023 | ||||||
Inter Pipeline, Ltd. | 4,351 | 104,091 | ||||||
Pembina Pipeline Corp. | 3,097 | 98,371 | ||||||
Veresen, Inc. | 8,522 | 109,718 | ||||||
|
| |||||||
512,285 | ||||||||
|
| |||||||
Utilities (5.15%) | ||||||||
Emera, Inc. | 3,338 | 92,109 | ||||||
Keyera Corp. | 1,729 | 99,944 | ||||||
|
| |||||||
192,053 | ||||||||
|
| |||||||
Total Canadian Infrastructure (Cost $721,677) | 704,338 | |||||||
|
| |||||||
Canadian Master Limited Partnership Affiliate (8.93%) | ||||||||
Energy (8.93%) | ||||||||
Enbridge, Inc. | 4,011 | 165,000 | ||||||
TransCanada Corp. | 3,810 | 167,990 | ||||||
|
| |||||||
332,990 | ||||||||
|
| |||||||
Total Canadian Master Limited Partnership Affiliate (Cost $347,588) | 332,990 | |||||||
|
| |||||||
Master Limited Partnership (24.30%) | ||||||||
Energy (24.30%) | ||||||||
Boardwalk Pipeline Partners LP | 4,183 | 110,180 | ||||||
Energy Transfer Partners LP | 2,441 | 132,204 | ||||||
Enterprise Products Partners LP | 2,114 | 133,119 | ||||||
Magellan Midstream Partners LP | 2,333 | 144,973 | ||||||
MarkWest Energy Partners LP | 1,810 | 125,017 | ||||||
Plains All American Pipeline LP | 2,456 | 126,656 | ||||||
Western Gas Partners LP | 2,108 | 134,237 | ||||||
|
| |||||||
906,386 | ||||||||
|
| |||||||
Total Master Limited Partnership (Cost $911,862) | 906,386 | |||||||
|
| |||||||
U.S. Infrastructure (14.88%) | ||||||||
Utilities (14.88%) | ||||||||
Atmos Energy Corp. | 1,883 | 83,699 | ||||||
CenterPoint Energy, Inc. | 3,260 | 76,382 | ||||||
Dominion Resources, Inc. | 1,293 | 83,929 |
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Alerian Energy Infrastructure ETF | Schedule of Investments | |||
November 30, 2013 |
Security Description | Shares | Value | ||||||||
Utilities (continued) | ||||||||||
New Jersey Resources Corp. | 1,762 | $ | 80,506 | |||||||
NiSource, Inc. | 2,555 | 80,789 | ||||||||
OGE Energy Corp. | 2,134 | 73,452 | ||||||||
Questar Corp. | 3,392 | 76,388 | ||||||||
|
| |||||||||
555,145 | ||||||||||
|
| |||||||||
Total U.S. Infrastructure | ||||||||||
(Cost $567,098) | 555,145 | |||||||||
|
| |||||||||
U.S. Master Limited Partnership Affiliate (32.44%) | ||||||||||
Energy (32.44%) | ||||||||||
Crosstex Energy, Inc. | 7,616 | 247,520 | ||||||||
Kinder Morgan, Inc. | 4,224 | 150,121 | ||||||||
ONEOK, Inc. | 2,901 | 168,461 | ||||||||
SemGroup Corp. | 2,823 | 173,276 | ||||||||
Spectra Energy Corp. | 4,537 | 152,216 | ||||||||
Targa Resources Corp. | 2,083 | 168,910 | ||||||||
The Williams Cos., Inc. | 4,236 | 149,192 | ||||||||
|
| |||||||||
1,209,696 | ||||||||||
|
| |||||||||
Total U.S. Master Limited Partnership Affiliate | ||||||||||
(Cost $1,182,102) | 1,209,696 | |||||||||
|
| |||||||||
Security Description | 7 Day Yield | Shares | Value | |||||||
Short Term Investments (0.43%) | ||||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(a) | 16,062 | 16,062 | |||||||
|
| |||||||||
Total Short Term Investments | ||||||||||
(Cost $16,062) | 16,062 | |||||||||
|
| |||||||||
Total Investments (99.87%) | ||||||||||
(Cost $3,746,389) | 3,724,617 | |||||||||
Net Liabilities Less Other Assets (0.13%) | 4,713 | |||||||||
|
| |||||||||
Net Assets (100.00%) | $ | 3,729,330 | ||||||||
|
|
(a) | Less than 0.00005%. |
Common Abbreviations: |
LP - Limited Partnerships. |
Ltd. - Limited. |
See Notes to Financial Statements.
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Table of Contents
Alerian Energy Infrastructure ETF | Statement of Assets & Liabilities | |||
November 30, 2013 |
ASSETS: | ||||
Investments, at value | $ | 3,724,617 | ||
Dividends receivable | 6,359 | |||
Total Assets | 3,730,976 | |||
LIABILITIES: | ||||
Payable to adviser | 1,646 | |||
Total Liabilities | 1,646 | |||
NET ASSETS | $ | 3,729,330 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 3,743,019 | ||
Accumulated net investment income | 4,749 | |||
Accumulated net realized gain on investments | 3,369 | |||
Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies | (21,807 | ) | ||
NET ASSETS | $ | 3,729,330 | ||
INVESTMENTS, AT COST | $ | 3,746,389 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 3,729,330 | ||
Shares of beneficial interest outstanding (Unlimited number of shares, par value $0.01 per share) | 150,002 | |||
Net Asset Value, offering and redemption price per share | $ | 24.86 |
See Notes to Financial Statements.
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Table of Contents
Alerian Energy Infrastructure ETF | Statement of Operations | |||
For the Period November 1, 2013 (commencement of operations) to November 30, 2013 |
INVESTMENT INCOME: | ||||
Dividends(a) | $ | 9,764 | ||
Total Investment Income | 9,764 | |||
EXPENSES: | ||||
Investment adviser fees | 1,646 | |||
Total Expenses | 1,646 | |||
NET INVESTMENT INCOME | 8,118 | |||
REALIZED AND UNREALIZED GAIN/(LOSS): | ||||
Net change in unrealized depreciation on investments | (21,772 | ) | ||
Net change in unrealized depreciation on translation of assets and liabilities denominated in foreign currencies | (35 | ) | ||
NET UNREALIZED LOSS ON INVESTMENTS | (21,807 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (13,689 | ) | |
(a)Net of foreign tax withholding | $ | 511 |
See Notes to Financial Statements.
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Table of Contents
Alerian Energy Infrastructure ETF | Statements of Changes in Net Assets | |||
For the Period November 1, 2013 (commencement of operations) to November 30, 2013 | ||||
OPERATIONS: | ||||
Net investment income | $ | 8,118 | ||
Net change in unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies | (21,807 | ) | ||
Net decrease in net assets resulting from operations | (13,689 | ) | ||
CAPITAL SHARE TRANSACTIONS: | ||||
Proceeds from sale of shares | 3,743,019 | |||
Net increase from share transactions | 3,743,019 | |||
Net increase in net assets | 3,729,330 | |||
NET ASSETS: | ||||
Beginning of period | – | |||
End of period* | $ | 3,729,330 | ||
*Including accumulated net investment income of: | $ | 4,749 | ||
OTHER INFORMATION: | ||||
CAPITAL SHARES TRANSACTIONS: | ||||
Beginning Shares | – | |||
Shares Sold | 150,002 | |||
Shares Outstanding, end of period | 150,002 | |||
See Notes to Financial Statements.
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Alerian Energy Infrastructure ETF | Financial Highlights | |||
For a Share Outstanding Throughout the Period Presented |
For the Period November 1, 2013 (commencement of operations) to November 30, 2013 | ||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 25.00 | ||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||
Net investment income(a) | 0.06 | |||
Net realized and unrealized loss | (0.20 | ) | ||
Total from investment operations | (0.14 | ) | ||
NET (DECREASE) IN NET ASSET VALUE | (0.14 | ) | ||
NET ASSET VALUE, END OF PERIOD | $ | 24.86 | ||
TOTAL RETURN(b) | (0.56 | )% | ||
RATIOS/SUPPLEMENTAL DATA: | ||||
Net assets, end of period (000s) | $ | 3,729 | ||
RATIO TO AVERAGE NET ASSETS: | ||||
Expenses | 0.65 | %(c) | ||
Net investment income | 3.21 | %(c) | ||
PORTFOLIO TURNOVER RATE(d) | 0 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net assets value at the beginning of the period and redemption at the net asset value on the last day of the period, and assuming all distributions are reinvested at actual reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. |
See Notes to Financial Statements.
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Table of Contents
Alerian Exchange Traded Funds | Notes to Financial Statements | |||
November 30, 2013 |
1. Organization
The ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of November 30, 2013, the Trust consisted of nineteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the Alerian MLP ETF and the Alerian Energy Infrastructure ETF (each a “Fund” and collectively, the “Funds”).
The investment objective of the Alerian MLP ETF is to seek investment results that correspond (before fees and expenses) generally to the price and yield performance of its underlying index, the Alerian MLP Infrastructure Index. The Alerian MLP ETF commenced investment operations on August 24, 2010 and began trading on the exchange on August 25, 2010.
The investment objective of the Alerian Energy Infrastructure ETF is to seek investment results that correspond (before fees and expenses) generally to the price and yield performance of its underlying index, the Alerian Energy Infrastructure Index. The Alerian Energy Infrastructure ETF commenced Investment Operations on November 1, 2013.
Each Fund’s Shares (“Shares”) are listed on the New York Stock Exchange (“NYSE”) Arca. Each Fund issues and redeems Shares at Net Asset Value (“NAV”), in blocks of 50,000 Shares, each of which is called a “Creation Unit.” Creation Units are issued and redeemed principally in-kind for securities included in a specified index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
2. Significant Accounting Policies
A. Use of Estimates
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates.
B. Portfolio Valuation
Each Fund’s NAV is determined daily, as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern Time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the National Association of Securities Dealer Automated Quotation (“NASDAQ”) exchange are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such
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Table of Contents
Alerian Exchange Traded Funds | Notes to Financial Statements | |||
November 30, 2013 |
day, the securities are valued at the mean of the most recent bid and asked prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ.
The Funds’ investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Funds may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Funds’ NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the closing sale prices on the applicable exchange and fair value prices may not reflect the actual value of a security. A variety of factors may be considered in determining the fair value of such securities.
C. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the last in, first out (“LIFO”) cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis, including amortization of premiums and accretion of discounts.
D. Dividends and Distributions to Shareholders
Each Fund intends to declare and make quarterly distributions, or as the Board may determine from time to time. Distributions of net realized capital gains earned by each Fund, if any, are distributed at least annually. Distributions from net investment income and capital gains are determined in accordance with income tax regulations, which may differ from U.S. GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Funds, timing differences and differing characterization of distributions made by the Funds.
Distributions received from each Fund’s investments in Master Limited Partnerships (“MLPs”) may be comprised of both income and return of capital. Each Fund records investment income and return of capital based on estimates made at the time such distributions are received. Such estimates are based on historical information available from each MLP and other industry sources. These estimates may subsequently be revised based on information received from MLPs after their tax reporting periods are concluded. For the year ended
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Table of Contents
Alerian Exchange Traded Funds | Notes to Financial Statements | |||
November 30, 2013 |
November 30, 2013, the Alerian MLP ETF distributed $383,931,834 of which 100% is characterized as return of capital from MLP distributions received.
The Alerian MLP ETF also expects a portion of the distributions it receives from MLPs may be treated as a tax deferred return of capital, thus reducing the Alerian MLP ETF’s current tax liability. Return of capital distributions are not taxable income to the shareholder, but reduce the investor’s tax basis in the investor’s Fund Shares. Such a reduction in tax basis will result in larger taxable gains and/or lower tax losses on a subsequent sale of Fund Shares. Shareholders who periodically receive the payment of dividends or other distributions consisting of a return of capital may be under the impression that they are receiving net profits from the Funds when, in fact, they are not. Shareholders should not assume that the source of the distributions is from the net profits of the Funds.
E. Federal Income Taxation and Tax Basis Information
Alerian MLP ETF
The Alerian MLP ETF is taxed as a regular C-corporation for federal income tax purposes. Currently, the maximum marginal regular federal income tax rate for a corporation is 35 percent. The Fund may be subject to a 20 percent federal alternative minimum tax on its federal alternative taxable income to the extent that its alternative minimum tax exceeds its regular federal income tax. This differs from most investment companies, which elect to be treated as “regulated investment companies” under the Code in order to avoid paying entity level income taxes. Under current law, the Fund is not eligible to elect treatment as a regulated investment company due to its investments primarily in MLPs invested in energy assets. As a result, the Fund will be obligated to pay applicable federal and state corporate income taxes on its taxable income as opposed to most other investment companies which are not so obligated. The Fund expects that a portion of the distributions it receives from MLPs may be treated as a tax-deferred return of capital, thus reducing the Fund’s current tax liability. However, the amount of taxes currently paid by the Fund will vary depending on the amount of income and gains derived from investments and/or sales of MLP interests and such taxes will reduce your return from an investment in the Fund.
Cash distributions from MLPs to the Fund that exceed such Fund’s allocable share of such MLP’s net taxable income are considered a tax-deferred return of capital that will reduce the Fund’s adjusted tax basis in the equity securities of the MLP. These reductions in such Fund’s adjusted tax basis in the MLP equity securities will increase the amount of gain (or decrease the amount of loss) recognized by the Fund on a subsequent sale of the securities. The Fund will accrue deferred income taxes for any future tax liability associated with (i) that portion of MLP distributions considered to be a tax-deferred return of capital as well as (ii) capital appreciation of its investments. Upon the sale of an MLP security, the Fund may be liable for previously deferred taxes. The Fund will rely to some extent on information provided by the MLPs, which is not necessarily timely, to estimate deferred tax liability for purposes of financial statement reporting and determining the NAV. From time to time, ALPS Advisors, Inc. will modify the estimates or assumptions related to the Fund’s deferred tax liability as
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November 30, 2013 |
new information becomes available. The Fund will generally compute deferred income taxes based on the marginal regular federal income tax rate applicable to corporations and an assumed rate attributable to state taxes.
The Fund recognizes interest and penalties related to unrecognized tax benefits within the income tax expense line in the accompanying statement of operations. Accrued interest and penalties are included within the related tax liability line in the balance sheet.
Since the Fund will be subject to taxation on its taxable income, the NAV of Fund shares will also be reduced by the accrual of any deferred tax liabilities. The Index however is calculated without any adjustments for taxes. As a result, the Fund’s after tax performance could differ significantly from the Index even if the pretax performance of the Fund and the performance of the Index are closely correlated.
The Fund’s income tax expense/(benefit) consists of the following:
Alerian MLP ETF | Year ended November 30, 2013 | |||||
| ||||||
Current | Deferred | Total | ||||
Federal | $ 331,761 | $ 440,217,783 | $ 440,549,544 | |||
State | (4,719) | 26,547,684 | 26,542,965 | |||
Net tax expense (benefit) | $ 327,042 | $ 466,765,467 | $ 467,092,509 | |||
|
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes.
Components of the Fund’s deferred tax assets and liabilities are as follows:
Alerian MLP ETF | As of November 30, 2013 | |||
| ||||
Deferred tax assets: | ||||
Accrued franchise taxes | $ | 290,794 | ||
Charitable contribution carryforward | 71,563 | |||
Income recognized from MLP investments | 14,111,686 | |||
Credit for prior year minimum tax | 331,761 | |||
Federal net operating loss carryforward | 165,703,528 | |||
Federal capital loss carryforward | 2,681,936 | |||
Less Deferred tax liabilities: | ||||
Net unrealized gain on investment securities | (794,414,660 | ) | ||
State taxes, net of federal benefit | (38,365,159 | ) | ||
| ||||
Total net deferred tax liability | $ | (649,588,551 | ) | |
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As of November 30, 2013, the Fund had net operating loss carryforwards for federal income tax purposes, which may be carried forward for 20 years as follows:
Alerian MLP ETF | Year-Ended | Amount | Expiration | |||||||
| ||||||||||
Federal | 11/30/2012 | $ | 92,112,756 | 11/30/2032 | ||||||
Federal | 11/30/2013 | 381,325,895 | 11/30/2033 | |||||||
| ||||||||||
Total | $ | 473,438,651 | ||||||||
| ||||||||||
The Fund also has state tax net operating loss carryforwards of various amounts per state. The Deferred Tax Assets associated with these state tax net operating losses are as follows: | ||||||||||
Alerian MLP ETF | Year-Ended | Amount | Expiration | |||||||
| ||||||||||
State | 11/30/2012 | $ | 2,950,477 | Varies by State (5-20 years) | ||||||
State | 11/30/2013 | 8,314,607 | Varies by State (5-20 years) | |||||||
| ||||||||||
Total | $ | 11,265,084 | ||||||||
| ||||||||||
The capital loss carryforward is available to offset future taxable income. The capital loss can be carried forward for 5 years and, accordingly, would begin to expire as of November 30, 2018. The Fund has net capital loss carryforwards for federal income tax purposes as follows: | ||||||||||
Alerian MLP ETF | Year-Ended | Amount | Expiration | |||||||
| ||||||||||
Federal | 11/30/2013 | $ | 7,662,673 | 11/30/2018 | ||||||
| ||||||||||
Total | $ | 7,662,673 | ||||||||
|
Although the Fund currently has a net deferred tax liability, it reviews the recoverability of its deferred tax assets based upon the weight of available evidence. When assessing the recoverability of its deferred tax assets, significant weight was given to the effects of potential future realized and unrealized gains on investments and the period over which these deferred tax assets can be realized. Currently, any capital losses that may be generated by the Fund in the future are eligible to be carried back up to three years and can be carried forward for five years to offset capital gains recognized by the fund in those years. For Federal Tax purposes, net operating losses that may be generated by the Fund in the future are eligible to be carried back up to two years and can be carried forward for 20 years to offset income generated by the Fund in those years.
Based upon the Fund’s assessment, it has determined that it is more likely than not that its deferred tax assets will be realized through future taxable income of the appropriate character. Accordingly, no valuation allowance has been established for the Fund’s deferred tax assets. The Fund will continue to assess the need for a valuation allowance in the future. Significant declines in the fair value of its portfolio of investments may change the Fund’s assessment of the recoverability of these assets and may result in the recording of a valuation allowance against all or a portion of the Fund’s gross deferred tax assets.
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November 30, 2013 |
As of November 30, 2013 the Total income tax benefit (current and deferred) differs from the amount computed by applying the federal statutory income tax rate of 35% to net investment and realized and unrealized gain/(losses) on investment before taxes as follows:
Alerian MLP ETF | Inception to November 30, 2013 | |
| ||
Income tax expense at statutory rate | $ 441,820,191 | |
State income taxes (net of federal benefit) | 27,524,725 | |
Permanent differences, net | (1,030,733) | |
Change in estimated state deferred rate | (1,272,530) | |
Other | 50,856 | |
| ||
Net income tax expense/(benefit) | $ 467,092,509 | |
|
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:
Alerian MLP ETF | Inception to November 30, 2013 | |
| ||
Unrecognized tax benefit – Beginning | $ – | |
Gross increases – tax positions in prior period | – | |
Gross decreases – tax positions in prior period | – | |
Gross increases – tax positions in current period | – | |
Settlement | – | |
Lapse of statute of limitations | – | |
| ||
Unrecognized tax benefit – Ending | $ – | |
|
The Fund recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense.
For the period from inception to November 30, 2013, the Fund had no accrued penalties or interest.
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 Fund’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on U.S. tax returns and state tax returns filed since inception of the fund. No U.S. federal or state income tax returns are currently under examination. The tax period ended November 30, 2013 remains subject to examination by tax authorities in the United States. Due to the nature of the Fund’s investments, the Fund may be required to file income tax returns in several states. 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 12 months.
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Alerian Exchange Traded Funds | Notes to Financial Statements | |||
November 30, 2013 |
Alerian Energy Infrastructure ETF
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Alerian Energy Infrastructure ETF’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations.
No provision for income taxes is included in the accompanying financial statements, as the Alerian Energy Infrastructure ETF intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. The Alerian Energy Infrastructure ETF evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the period ended November 30, 2013, the Alerian Energy Infrastructure ETF did not have a liability for any unrecognized tax benefits. The Alerian Energy Infrastructure ETF files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is generally three years after the filing of the tax return. Being that the Fund commenced operations on November 1, 2013; no tax returns have been filed as of the date of this report.
For the year ended November 30, 2013, permanent book and tax differences resulting primarily from differing treatment of investments in partnerships were identified and reclassified among the components of the Fund’s net assets as follows:
Undistributed Net Investment Loss | Accumulated Net Realized Gain | Paid-in Capital | ||||||||||
| ||||||||||||
Alerian Energy Infrastructure ETF | $ (3,369) | $ 3,369 | $ – |
At November 30, 2013, the Alerian Energy Infrastructure ETF had no unused capital loss carryforwards.
Distributions from net investment income and capital gains are determined in accordance with income tax regulations, which may differ from U.S. GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterization of distributions made by the Fund. During the period ended November 30, 2013 the Alerian Energy Infrastructure ETF paid no distributions
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Alerian Exchange Traded Funds | Notes to Financial Statements | |||
November 30, 2013 |
As of November 30, 2013, the components of distributable earnings on a tax basis for the Fund were as follows:
Alerian Energy Infrastructure ETF | ||||
| ||||
Undistributed net investment income | $ | 4,749 | ||
Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies | (18,438 | ) | ||
| ||||
Total | $ | (13,689 | ) | |
|
As of November 30, 2013, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Alerian MLP ETF | Alerian Energy Infrastructure ETF | |||||||
| ||||||||
Cost of investments for income tax purposes | $ | 5,799,124,759 | $ | 3,743,020 | ||||
| ||||||||
Gross Appreciation (excess of value over tax cost) | $ | 2,289,697,768 | $ | 55,653 | ||||
Gross Depreciation (excess of tax cost over value) | (54,126,567 | ) | (74,056 | ) | ||||
Net unrealized appreciation of foreign currency | – | (35 | ) | |||||
| ||||||||
Net Unrealized Appreciation/(Depreciation) | $ | 2,235,571,201 | $ | (18,438 | ) | |||
|
The difference between cost amounts for financial statement purposes is due primarily to the recognition of pass-through income from a Fund’s investments in master limited partnerships.
F. Fair Value Measurements
Each Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Funds’ investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy.
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Alerian Exchange Traded Funds | Notes to Financial Statements | |||
November 30, 2013 |
Investments in open-end mutual funds are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the Funds’ investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; | |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and | |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value each Funds’ investments at November 30, 2013:
Alerian MLP ETF
Investments in Securities at Value* | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
| ||||||||||||||||
Master Limited Partnerships Shares | $8,033,663,181 | $ – | �� | $ – | $8,033,663,181 | |||||||||||
| ||||||||||||||||
Short Term Investments | 1,032,779 | – | – | 1,032,779 | ||||||||||||
| ||||||||||||||||
TOTAL | $8,034,695,960 | $ – | $ – | $8,034,695,960 | ||||||||||||
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Alerian Energy Infrastructure ETF
Investments in Securities at Value* | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
| ||||||||||||||||
Canadian Infrastructure | $ | 704,338 | $ | – | $ | – | $ | 704,338 | ||||||||
| ||||||||||||||||
Canadian Master Limited Partnership Affiliate | 332,990 | – | – | 332,990 | ||||||||||||
| ||||||||||||||||
Master Limited Partnership | 906,386 | – | – | 906,386 | ||||||||||||
| ||||||||||||||||
U.S. Infrastructure | 555,145 | – | – | 555,145 | ||||||||||||
| ||||||||||||||||
U.S. Master Limited Partnership Affiliate | 1,209,696 | – | – | 1,209,696 | ||||||||||||
| ||||||||||||||||
Short Term Investments | 16,062 | – | – | 16,062 | ||||||||||||
| ||||||||||||||||
TOTAL | $ | 3,724,617 | $ | – | $ | – | $ | 3,724,617 | ||||||||
|
* For detailed descriptions of sectors, see the accompanying Schedule of Investments.
Each Fund recognizes transfers between levels as of the end of the period. For the year ended November 30, 2013, the Funds did not have any transfers between Level 1 and Level 2 securities. The Funds did not have any securities which used significant unobservable inputs (Level 3) in determining fair value.
3. Investment Advisory Fee and Other Affiliated Transactions
ALPS Advisors, Inc. (the “Investment Adviser”) acts as the Funds’ investment adviser pursuant to advisory agreements with the Trust on behalf of each Fund (the “Advisory Agreements”). Pursuant to the Advisory Agreements, each Fund pays the Investment Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rates below, based on each Fund’s average daily net assets. From time to time, the Investment Adviser may waive all or a portion of its fees.
Fund | Advisory Fee | |
| ||
Alerian MLP ETF | 0.85% | |
Alerian Energy Infrastructure ETF | 0.65% |
Out of the unitary management fees, the Investment Adviser pays substantially all expenses of the Funds, including the fee of the Index Provider, and the cost of transfer agency, custody, fund administration, legal, audit, trustees and other services, other than taxes, interest expenses, distribution fees or expenses, brokerage expenses, and extraordinary expenses such as litigation not incurred in the ordinary course of the Funds’ business.
ALPS Fund Services, Inc. (“ALPS”), an affiliate of the Investment Adviser, is the administrator of the Funds.
Each Trustee who is not an officer or employee of the Investment Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) is paid a quarterly retainer of $5,000, $3,750 for each regularly scheduled Board meeting attended and $1,500 for each special meeting held outside of regularly scheduled meetings.
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November 30, 2013 |
4. Purchases and Sales of Securities
For the year/period ended November 30, 2013, the cost of purchases and proceeds from sales of investment securities, excluding short-term investments and in-kind transactions, were as follows:
Purchases | Sales | |||||||
Alerian MLP ETF | $ | 814,113,096 | $ | 1,185,093,739 | ||||
Alerian Energy Infrastructure ETF | $ | 3,730,328 | $ | – | ||||
For the year/period ended November 30, 2013, the cost of in-kind purchases and proceeds from in-kind sales were as follows: | ||||||||
Purchases | Sales | |||||||
Alerian MLP ETF | $ | 2,832,099,003 | $ | – | ||||
Alerian Energy Infrastructure ETF | $ | – | $ | – |
5. Master Limited Partnerships
MLPs are publicly traded partnerships engaged in the transportation, storage and processing of minerals and 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. Of the roughly ninety MLPs in existence, fifty are eligible for inclusion in the Index, approximately two-thirds trade on the NYSE and the rest trade on the NASDAQ. To qualify as a 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 of 1986, as amended (the “Code”). These qualifying sources include natural resource based activities such as the processing, transportation and storage of mineral or natural resources. MLPs generally have two classes of owners, the general partner and limited partners. The general partner of an MLP is typically owned by a major energy company, an investment fund, the direct management of the MLP, or is an entity owned by one or more of such parties. The general partner may be structured as a private or publicly traded corporation or other entity. The general partner typically controls the operations and management of the MLP through an up to 2% equity interest in the MLP plus, in many cases, ownership of common units and subordinated units. Limited partners typically own the remainder of the partnership, through ownership of common units, and have a limited role in the partnership’s operations and management. MLPs are typically structured such that common units and general partner interests have first priority to receive quarterly cash distributions up to an established minimum amount (“minimum quarterly distributions” or “MQD”). Common and general partner interests also accrue arrearages in distributions to the extent the MQD is not paid. Once common and general partner interests have been paid, subordinated units receive distributions of up to the MQD; however, subordinated units do not accrue arrearages. Distributable cash in excess of the MQD is paid to both common
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and subordinated units and is distributed to both common and subordinated units generally on a pro rata basis. The general partner is also eligible to receive incentive distributions if the general partner operates the business in a manner which results in distributions paid per common unit surpassing specified target levels. As the general partner increases cash distributions to the limited partners, the general partner receives an increasingly higher percentage of the incremental cash distributions.
6. Capital Share Transactions
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Funds. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the net asset value per unit of each 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 AP or as a result of other market circumstances.
7. Indemnifications
Under the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made again the Trust that have not yet occurred.
8. New Accounting Pronouncements
In June 2013, the FASB issued ASU No. 2013-08, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The FASB standard identifies characteristics a company must assess to determine whether it is considered an investment company for financial reporting purposes. This ASU is effective for fiscal years beginning after December 15, 2013. The Funds are currently reviewing the requirements and believe the adoption of this ASU will not have a material impact on its financial statements.
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Alerian Exchange Traded Funds | Additional Information | |||
November 30, 2013 (Unaudited) |
Proxy Voting Policies And Procedures
A description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies and information regarding how the Fund voted proxies related to portfolio securities during the most recent 12-month period ended June 30th is available without charge, (1) on the Securities and Exchange Commission’s (“SEC”) website at http://www.sec. gov; (2) upon request, by calling (toll free) 1-866-513-5856; and (3) on the Trust’s website located at http://www.alpsfunds.com.
Portfolio Holdings
The Trust will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q will be available (1) on the SEC’s website at http://www.sec.gov; (2) by calling (toll free) 1-866-513-5856; (3) on the Trust’s website located at http://www.alpsfunds.com; and (4) for review and copying at the SEC’s Public Reference Room (“PRR”) in Washington D.C. Information regarding the operation of the PRR may be obtained by calling (toll free) 1-800-732-0330.
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Board Considerations Regarding Approval of Investment Advisory Agreement | ||||
November 30, 2013 (Unaudited) |
At an in-person meeting held on June 10, 2013, the Board of Trustees of the Trust (the “Board”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve the continuance of the Advisory Agreement between the Trust and ALPS Advisors, Inc. (the “Adviser”) with respect to the Alerian MLP ETF (“AMLP”). The Independent Trustees also met separately to consider the Advisory Agreement.
In evaluating whether to approve the Advisory Agreement for AMLP, the Board considered numerous factors, as described below.
With respect to the nature, extent and quality of the services provided by the Adviser under the Advisory Agreement, representatives from the Adviser presented the Adviser’s materials regarding consideration of renewal of the Advisory Agreement. The Independent Trustees noted that included in the Board materials were responses by the Adviser to a questionnaire drafted by legal counsel to the Trust to assist the Board in evaluating whether to renew the Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the functions performed by the Adviser, information describing the Adviser’s organization, the background and experience of the persons responsible for the day-to-day management of AMLP and financial information regarding the Adviser. The Board reviewed information on the performance of AMLP and the performance of its benchmark index, and evaluated the correlation and tracking error between the underlying index and AMLP’s performance. Based on its review, the Board found that the nature and extent of services provided to AMLP under the Advisory Agreement were appropriate and that the quality was satisfactory.
The Independent Trustees noted the services provided by the Adviser for the annual advisory fee of 0.85 % of AMLP’s average daily net assets. The Independent Trustees noted that the advisory fees for AMLP were unitary fees pursuant to which the Adviser assumes all expenses of AMLP (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than payments under the Advisory Agreement, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
The Independent Trustees reviewed the comparative fee information, including data from Lipper Analytical Services (“Lipper”). The Independent Trustees noted that Lipper’s report contained information regarding investment performance, comparisons of cost and expense structures of AMLP’s with other funds’ cost and expense structures, as well as comparisons of AMLP’s performance with performance during similar periods of members of a peer group identified pursuant to Lipper’s methodology. The Independent Trustees noted that the advisory fee rate for AMLP was higher than others in its Lipper peer group. In reviewing this data, the Trustees considered, among other things, the additional costs and complexities associated with management and administration of AMLP, such as the added administrative costs resulting from AMLP being taxed as a corporation and the additional complexities associated with rebalancing the portfolio in a manner which minimizes market impact due to AMLP’s size and the limited liquidity of certain securities in the index, which had required the Adviser to add staff to assist in the process. The Independent Trustees also considered information
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November 30, 2013 (Unaudited) |
provided by the Adviser about the costs and profitability of the Adviser in respect of AMLP. Based on the foregoing and the other information available to them, the Independent Trustees concluded that the advisory fee for AMLP was reasonable under the circumstances and in light of the quality of services provided.
The Independent Trustees also considered other benefits that may be realized by the Adviser from its relationship with AMLP and concluded that the advisory fee was reasonable taking into account any such benefits. The Independent Trustees also considered whether there have been economies of scale with respect to management of AMLP, whether AMLP has appropriately benefited from any economies of scale, and whether the fee is reasonable in relation to AMLP’s assets and any economies of scale that may exist. The Independent Trustees noted that AMLP has experienced substantial growth in assets. The Independent Trustees considered, among other things, the additional costs incurred by the Adviser and ALPS Fund Services, Inc. in managing and administering AMLP. They also noted that AMLP is still a relatively new product which makes it difficult to quantify the potential variability in net assets and thus determine the sustainability of any potential economies of scale which may exist. The Independent Trustees deemed that they would continue to evaluate whether further economies of scale have been achieved on an ongoing basis. Based on the foregoing, the Independent Trustees determined that currently the advisory fee rate for AMLP reflects an appropriate sharing of any economies of scale which may exist.
Based on consideration of all factors deemed relevant, the Independent Trustees determined that approval of the Advisory Agreement was in the best interests of AMLP and its shareholders. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
In voting to approve the Advisory Agreement, the Trustees, including the Independent Trustees, concluded that the terms of the Advisory Agreement are reasonable and fair in light of the services performed, the fees paid by certain other funds, expenses incurred and such other matters as the Trustees considered relevant in the exercise of their reasonable business judgment.
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Table of Contents
Board Considerations Regarding Approval of Investment Advisory Agreement | ||||
November 30, 2013 (Unaudited) |
At an in-person meeting held on June 10, 2013 (the “Meeting”), the Board of Trustees of the Trust (the “Board”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve the Advisory Agreement between the Trust and ALPS Advisors, Inc. (the “Adviser”) with respect to the Alerian Energy Infrastructure ETF (the “ENFR ETF”). The Independent Trustees also met separately to consider the Advisory Agreement.
In evaluating whether to approve the Advisory Agreement for the ENFR ETF, the Board considered numerous factors, as described below.
With respect to the nature, extent and quality of the services to be provided by the Adviser under the Advisory Agreement, representatives from the Adviser presented the Adviser’s material regarding consideration of renewal of the Advisory Agreement. The Independent Trustees noted that included in the Board materials were responses by the Adviser to a questionnaire drafted by legal counsel to the Trust to assist the Board in evaluating whether to approve the Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the services proposed to be provided under the Advisory Agreement, the proposed investment parameters of the index for the ENFR ETF, financial information regarding the Adviser, its parent company, information describing the Adviser’s current organizations and the background and experience of the persons who would be responsible for the day-to-day management of the ENFR ETF, the nature and quality of services provided to other exchange-traded (“ETFs”), open-end and closed-end funds by the Adviser. Based upon their review, the Independent Trustees concluded that the Adviser was qualified to oversee the services to be provided by other service providers and that the services to be provided by the Adviser to the ENFR ETF are expected to be satisfactory.
At the Meeting, the Independent Trustees considered and approved an annual advisory fee of 0.75% of ENFR ETF’s average daily net assets. The Independent Trustees noted the services to be provided by the Adviser for the proposed annual advisory fee of 0.75% of ENFR ETF’s average daily net assets. The Independent Trustees noted that the advisory fees proposed for the ENFR ETF were unitary fees pursuant to which the Adviser will assume all expense of the ENFR ETF (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than payments under the Advisory Agreement, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses. Based on its review, the Independent Trustees concluded that the expected profitability of the ENFR ETF to the Adviser was not unreasonable.
The Independent Trustees also reviewed comparative fee information provided by Lipper Analytical Services (“Lipper”). The Independent Trustees noted that Lipper’s report contained information regarding comparisons of the proposed cost and expense structures of ENFR ETF with other funds’ cost and expense structures. The Independent Trustees noted the services to be provided by the Adviser for the annual advisory fee of 0.75% of the ENFR ETF’s average daily net assets. The Board also considered that the advisory fee was a unitary one and that, as set forth above, the Adviser had agreed to pay all of the ENFR ETF’s expenses (except for interest expenses, marketing fees, distribution fees or expenses, brokerage expenses,
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Alerian Energy Infrastructure ETF | Board Considerations Regarding Approval of Investment Advisory Agreement | |||
November 30, 2013 (Unaudited) |
taxes and extraordinary expenses such as litigation and other expenses not incurred in the ordinary course of the ENFR ETF’s business) out of the unitary fee. The Independent Trustees considered that, taking into account the impact of the ENFR ETF’s unitary advisory fee, the ENFR ETF’s expense ratio was higher than the median of its peer group. In evaluating the reasonableness of the fee the Independent Trustees considered, among other things, the index provider to ENFR ETF’s general reputation in the MLP space, the performance and rapid growth in assets of AMLP which is also based on an index from the same index provided to ENFR ETF and the fees charged by the index provider for licensing its index. Based on the foregoing and the other information available to them, the Independent Trustees concluded that the advisory fee for ENFR ETF was reasonable under the circumstances and in light of the quality of services provided.
The Independent Trustees also considered other benefits that may be realized by the Adviser from its relationship with the ENFR ETF and concluded that the advisory fee was reasonable taking into account such benefits. The Independent Trustees considered the extent to which economies of scale would be realized as the ENFR ETF grows and whether fee level reflects a reasonable sharing of such economies of scale for the benefit of the Fund’s investors. Because the ENFR ETF is newly organized, the Independent Trustees reviewed the unitary advisory fee proposed for ENFR ETF and anticipated expenses of the Fund and determined to review economies of scale in the future when the ENFR ETF had attracted assets.
Based on consideration of all factors deemed relevant, the Independent Trustees determined that approval of the Advisory Agreement was in the best interests of the ENFR ETF. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
In voting to approve the Advisory Agreement, the Trustees, including the Independent Trustees, concluded that the terms of the Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Trustees considered relevant in the exercise of their reasonable business judgment.
At a special telephonic meeting of the Board held on October 24, 2013, the Board met to approve a reduction in the proposed annual advisory fee to 0.65%. The Board noted that the Adviser had recommended the reduction for competitive reasons and that the Adviser was not proposing to reduce in any way the nature and scope of the services to be provided under the Advisory Agreement. The Board concluded that the proposed reduction in the advisory fee was reasonable.
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Table of Contents
Alerian Exchange Traded Funds | Trustees & Officers | |||
November 30, 2013 (Unaudited) |
Independent Trustees
Name, Address and Year of Birth of Trustee* | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustees*** | Other Directorships Held by Trustees | |||||
Mary K. Anstine, 1940 | Trustee | Since March 2008 | Ms. Anstine was President/Chief Executive Officer of HealthONE Alliance, Denver, Colorado, and former Executive Vice President of First Interstate Bank of Denver. Ms. Anstine is also Trustee/ Director of the following: AV Hunter Trust; Colorado Uplift Board. Ms. Anstine was formerly a Director of the Trust Bank of Colorado (later purchased and now known as Northern Trust Bank), HealthONE and Denver Area Council of the Boy Scouts of America and a member of the American Bankers Association Trust Executive Committee.
| 41 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder, Chief Operations Officer and Chief Financial Officer of Green Alpha Advisors, LLC. Prior to joining Green Alpha Advisors, Mr. Deems was CFO and Treasurer of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC, a private investment fund, and Sutton Place Management, LLC, an administrative services company, from 2004 to June 2007. Prior to this, Mr. Deems served as Controller of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC and Sutton Place Management, LLC. | 41 | Mr. Deems is a Trustee of Financial Investors Trust (30 funds); ALPS Variable Investment Trust (7 funds); and Reaves Utility Income Fund. |
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Alerian Exchange Traded Funds | Trustees & Officers | |||
November 30, 2013 (Unaudited) |
Independent Trustees (continued)
Name, Address and Year of Birth of Trustee* | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustees*** | Other Directorships Held by Trustees | |||||
Rick A. Pederson, 1952 | Trustee | Since March 2008 | Mr. Pederson is President, Foundation Properties, Inc. (a real estate investment management company), 1994 - present; Advisory Committee, Bow River Capital Partners (private equity management), 2003 - present; Advisor, Pauls Corporation (real estate investment management and development), 2008 - present; Chairman, Ross Consulting Group (real estate consulting services) 1983-2013; Advisory Board, Neenan Company (construction services) 2002-present; Board Member, Urban Land Conservancy (a not-for-profit organization), 2004 – present; Director, National Western Stock Show (not-for-profit organization). | 22 | Mr. Pederson is Trustee of Westcore Trust (12 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
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Alerian Exchange Traded Funds | Trustees & Officers | |||
November 30, 2013 (Unaudited) |
Interested Trustee
Name, Address and Year of Birth of Management Trustee* | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of in Fund Complex Overseen by | Other Directorships Held by Trustees | |||||
Thomas A. Carter, 1966 | Trustee and President | Since March 2008 | Mr. Carter joined ALPS Fund Services, Inc. (“ALPS”) in 1994 and is currently President and Director of ALPS Advisors, Inc. (“AAI”), ALPS Distributors, Inc. (“ADI”) and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”). Because of his position with AHI, APSD, ADI, ALPS and AAI, Mr. Carter is deemed an affiliate of the Fund as defined under the 1940 Act. Before joining ALPS, Mr. Carter was with Deloitte & Touché LLP, where he worked with a diverse group of clients, primarily within the financial services industry. Mr. Carter is a Certified Public Accountant and received his Bachelor of Science in Accounting from the University of Colorado at Boulder. | 29 | Mr. Carter is a Trustee of ALPS Variable Investment Trust (7 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203 |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services |
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Table of Contents
Alerian Exchange Traded Funds | Trustees & Officers | |||
November 30, 2013 (Unaudited) |
Officers
Name, Address and Year of Birth of Officer* | Position(s) Held with Trust | Length of Time Served** | Principal Occupation(s) During Past 5 Years | |||
Melanie Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars currently serves as a Deputy Chief Compliance Officer with ALPS. Prior to joining ALPS in September 2009, Ms. Zimdars served as Principal Financial Officer, Treasurer and Secretary for the Wasatch Funds from February 2007 to December 2008. From November 2006 to February 2007, she served as Assistant Treasurer for the Wasatch Funds and served as a Senior Compliance Officer for Wasatch Advisors, Inc. since 2005. Because of her position with ALPS, Ms. Zimdars is deemed an affiliate of the Trust as defined under the 1940 Act. Ms. Zimdars is also the CCO of ALPS Variable Investment Trust, Liberty All-Star Growth Fund, Inc., Liberty All-Star Equity Fund and BPV Family of Funds. | |||
Patrick D. Buchanan, 1972 | Treasurer | Since June 2012 | Mr. Buchanan is Vice President of ALPS. Mr. Buchanan joined ALPS in 2007 and because of his position with AAI, he is deemed an affiliate of the Trust as defined under the 1940 Act. Mr. Buchanan is also Treasurer of ALPS Variable Investment Trust and the Principal Real Estate Income Fund. | |||
William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer, AAI (since 2006); President of the Liberty All-Star Funds (since April 1999); Senior Vice President (2005-2006), Banc of America Investment Advisors, Inc. Because of his position with AAI, Mr. Parmentier is deemed an affiliate of the Trust as defined under the 1940 Act. | |||
Erin D. Nelson, 1977 | Secretary | Since October 2013 | Ms. Nelson is Vice President and Assistant General Counsel of AAI, ALPS Fund Services, Inc., ALPS Distributors, Inc., and ALPS Portfolio Solutions Distributor, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson has served as Secretary of the Clough Global Allocation Fund since 2004, Clough Global Equity Fund since 2005, Clough Global Opportunities Fund since 2006, Liberty All-Star Equity Fund since 2013 and Liberty All-Star Growth Fund since 2013. Ms. Nelson received her Bachelor of Arts in Political Science, magna cum laude, from the University of New Hampshire and Juris Doctorate from the University of Denver. | |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Senior Paralegal. Prior to joining ALPS, Ms. Craig was Legal Manager at Janus Capital Management LLC and served as Assistant Secretary of Janus Investment Fund, Janus Adviser Series and Janus Aspen Series. Because of her position with ALPS, Ms. Craig is deemed an affiliate of the Trust as defined under the 1940 Act. |
* | The business address of each Officer is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Officer began serving the Trust. Each Officer serves an indefinite term, until his successor is elected. |
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Table of Contents
Table of Contents
Table of Contents
RiverFront Strategic Income Fund
| ||
CONTENTS
1 |
2 |
3 |
4 |
6 |
7 |
8 |
9 |
10 |
14 |
Board Considerations Regarding Approval of Investment Advisory Agreement | 15 |
16 |
November 30, 2013
Table of Contents
RiverFront Strategic Income Fund
| ||
November 30, 2013 (Unaudited) |
INVESTMENT OBJECTIVE
The RiverFront Strategic Income Fund (the “Fund”) seeks total return, with an emphasis on income as the source of that total return. The Fund seeks to achieve its investment objective by investing in a global portfolio of fixed income securities of various maturities, ratings and currency denominations.
PERFORMANCE OVERVIEW
Since its’ inception on 10/7/13 through 11/30/13, the RiverFront Strategic Income Fund performed relatively well given a tough fixed income environment. During this short time period, the RiverFront Strategic Income Fund market price returned 2.58% vs. 0.42% for the Barclays Capital U.S. Aggregate Bond Index. The RiverFront Strategic Income Fund is comprised almost entirely of shorter maturity high yield bonds, which performed well due to the combination of their shorter durations and tightening risk premiums. Shorter duration bonds generally performed better than longer duration bonds during this time period, as yields on shorter-term (2-5 year) U.S. Treasuries fell about 5-10 basis points (bps)1, while longer-term (7-30 years) yields rose about 5-10 basis points. During this time period, risk premiums on shorter-term high yield bonds also fell over 50 bps.
GROWTH OF $10,000 (as of November 30, 2013) Comparison of change in value of a $10,000 investment in the Fund and the Index
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
FUND PERFORMANCE (as of November 30, 2013)
Since Inception^ | ||
RiverFront Strategic Income Fund – NAV | 2.08% | |
RiverFront Strategic Income Fund – Market Price* | 2.58% | |
Barclays Capital U.S. Aggregate Bond Index 2 | 0.42% | |
Total Expense Ratio (per the current prospectus) 0.22% |
Performance data quoted represent past performance. Past performance is no guarantee of future results. The investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance quoted. Call 1-866-759-5679 for current month end performance.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund commenced Investment Operations on October 8, 2013. Total return for a period of less than one year is not annualized. |
* | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times |
1 | Basis Points or bps is a unit that is equal to 1/100th of 1%, and is used to denote the change in a financial instrument. |
2 | Barclays Capital U.S. Aggregate Bond Index - An unmanaged index composed of securities from the Barclays Capital Government/Corporate Bond Index, Mortgage-Backed Securities Index and the Asset-Backed Securities Index. Total return comprises price appreciation/depreciation and income as a percentage of the original investment. Indices are rebalanced monthly by market capitalization. The index is not actively managed and does not reflect any deductions for fees, expenses or taxes. An investor may not invest directly in an index. |
TOP TEN LONG HOLDINGS (as a % of Net Assets)† | ||
Windstream Corp., Sr. Unsec. | 4.63% | |
MGM Resorts International, Sr. Unsec. | 4.58% | |
Aircastle, Ltd., Sr. Unsec. | 4.48% | |
E*Trade Financial Corp., Sr. Unsec. | 4.28% | |
Avis Budget Car Rental LLC/Avis Budget Finance, Inc., Sr. Unsec. | 4.24% | |
DaVita HealthCare Partners, Inc., Sr. Unsec. | 4.23% | |
CIT Group, Inc., Sr. Unsec. | 4.22% | |
CHS/Community Health Systems, Inc., First Lien | 4.19% | |
Ally Financial, Inc., Sr. Unsec. | 4.14% | |
Ball Corp., Sr. Unsec. | 3.99% | |
TOP TEN HOLDINGS | 42.98% |
† | Holdings and sector allocations are subject to change. |
SECTOR ALLOCATION (% of Total Investments)†
1 | November 30, 2013
Table of Contents
RiverFront Strategic Income Fund
| ||
November 30, 2013 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Fund, you incur two types of costs:(1) transaction costs which may include creation and redemption fees or brokerage charges, and (2) ongoing costs, including management fees and other Fund expenses. These examples are 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 funds. It is based on an investment of $1,000 invested at the beginning of the (six month) period and held though November 30, 2013.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred 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 first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second line 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 costs were included, your costs would have been higher.
Beginning Account 6/1/13 | Ending Account Value 11/30/13 | Expense Ratio(a) | Expenses Paid During Period 6/1/13 - 11/30/13(b) | |||||
Actual(c) | $ 1,000.00 | $ 1,020.80 | 0.22% | $ 0.33 | ||||
Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,023.97 | 0.22% | $ 1.12 |
(a) | Annualized, based on the Fund’s most recent fiscal half year expenses. |
(b) | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (183), divided by 365. |
(c) | The Fund commenced operations on October 8, 2013, and as such the actual expenses paid during the period were based on 54 days. |
2 | November 30, 2013
Table of Contents
RiverFront Strategic Income Fund
| ||
To the Board of Trustees and Shareholders of ALPS ETF Trust:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Riverfront Strategic Income Fund, one of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2013, and the related statements of operations, changes in net assets, and the financial highlights for the period October 8, 2013 (Commencement) to November 30, 2013. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2013, by correspondence with the custodian. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Riverfront Strategic Income Fund of the ALPS ETF Trust as of November 30, 2013, the results of its operations, the changes in its net assets, and the financial highlights for the period October 8, 2013 (Commencement) to November 30, 2013, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 27, 2014
3 | November 30, 2013
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RiverFront Strategic Income Fund
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November 30, 2013 |
Security Description | Principal Amount | Value | ||||||
| ||||||||
CORPORATE BONDS (97.16%) |
| |||||||
Basic Materials (6.93%) |
| |||||||
ArcelorMittal, Sr. Unsec.(a) | ||||||||
5.75%, 08/05/2020 | $ | 3,500,000 | $ | 3,701,250 | ||||
Cascades, Inc., Sr. Unsec. | ||||||||
7.75%, 12/15/2017 | 2,900,000 | 3,026,875 | ||||||
|
| |||||||
Total Basic Materials | 6,728,125 | |||||||
|
| |||||||
Communications (17.38%) |
| |||||||
Cablevision Systems Corp., Sr. Unsec. | ||||||||
8.63%, 09/15/2017 | 1,900,000 | 2,204,000 | ||||||
DISH DBS Corp., Sr. Unsec. | ||||||||
4.25%, 04/01/2018 | 2,900,000 | 2,958,000 | ||||||
Frontier Communications Corp., Sr.Unsec. | ||||||||
8.25%, 04/15/2017 | 2,900,000 | 3,389,375 | ||||||
Lamar Media Corp., Sr. Sub. Series | ||||||||
5.88%, 02/01/2022 | 3,700,000 | 3,834,125 | ||||||
Windstream Corp., Sr. Unsec. | ||||||||
7.88%, 11/01/2017 | 3,900,000 | 4,494,750 | ||||||
|
| |||||||
Total Communications | 16,880,250 | |||||||
|
| |||||||
Consumer, Cyclical (4.58%) |
| |||||||
MGM Resorts International, Sr. Unsec. | ||||||||
7.63%, 01/15/2017 | 3,900,000 | 4,446,000 | ||||||
|
| |||||||
Total Consumer, Cyclical | 4,446,000 | |||||||
|
| |||||||
Consumer, Non-cyclical (28.86%) |
| |||||||
Avis Budget Car Rental LLC/Avis Budget Finance, Inc., Sr. Unsec. | ||||||||
4.88%, 11/15/2017 | 3,900,000 | 4,114,500 | ||||||
Biomet, Inc., Sr. Unsec. | ||||||||
6.50%, 08/01/2020 | 2,700,000 | 2,875,500 | ||||||
CHS/Community Health Systems, Inc., First Lien | ||||||||
5.13%, 08/15/2018 | 3,900,000 | 4,065,750 | ||||||
DaVita HealthCare Partners, Inc., Sr. Unsec. | ||||||||
6.38%, 11/01/2018 | 3,900,000 | 4,104,750 | ||||||
HCA, Inc., First Lien | ||||||||
6.50%, 02/15/2020 | 2,900,000 | 3,208,125 | ||||||
Smithfield Foods, Inc., Sr. Unsec. | ||||||||
7.75%, 07/01/2017 | 1,925,000 | 2,252,250 | ||||||
Tenet Healthcare Corp., First Lien | ||||||||
6.25%, 11/01/2018 | 3,400,000 | 3,735,750 |
Security Description | Principal Amount | Value | ||||||
| ||||||||
Consumer, Non-cyclical (continued) |
| |||||||
Valeant Pharmaceuticals International, | ||||||||
6.75%, 08/15/2018 | $ | 1,300,000 | $ | 1,438,125 | ||||
6.38%, 10/15/2020 | 2,100,000 | 2,223,375 | ||||||
|
| |||||||
Total Consumer, Non-cyclical |
| 28,018,125 | ||||||
|
| |||||||
Energy (8.31%) | ||||||||
Access Midstream Partners LP/ACMP Finance Corp., Sr. Unsec. | ||||||||
6.13%, 07/15/2022 | 2,700,000 | 2,909,250 | ||||||
Continental Resources, Inc., Sr. Unsec. | ||||||||
5.00%, 09/15/2022 | 2,900,000 | 3,001,500 | ||||||
El Paso LLC, First Lien | ||||||||
7.00%, 06/15/2017 | 1,900,000 | 2,159,738 | ||||||
|
| |||||||
Total Energy | 8,070,488 | |||||||
|
| |||||||
Financial (20.29%) | ||||||||
Aircastle, Ltd., Sr. Unsec. | ||||||||
6.75%, 04/15/2017 | 3,900,000 | 4,348,500 | ||||||
Ally Financial, Inc., Sr. Unsec. | ||||||||
5.50%, 02/15/2017 | 3,700,000 | 4,022,144 | ||||||
CIT Group, Inc., Sr. Unsec. | ||||||||
4.25%, 08/15/2017 | 3,900,000 | 4,094,025 | ||||||
E*Trade Financial Corp., Sr. Unsec. | ||||||||
6.00%, 11/15/2017 | 3,900,000 | 4,153,500 | ||||||
General Motors Financial Co., Inc, Sr. Unsec.(b) | ||||||||
4.75%, 08/15/2017 | 2,900,000 | 3,088,500 | ||||||
|
| |||||||
Total Financial | 19,706,669 | |||||||
|
| |||||||
Industrial (3.99%) | ||||||||
Ball Corp., Sr. Unsec. | ||||||||
5.00%, 03/15/2022 | 3,900,000 | 3,870,750 | ||||||
|
| |||||||
Total Industrial | 3,870,750 | |||||||
|
| |||||||
Utilities (6.82%) | ||||||||
AES Corp., Sr. Unsec. | ||||||||
8.00%, 10/15/2017 | 2,900,000 | 3,414,750 | ||||||
NRG Energy, Inc., Sr. Unsec. | ||||||||
7.63%, 01/15/2018 | 2,800,000 | 3,206,000 | ||||||
|
| |||||||
Total Utilities | 6,620,750 | |||||||
|
| |||||||
TOTAL CORPORATE BONDS |
| |||||||
(Cost $93,863,739) | 94,341,157 | |||||||
|
|
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Schedule of Investments | November 30, 2013 |
7 Day Yield | Shares | Value | ||||||||||
| ||||||||||||
SHORT TERM INVESTMENTS (1.52%) |
| |||||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(c) | 1,480,648 | $ | 1,480,648 | ||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS |
| |||||||||||
(Cost $1,480,648) |
| 1,480,648 | ||||||||||
|
| |||||||||||
TOTAL INVESTMENTS (98.68%) |
| |||||||||||
(Cost $95,344,387) |
| $ | 95,821,805 | |||||||||
NET OTHER ASSETS AND LIABILITIES (1.32%) |
| 1,280,540 | ||||||||||
|
| |||||||||||
NET ASSETS (100.00%) |
| $ | 97,102,345 | |||||||||
|
|
(a) | Represents a step bond. Rate disclosed is as of November 30, 2013. |
(b) | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from regstration, normally to qualified institutional buyers. At period end, the market value of those securities restricted under Rule 144A was $6,750,000, representing 6.95% of the Fund’s net assets. |
(c) | Less than 0.0005%. |
Common Abbreviations:
LLC - Limited Liability Company.
LP - Limited Partnership.
Ltd. - Limited.
Sr. - Senior.
Sub. - Subordinated.
Unsec. - Unsecured.
See Notes to Financial Statements.
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November 30, 2013 |
ASSETS: | ||||
Investments, at value | $ | 95,821,805 | ||
Interest receivable | 1,294,638 | |||
| ||||
Total Assets | 97,116,443 | |||
| ||||
LIABILITIES: | ||||
Payable to adviser | 14,098 | |||
| ||||
Total Liabilities | 14,098 | |||
| ||||
NET ASSETS | $ | 97,102,345 | ||
| ||||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 96,489,989 | ||
Accumulated net investment income | 134,938 | |||
Net unrealized appreciation on investments | 477,418 | |||
| ||||
NET ASSETS | $ | 97,102,345 | ||
| ||||
INVESTMENTS, AT COST | $ | 95,344,387 | ||
| ||||
PRICING OF SHARES | ||||
Net Assets | $ | 97,102,345 | ||
Shares of beneficial interest outstanding (Unlimited number of shares, par value $0.01 per share) | 3,900,002 | |||
Net Asset Value, offering and redemption price per share | $ | 24.90 |
See Notes to Financial Statements.
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For the Period October 8, 2013 (Commencement) to November 30, 2013 |
INVESTMENT INCOME: | ||||
Interest | $263,516 | |||
| ||||
Total Investment Income | 263,516 | |||
| ||||
EXPENSES: | ||||
Investment adviser and sub-adviser fees (note 3) | 34,680 | |||
| ||||
Total Expenses | 34,680 | |||
Less fees waived/reimbursed by sub-adviser fees (note 3) | (18,094) | |||
| ||||
Net Expenses | 16,586 | |||
| ||||
NET INVESTMENT INCOME | 246,930 | |||
| ||||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net change in unrealized appreciation on investments | 477,418 | |||
| ||||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 477,418 | |||
| ||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ 724,348 | |||
|
See Notes to Financial Statements.
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| ||
For the Period October 8, 2013 (Commencement) to November 30, 2013 | ||||
| ||||
OPERATIONS: | ||||
Net investment income | $ | 246,930 | ||
Net change in unrealized appreciation on investments | 477,418 | |||
| ||||
Net increase in net assets resulting from operations | 724,348 | |||
| ||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||
From net investment income | (111,992) | |||
| ||||
Total distributions | (111,992) | |||
| ||||
CAPITAL SHARE TRANSACTIONS: | ||||
Proceeds from sale of shares | 96,489,989 | |||
| ||||
Net increase from share transactions | 96,489,989 | |||
| ||||
Net increase in net assets | 97,102,345 | |||
NET ASSETS: | ||||
Beginning of period | – | |||
| ||||
End of period * | $ | 97,102,345 | ||
| ||||
*Including accumulated net investment income of: | $ | 134,938 | ||
OTHER INFORMATION: | ||||
CAPITAL SHARE TRANSACTIONS: | ||||
Beginning shares | – | |||
Shares sold | 3,900,002 | |||
| ||||
Shares outstanding, end of period | 3,900,002 | |||
|
See Notes to Financial Statements.
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For a share outstanding throughout the period presented |
For the Period October 8, 2013 (Commencement) to November 30, 2013 | ||
| ||
NET ASSET VALUE, BEGINNING OF PERIOD | $24.42 | |
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||
Net investment income(a) | 0.11 | |
Net realized and unrealized gain | 0.40 | |
| ||
Total from investment operations | 0.51 | |
| ||
DISTRIBUTIONS: | ||
From net investment income | (0.03) | |
| ||
Total distributions | (0.03) | |
| ||
NET INCREASE IN NET ASSET VALUE | 0.48 | |
| ||
NET ASSET VALUE, END OF PERIOD | $24.90 | |
| ||
TOTAL RETURN(b) | 2.08% | |
RATIOS/SUPPLEMENTAL DATA: | ||
Net assets, end of period (000s) | $97,102 | |
RATIOS TO AVERAGE NET ASSETS: | ||
Expenses excluding waiver/reimbursement | 0.46%(c) | |
Expenses including waiver/reimbursement | 0.22%(c) | |
Net investment income including expenses waiver/reimbursement | 3.28%(c) | |
PORTFOLIO TURNOVER RATE(d) | 0% |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and the redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at the actual reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover rate is not annualized. |
See Notes to Financial Statements.
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November 30, 2013 |
1. ORGANIZATION
The ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of November 30, 2013, the Trust consists of nineteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains solely to the RiverFront Strategic Income Fund (the “Fund”). The investment objective of the Fund is to seek total return, with an emphasis on income as the source of that total return. The Fund commenced operations on October 8, 2013.
The Fund’s Shares (“Shares”) are listed on the New York Stock Exchange (“NYSE”) Arca. The Fund issues and redeems Shares at Net Asset Value (“NAV”) in blocks of 50,000 Shares, each of which is called a “Creation Unit.” Creation Units are issued and redeemed principally in-kind for securities and/or cash. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates.
A. Portfolio Valuation
The Fund’s NAV is determined daily, as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Fixed-income obligations, excluding municipal securities, having a remaining maturity of greater than 60 days, are typically valued at the mean between the evaluated bid and ask prices formulated by an independent pricing service. Municipal securities having a remaining maturity of greater than 60 days, are typically valued at the evaluated bid price formulated by an independent pricing service.
The Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Fund may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the closing sale prices on the applicable exchange and fair value prices may not reflect the actual value of a security. A variety of factors may be considered in determining the fair value of such securities.
B. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
C. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid monthly or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually.
D. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carry forwards) under income tax regulations.
For the period ended November 30, 2013, the Fund had no reclassifications on results of operations or net assets recorded to reflect tax character.
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Notes to Financial Statements | November 30, 2013 |
At November 30, 2013, the Fund had no unused capital loss carry forwards available for tax purposes.
Distributions from net investment income and capital gains are determined in accordance with income tax regulations, which may differ from U.S. GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterization of distributions made by the Fund.
The tax character of the distributions paid was as follows:
Ordinary Income | Long-Term Capital Gain | Return of Capital | ||||||||||
RiverFront Strategic Income Fund | $ | 111,992 | $ | – | $ | – |
As of November 30, 2013, the components of distributable earnings on a tax basis were as follows:
RiverFront Strategic Income Fund | ||||
Undistributed net investment income | $ | 134,938 | ||
Accumulated net realized gain on investments | – | |||
Other accumulated gains | – | |||
Net unrealized appreciation on investments | 477,418 | |||
Total | $ | 612,356 | ||
As of November 30, 2013, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Gross Appreciation (excess of value over tax cost) | Gross Depreciation (excess of tax cost over value) | Net Appreciation/(Depreciation) of Foreign Currency and Derivatives | Net Unrealized (Depreciation) | Cost of Investments for Income Tax Purposes | ||||||||||||||||
RiverFront Strategic Income Fund | 532,063 | $ | (54,645 | ) | $ | – | $ | 477,418 | $ | 95,344,387 |
E. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies.
The Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the period ended November 30, 2013, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is generally three years after the filing of the tax return. Being that the Fund commenced operations on October 8, 2013; no tax returns have been filed as of the date of this report.
F. Fair Value Measurements
The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Fund’s investments by major category are as follows:
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who make markets in such securities. For corporate bonds, pricing vendors utilize matrix pricing which considers yield or price of bonds of comparable
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Notes to Financial Statements | November 30, 2013 |
quality, coupon, maturity and type as well as broker-supplied prices. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances. The Fund invests a significant portion of its assets in below investment grade securities. The value of these securities can be more volatile due to changes in the credit quality of the issuer and is sensitive to changes in economic, market and regulatory conditions.
Investments in open-end mutual funds are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; | |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and | |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value the Fund’s investments as of November 30, 2013:
Investments in Securities at Value* | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Corporate Bonds | $ | – | $ | 94,341,157 | $ | – | $ | 94,341,157 | ||||||||
Short Term Investments | 1,480,648 | – | – | 1,480,648 | ||||||||||||
TOTAL | $ | 1,480,648 | $ | 94,341,157 | $ | – | $ | 95,821,805 | ||||||||
*For detailed description of the sectors, see the accompanying Schedule of Investments.
The Fund recognizes transfers between levels as of the end of the period. For the period ended November 30, 2013, the Fund did not have any transfers between Level 1 and Level 2 securities. The Fund did not have any securities which used significant unobservable inputs (Level 3) in determining fair value.
3. | INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS |
ALPS Advisors, Inc. (the “Investment Adviser”) acts as the Fund’s investment adviser pursuant to an Advisory Agreement with the Trust on behalf of the Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Fund pays the Investment Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.22% of the Fund’s average daily net assets. From time to time, the Investment Adviser may waive all or a portion of its fee.
Riverfront Investment Group, LLC acts as the Fund’s sub-adviser (“Sub-Adviser”) pursuant to a sub-advisory agreement with the Trust (the ‘‘Sub-Advisory Agreement’’). Pursuant to the Sub-Advisory Agreement, the Fund pays the Sub-Adviser a sub-advisory fee for the services provided, payable on a quarterly basis at the annual rate of 0.24% of the Fund’s average daily net assets. However, the Sub-Adviser has agreed to waive all of its sub-advisory fee until at least October 1, 2014. This waiver may only be terminated by the Fund’s Board of Trustees (and not by the Fund’s Sub-Adviser) prior to October 1, 2014.
Out of the unitary management fee, the Investment Adviser pays substantially all expenses of the Fund, including the cost of transfer agency, custody, fund administration, legal, audit and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes
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Notes to Financial Statements | November 30, 2013 |
and extraordinary expenses not incurred in the ordinary course of the Fund’s business. In addition, the Investment Adviser’s unitary management fee is designed to compensate the Investment Adviser for providing services for the Fund.
The Fund’s total management fees of 0.46% consists of 0.22% paid to the Fund’s investment adviser and a fee of 0.24% paid to the Fund’s sub-adviser.
ALPS Fund Services, Inc. (“ALPS”), an affiliate of the Investment Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Investment Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) is paid a quarterly retainer of $5,000, $3,750 for each regularly scheduled Board meeting attended and $1,500 for each special meeting held outside of regularly scheduled meetings.
4. | PURCHASES AND SALES OF SECURITIES |
For the period ended November 30, 2013, the cost of purchases and proceeds from sales of investment securities, excluding in-kind transactions and short-term investments, were as follows:
Fund | Purchases of Securities | Proceeds From Sales of Securities | ||||||
RiverFront Strategic Income Fund | $ | 1,061,500 | $ | – |
For the period ended November 30, 2013, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases of Securities | Proceeds from Sales of Securities | ||||||
RiverFront Strategic Income Fund | $ | 92,939,220 | $ | – |
Gains on in-kind transactions are not considered taxable for federal income tax purposes.
5. | CAPITAL SHARE TRANSACTIONS |
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 shares. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Fund. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the net asset value per unit 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 AP or as a result of other market circumstances.
6. | INDEMNIFICATIONS |
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
7. | NEW ACCOUNTING PRONOUNCEMENTS |
In June 2013, the FASB issued ASU No. 2013-08, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The FASB standard identifies characteristics a company must assess to determine whether it is considered an investment company for financial reporting purposes. This ASU is effective for fiscal years beginning after December 15, 2013. The Fund is currently reviewing the requirements and believes the adoption of this ASU will not have a material impact on its financial statements.
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November 30, 2013 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
A description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies and information regarding how the Fund voted proxies related to portfolio securities during the most recent 12-month period ended June 30th is available without charge, (1) on the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov; (2) upon request, by calling (toll-free) 1-866-513-5856; and (3) on the Trust’s website located at http://www.alpsfunds.com.
PORTFOLIO HOLDINGS
The Trust will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q will be available (1) on the SEC’s website at http://www.sec.gov; (2) by calling (toll-free) 1-866-513-5856; (3) on the Trust’s website located at http://www.alpsfunds.com; and (4) for review and copying at the SEC’s Public Reference Room (“PRR”) in Washington D.C. Information regarding the operation of the PRR may be obtained by calling (toll-free) 1-800-732-0330.
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Board Considerations Regarding Approval of Investment Advisory Agreements November 30, 2013 (Unaudited) |
At an in-person meeting held on June 10, 2013, the Board of Trustees of the Trust (the “Board”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve the Advisory Agreement between the Trust and ALPS Advisors, Inc. (the “Adviser”) and Sub-Advisory Agreement between the Trust and RiverFront Investment Group LLC ( the “Sub-Adviser”) with respect to the RiverFront Strategic Income Fund (the “Fund” or “RIGS”). The Independent Trustees also met separately to consider the Advisory Agreement and Sub-Advisory Agreement (together the “Advisory Agreements”).
In evaluating whether to approve the Advisory Agreements for the Fund, the Board considered numerous factors, as described below.
With respect to the nature, extent and quality of the services to be provided by the Adviser under the Advisory Agreement and the Sub-Adviser under the Sub-Advisory Agreement, representatives from the Adviser and Sub-Adviser presented the Adviser’s and Sub-Advisers materials, respectively, regarding consideration of the approval of the Advisory Agreements. The Independent Trustees noted that included in the Board materials were responses by the Adviser and Sub-Adviser to a questionnaire drafted by legal counsel to the Trust to assist the Board in evaluating whether to approve the Advisory Agreements (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the services proposed to be provided under the Advisory Agreements, financial information regarding the Adviser and Sub-Adviser, each of their parent companies, information describing the Adviser’s and Sub-Advisors current organizations and the background and experience of the persons who would be responsible for the day-to-day management of the Fund, the anticipated financial support of the Fund, the nature and quality of services provided to other exchange-traded (“ETFs”), open-end and closed-end funds by the Adviser and Sub-Adviser. The Independent Trustees noted that while the Fund would be the first actively managed ETF offered by the Adviser both the Adviser and Sub-Adviser have extensive experience in managing actively managed funds. Based upon their review, the Independent Trustees concluded that the Adviser and Sub-Adviser were qualified to oversee the services to be provided by other service providers and that the services to be provided by the Adviser and Sub-Adviser to the Fund are expected to be satisfactory.
The Independent Trustees noted the services to be provided by the Adviser and the Sub-Adviser for the annual advisory fee of 0.46% of the Fund’s average daily net assets consisting of an advisory fee of 0.22% paid to the Adviser and 0.24% to be paid to the Sub-Adviser. The Independent Trustees also noted that the Sub-Adviser has agreed to waive its entire fee until at least October 1, 2014. The Independent Trustees noted that the advisory fees proposed for RIGS were unitary fees pursuant to which Adviser will assume all expenses of RIGS (including the costs of transfer agency, custody, fund administration, legal, audit and other services) other than payments under the Advisory Agreements, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses. Based on its review, the Independent Trustees concluded that the expected profitability of the Fund to the Adviser and Sub-Adviser was not unreasonable.
The Independent Trustees also reviewed comparative fees and expense data provided from Lipper Analytical Services (“Lipper”). The Independent Trustees noted that Lipper’s report contained information regarding comparisons of the proposed cost and expense structures of RIGS with other funds’ cost and expense structures. The Independent Trustees also considered that the advisory fee was a unitary one and that, as set forth above, the Adviser had agreed to pay all of the Fund’s expenses (payments under the Advisory Agreement, except for interest expenses, marketing fees, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses such as litigation and other expenses not incurred in the ordinary course of the Fund’s business) out of the unitary fee. The Independent Trustees considered that, taking into account the impact of the Fund’s unitary advisory fee and the Sub-Adviser’s fee waiver, the Fund’s expense ratio was lower than other funds in its peer group and without the Sub-Adviser waiver was at the median of its peer group. Based on the foregoing and other information available to them, the Independent Trustees concluded that the advisory and sub-advisory fees for RIGS were reasonable under the circumstances and in light of the quality of services provided.
The Independent Trustees also considered other benefits that may be realized by the Adviser or Sub-Adviser from their relationship with RIGS and concluded that the advisory and sub-advisory fees were reasonable taking into account any such benefits. The Independent Trustees considered the extent to which economies of scale would be realized as the Fund grows and whether fee levels reflect a reasonable sharing of such economies of scale for the benefit of Fund investors. Because the Fund is newly organized, the Independent Trustees reviewed the Fund’s proposed unitary advisory fee and sub-advisory fee for RIGS and anticipated expenses and determined to review economies of scale in the future when the Fund had attracted assets.
In voting to approve the Advisory and Sub-Advisory Agreements, the Independent Trustees, including the Independent Trustees, concluded that the terms of the Advisory and Sub-Advisory Agreements are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Independent Trustees considered relevant in the exercise of their reasonable business judgment. The Independent Trustees did not identify any single factor or group of factors as all controlling and considered all factors together.
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| ||
November 30, 2013 (Unaudited) |
INDEPENDENT TRUSTEES | ||||||||||
Name, Address and Year of Birth of Trustee* | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustees*** | Other Directorships Held by Trustees | |||||
Mary K. Anstine, 1940 |
Trustee |
Since |
Ms. Anstine was President/Chief Executive Officer of HealthONE Alliance, Denver, Colorado, and former Executive Vice President of First Interstate Bank of Denver. Ms. Anstine is also Trustee/Director of the following: AV Hunter Trust; Colorado Uplift Board. Ms. Anstine was formerly a Director of the Trust Bank of Colorado (later purchased and now known as Northern Trust Bank), HealthONE and Denver Area Council of the Boy Scouts of America and a member of the American Bankers Association Trust Executive Committee.
|
41 |
Ms. Anstine is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder, Chief Operations Officer and Chief Financial Officer of Green Alpha Advisors, LLC. Prior to joining Green Alpha Advisors, Mr. Deems was CFO and Treasurer of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC, a private investment fund, and Sutton Place Management, LLC, an administrative services company, from 2004 to June 2007. Prior to this, Mr. Deems served as Controller of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC and Sutton Place Management, LLC.
| 41 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); and Reaves Utility Income Fund. | |||||
Rick A. Pederson, 1952 | Trustee | Since March 2008 | Mr. Pederson is President, Foundation Properties, Inc. (a real estate investment management company), 1994 – present; Advisory Committee, Bow River Capital Partners (private equity management), 2003 – present; Advisor, Pauls Corporation (real estate investment management and development), 2008 – present; Chairman, Ross Consulting Group (real estate consulting services) 1983 – 2013; Advisory Board, Neenan Company (construction services) 2002 – present; Board Member, Urban Land Conservancy (a not- for-profit organization), 2004 – present; Director, National Western Stock Show (not- for-profit organization).
| 22 | Mr. Pederson is Trustee of Westcore Trust (12 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
16 | November 30, 2013
Table of Contents
RiverFront Strategic Income Fund
| ||
Trustees and Officers | November 30, 2013 (Unaudited) |
INTERESTED TRUSTEE
Name, Address and Year of Birth of Management | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustees*** | Other Directorships Held by Trustees | |||||
Thomas A. Carter, 1966 | Trustee and President | Since March 2008 | Mr. Carter joined ALPS Fund Services, Inc. (“ALPS”) in 1994 and is currently President and Director of ALPS Advisors, Inc. (“AAI”), ALPS Distributors, Inc. (“ADI”) and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”). Because of his position with AHI, ALPS, ADI, APSD and AAI, Mr. Carter is deemed an affiliate of the Fund as defined under the 1940 Act. Before joining ALPS, Mr. Carter was with Deloitte & Touché LLP, where he worked with a diverse group of clients, primarily within the financial services industry. Mr. Carter is a Certified Public Accountant and received his Bachelor of Science in Accounting from the University of Colorado at Boulder.
| 29 | Mr. Carter is a Trustee of ALPS Variable Investment Trust (7 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
17 | November 30, 2013
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RiverFront Strategic Income Fund
| ||
Trustees and Officers | November 30, 2013 (Unaudited) |
OFFICERS
| ||||||
Name, Address and Year of Birth of Officer*
| Position(s) Held with Trust
| Length of Time
| Principal Occupation(s) During Past 5 Years
| |||
Melanie Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars currently serves as a Deputy Chief Compliance Officer with ALPS. Prior to joining ALPS in September 2009, Ms. Zimdars served as Principal Financial Officer, Treasurer and Secretary for the Wasatch Funds from February 2007 to December 2008. From November 2006 to February 2007, she served as Assistant Treasurer for the Wasatch Funds and served as a Senior Compliance Officer for Wasatch Advisors, Inc. since 2005. Because of her position with ALPS, Ms. Zimdars is deemed an affiliate of the Trust as defined under the 1940 Act. Ms. Zimdars is also the CCO of ALPS Variable Investment Trust, Liberty All-Star Growth Fund, Inc., Liberty All-Star Equity Fund and BPV Family of Funds.
| |||
William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer, AAI (since 2006); President of the Liberty All- Star Funds (since April 1999); Senior Vice President (2005 – 2006), Banc of America Investment Advisors, Inc. Because of his position with AAI, Mr. Parmentier is deemed an affiliate of the Trust as defined under the 1940 Act.
| |||
Patrick D. Buchanan, 1972 | Treasurer | Since June 2012 | Mr. Buchanan is Vice President of AAI. Mr. Buchanan joined ALPS in 2007 and because of his position with AAI, he is deemed an affiliate of the Trust as defined under the 1940 Act. Mr. Buchanan is also Treasurer of ALPS Variable Investment Trust and the Principal Real Estate Income Fund.
| |||
Erin D. Nelson 1977 | Secretary | Since October 2013 | Ms. Nelson is Vice President and Assistant General Counsel of AAI, ALPS Fund Services, Inc., ALPS Distributors, Inc., and ALPS Portfolio Solutions Distributor, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson has served as Secretary of the Clough Global Allocation Fund since 2004, Clough Global Equity Fund since 2005, Clough Global Opportunities Fund since 2006, Liberty All-Star Equity Fund since 2013 and Liberty All-Star Growth Fund since 2013. Ms. Nelson received her Bachelor of Arts in Political Science, magna cum laude, from the University of New Hampshire and Juris Doctorate from the University of Denver.
| |||
Jennifer A. Craig 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Senior Paralegal. Prior to joining ALPS, Ms. Craig was Legal Manager at Janus Capital Management LLC and served as Assistant Secretary of Janus Investment Fund, Janus Adviser Series and Janus Aspen Series. Because of her position with ALPS, Ms. Craig is deemed an affiliate of the Trust as defined under the 1940 Act.
|
* | The business address of each Officer is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Officer began serving the Trust. Each Officer serves an indefinite term, until his successor is elected. |
18 | November 30, 2013
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![]() | PERFORMANCE OVERVIEW | |
November 30, 2013 (Unaudited) |
PERFORMANCE OVERVIEW
The US Equity High Volatility Put Write Index Fund (HVPW) listed on the NYSE Arca on Feb 28, 2013. The Fund gained 9.51% on a total NAV return basis from February 28, 2013 through November 30, 2013, while distributing approximately 6% or $1.52 per share in each of the Fund’s four bi-monthly distributions during this same period.
The Fund’s return was consistent with the NYSE Arca U.S. Equity High Volatility Put Write IndexSM (the Fund’s “Underlying Index”) which returned 11.41%, after considering the Fund’s fees, the cost of rolling its options every two months, the compounding effect of reinvested distributions in the Index, and the fact that the Index values options at a mid price between the bid(1) and the offer(2), whereas the Fund sells options closer to the bid.
Of the 80 two-month options sold by the Fund which expired prior to November 30, 2013 the average premium(3) generated was approximately 2.5%. Of those 80 options, 4 expired “in-the-money”(4), and were subsequently closed out by buying the options back, while 76 options expired worthless.
Because the Fund collateralizes its short put(5) position by purchasing 3mth T-bills, part of the Fund’s return is generated by interest income. During the 9 month period from February 28, 2013 through November 30, 2013 interest rates remained very low. Should interest rates increase the Fund’s return due to interest income will also increase.
While not an “apples-to-apples” comparison, over the same time period (from Feb 28, 2013 through Nov 30, 2013) the S&P 500® Index(6) had a return 21.1%. However, considering that the Fund’s NAV annualized historical volatility of 3.05% over this period was about one third of the S&P 500’s annualized historical volatility of 11.26% over that same period, the risk/return profile of the Fund appears more favorable.
Looking forward we believe the Fund’s strategy of selling high implied volatility put options(7) on a diversified selection of 20 large-capitalization stocks with strike prices(8) that are 15% “out-of-the money”(9) will continue to provide income potential to investors while at the same time allowing the Fund to experience lower volatility than the broad market.
(1) | Bid: the price a buyer is willing to pay for a security. |
(2) | Offer: the price at which publicly issued securities are made available for purchase by the investment bank underwriting the issue. |
(3) | Premium: the total cost of an option. |
(4) | “in-the-money”: this occurs if the option’s underlying stock declines below the strike price, the Fund will be required to buy the underlying stock at the strike price, effectively paying the buyer the difference between the strike price and the closing price. |
(5) | Short put: also known as writing a put option, is generally considered more risky than going long since the Fund is obligated to honor its side of the contract should the holder decide to exercise its rights. Typically this strategy is used because the Fund believes the stock’s price will rise above the strike price, leaving the option without any value at expiration and you with the premium. |
(6) | S&P 500® Index: The Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices. You cannot invest directly into an index. |
(7) | Put Options: are financial instruments that give the owner/buyer the right, but not the obligation, to sell a specified quantity of a security at a set price called the “strike” price on or before an agreed upon expiration date. |
(8) | Strike Price: the specified price at which an option contract may be exercised. |
(9) | “out-of-the money”: a call option with a strike price that is higher than the market price of the underlying asset, or a put option with a strike price that is lower than the market price of the underlying asset. |
2 | Annual Report | November 30, 2013 | ||
Table of Contents
PERFORMANCE OVERVIEW |
November 30, 2013 (Unaudited) |
FUND DESCRIPTION
The U.S. Equity High Volatility Put Write Index Fund (the “Fund”) seeks investment results that correspond generally to the performance, before the Fund’s fees and expenses, of the NYSE Arca U.S. Equity High Volatility Put Write IndexSM (the “Index”). The Index reflects the performance of a portfolio of exchange-traded put options on a selection of the largest capitalized stocks which also have listed options and which have the highest volatility, as determined by the NYSE Arca, Inc., the Fund’s index provider.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT as of 11.30.13
Comparison of Change in Value of a hypothetical $10,000 investment in the US Equity High Volatility Put Write Index Fund.
The chart represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
AVERAGE ANNUAL TOTAL RETURN as of 11.30.13 | ||||
Since Inception* | ||||
U.S. Equity High Volatility Put Write Index Fund - NAV | 9.51% | |||
U.S. Equity High Volatility Put Write Index Fund - Market** | 9.89% | |||
U.S. Equity High Volatility Put Write Index TR | 11.41% |
Total Expense Ratio (per the current prospectus) 0.95%
* | The Fund commenced Investment Operations on February 28, 2013. Total return for a period of less than one year is not annualized. |
** | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
NYSE Arca U.S. Equity High Volatility Put Write IndexSM: measures the return of a hypothetical portfolio of listed put options on each of 20 stocks and a cash (US T-Bill) position. The 20 underlying stocks on which options are written are a selection of the largest capitalized (over $5 billion in market cap) US listed stocks which also have listed options and which have the highest volatility, as determined by the NYSE Arca, Inc., the Fund’s Index provider. No more than 50% of the Index positions will be from the same industry sector. Full details of the index rules, methodology, values and period, constituents can be found at http://www.nyse.com/about/listed/lcddata.html?ticker=PUTWRT. An investor cannot directly invest in an index.
The “NYSE Arca U.S. Equity High Volatility Put Write IndexSM” is a service mark of NYSE Euronext or its affiliates and has been licensed for use by Rich Investment Solutions, LLC in connection with the U.S. Equity High Volatility Put Write Index Fund. Neither the Trust nor the Fund is sponsored, endorsed, sold or promoted by NYSE Euronext. NYSE Euronext makes no representations or warranties regarding the Trust or the Fund or the ability of the NYSE Arca U.S. Equity HighVolatility Put Write IndexSM to track general stock market performance.
www.alpsfunds.com | 3 | |
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![]() | DISCLOSURE OF FUND EXPENSES | |
November 30, 2013 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, and (2) ongoing costs, including management fees and other Fund expenses. These examples are 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 funds. The example is based on an investment of $1,000 invested at the beginning of the (six month) period and held through November 30, 2013.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred 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 first line of the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning 6/1/13 | Ending 11/30/13 | Expense Ratio(a) | Expenses Paid 6/1/13 - | |||||||||||
U.S. Equity High Volatility Put Write Index Fund | ||||||||||||||
Actual | $ 1,000.00 | $ 1,057.60 | 0.95% | $ 4.90 | ||||||||||
Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,020.31 | 0.95% | $ 4.81 |
(a) | Annualized based on the Fund’s most recent fiscal half year expenses. |
(b) | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (183), then divided by 365. |
4 | Annual Report | November 30, 2013 | ||
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
To the Board of Trustees and Shareholders of ALPS ETF Trust:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of U.S. Equity High Volatility Put Write Index Fund, one of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2013, and the related statements of operations, changes in net assets, and the financial highlight for the period February 28, 2013 (Commencement of Operations) to November 30, 2013. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2013, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of U.S. Equity High Volatility Put Write Index Fund of the ALPS ETF Trust as of November 30, 2013, the results of its operations, the changes in its net assets, and the financial highlights for the period February 28, 2013 (Commencement of Operations) to November 30, 2013, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 27, 2014
www.alpsfunds.com | 5 | |
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![]() | SCHEDULE OF INVESTMENTS | |
November 30, 2013 |
Security Description | Principal Amount | Value | ||||||
SHORT TERM INVESTMENTS (102.54%) | ||||||||
U.S. Treasury Bills Discount Notes | ||||||||
0.005%, 12/19/2013(a)(b) | $ | 2,500,000 | $ | 2,499,985 | ||||
0.010%, 12/26/2013(a) | 2,700,000 | 2,699,919 | ||||||
0.035%, 01/09/2014(a)(b) | 2,300,000 | 2,299,989 | ||||||
0.022%, 01/16/2014(a) | 5,500,000 | 5,499,923 | ||||||
0.030%, 01/30/2014(a)(b) | 3,100,000 | 3,099,916 | ||||||
0.056%, 02/06/2014(a) | 2,500,000 | 2,499,850 | ||||||
0.074%, 02/20/2014(a) | 7,900,000 | 7,899,257 | ||||||
0.053%, 02/27/2014(a) | 2,600,000 | 2,599,639 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||
(Cost $29,097,615) | 29,098,478 | |||||||
|
| |||||||
TOTAL INVESTMENTS (102.54%) | ||||||||
(Cost $29,097,615) | $ | 29,098,478 | ||||||
NET LIABILITIES LESS OTHER ASSETS (-2.54%) | (719,470 | ) | ||||||
|
| |||||||
NET ASSETS (100.00%) | $ | 28,379,008 | ||||||
|
|
(a) Rate shown represents the bond equivalent yield to maturity at date of purchase.
(b) All or portion of this security is being held as collateral for written options.
6 | Annual Report | November 30, 2013 | ||
Table of Contents
SCHEDULE OF INVESTMENTS |
November 30, 2013 |
SCHEDULE OF WRITTEN OPTIONS
Expiration Date | Exercise Price | Contracts | Value | |||||||||||||
WRITTEN PUT OPTIONS | ||||||||||||||||
3D Systems Corp. | 12/21/2013 | $ | 50.00 | (280 | ) | $ | (3,500) | |||||||||
BioMarin Pharmaceutical, Inc. | 12/21/2013 | 55.00 | (255 | ) | (4,462) | |||||||||||
Cobalt International Energy, Inc. | 12/21/2013 | 20.00 | (701 | ) | (28,040) | |||||||||||
Cree, Inc. | 12/21/2013 | 62.50 | (224 | ) | (151,760) | |||||||||||
Electronic Arts, Inc. | 12/21/2013 | 21.00 | (668 | ) | (23,380) | |||||||||||
Expedia, Inc. | 12/21/2013 | 41.00 | (311 | ) | (778) | |||||||||||
Facebook, Inc. | 12/21/2013 | 46.00 | (304 | ) | (38,608) | |||||||||||
Green Mountain Coffee Roasters, Inc. | 12/21/2013 | 52.50 | (267 | ) | (4,005) | |||||||||||
Groupon, Inc. | 12/21/2013 | 9.00 | (1,560 | ) | (73,320) | |||||||||||
Herbalife Ltd. | 12/21/2013 | 55.00 | (255 | ) | (10,838) | |||||||||||
Incyte Corp. Ltd. | 12/21/2013 | 30.00 | (467 | ) | (3,502) | |||||||||||
LinkedIn Corp. | 12/21/2013 | 210.00 | (66 | ) | (17,985) | |||||||||||
Netflix, Inc. | 12/21/2013 | 295.00 | (47 | ) | (1,880) | |||||||||||
Nu Skin Enterprises, Inc. | 12/21/2013 | 85.00 | (165 | ) | (412) | |||||||||||
Pandora Media, Inc. | 12/21/2013 | 23.00 | (610 | ) | (9,150) | |||||||||||
Rackspace Hosting, Inc. | 12/21/2013 | 42.50 | (330 | ) | (151,800) | |||||||||||
Sears Holdings Corp. | 12/21/2013 | 48.00 | (292 | ) | (5,256) | |||||||||||
ServiceNow, Inc. | 12/21/2013 | 45.00 | (311 | ) | (6,998) | |||||||||||
Tesla Motors, Inc. | 12/21/2013 | 150.00 | (93 | ) | (222,270) | |||||||||||
TripAdvisor, Inc. | 12/21/2013 | 62.50 | (224 | ) | (1,120) | |||||||||||
TOTAL WRITTEN OPTIONS | ||||||||||||||||
|
| |||||||||||||||
(Premiums received $1,039,328) | $ | (759,064) | ||||||||||||||
|
|
See Notes to Financial Statements.
www.alpsfunds.com | 7 | |
Table of Contents
![]() | STATEMENT OF ASSETS & LIABILITIES | |
November 30, 2013 |
ASSETS: | ||||
Investments, at value | $ | 29,098,478 | ||
Cash | 2,660,381 | |||
| ||||
Total Assets | 31,758,859 | |||
| ||||
LIABILITIES: | ||||
Written options, at value (Proceeds $1,039,328) | 759,064 | |||
Payable for investments purchased | 2,599,654 | |||
Payable to adviser | 21,133 | |||
| ||||
Total Liabilities | 3,379,851 | |||
| ||||
NET ASSETS | $ | 28,379,008 | ||
| ||||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 28,140,938 | ||
Accumulated net investment loss | (43,057) | |||
Net unrealized appreciation on investments and written option contracts | 281,127 | |||
| ||||
NET ASSETS | $ | 28,379,008 | ||
| ||||
INVESTMENTS, AT COST | $ | 29,097,615 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 28,379,008 | ||
Shares of beneficial interest outstanding (Unlimited number of shares, par value $0.01 per share) | 1,100,002 | |||
Net Asset Value, offering and redemption price per share | $ | 25.80 |
See Notes to Financial Statements.
8 | Annual Report | November 30, 2013 | ||
Table of Contents
STATEMENT OF OPERATIONS |
For the Period February 28, 2013 | ||
INVESTMENT INCOME: | ||
Interest | $ 2,376 | |
| ||
Total investment income | 2,376 | |
| ||
EXPENSES: | ||
Investment adviser fees | 74,593 | |
| ||
Total expenses | 74,593 | |
| ||
NET INVESTMENT LOSS | (72,217) | |
| ||
REALIZED AND UNREALIZED GAIN/(LOSS): | ||
Net realized gain on written option contracts | 602,509 | |
Net change in unrealized appreciation on investments | 863 | |
Net change in unrealized appreciation on written option contracts | 280,264 | |
| ||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND WRITTEN OPTION CONTRACTS | 883,636 | |
| ||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ 811,419 | |
|
See Notes to Financial Statements.
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Table of Contents
![]() | STATEMENT OF CHANGES IN NET ASSETS | |
For the Period February 28, 2013 | ||||
OPERATIONS: | ||||
Net investment loss | $ | (72,217) | ||
Net realized gain on written option contracts | 602,509 | |||
Net change in unrealized appreciation on investments and written option contracts | 281,127 | |||
| ||||
Net increase in net assets resulting from operations | 811,419 | |||
| ||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||
From net investment income | (573,349) | |||
| ||||
Total distributions | (573,349) | |||
| ||||
CAPITAL SHARE TRANSACTIONS: | ||||
Proceeds from sale of shares | 28,140,938 | |||
| ||||
Net increase from share transactions | 28,140,938 | |||
| ||||
Net increase in net assets | 28,379,008 | |||
| ||||
NET ASSETS: | ||||
Beginning of period | – | |||
| ||||
End of period* | $ | 28,379,008 | ||
| ||||
*Including accumulated net investment loss of: | $ | (43,057) | ||
OTHER INFORMATION: | ||||
CAPITAL SHARE TRANSACTIONS: | ||||
Beginning shares | – | |||
Shares sold | 1,100,002 | |||
| ||||
Shares outstanding, end of period | 1,100,002 | |||
|
See Notes to Financial Statements.
10 | Annual Report | November 30, 2013 | ||
Table of Contents
FINANCIAL HIGHLIGHTS |
For a Share Outstanding Throughout the Period Presented |
For the Period February 28, 2013 | |||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 25.00 | |||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | |||||
Net investment loss(a) | (0.18 | ) | |||
Net realized and unrealized gain | 2.50 | ||||
Total from investment operations | 2.32 | ||||
DISTRIBUTIONS: | |||||
From net investment income | (1.52 | ) | |||
Total distributions | (1.52 | ) | |||
NET INCREASE IN NET ASSET VALUE | 0.80 | ||||
NET ASSET VALUE, END OF PERIOD | $ | 25.80 | |||
TOTAL RETURN(b) | 9.51 | % | |||
RATIOS/SUPPLEMENTAL DATA: | |||||
Net assets, end of period (000s) | $ | 28,379 | |||
RATIOS TO AVERAGE NET ASSETS: | |||||
Expenses | 0.95 | %(c) | |||
Net investment loss | (0.92 | )%(c) | |||
PORTFOLIO TURNOVER RATE(d) | 0 | % |
(a) Based on average shares outstanding during the period.
(b) Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the
net asset value on the last day of the period and assuming all distributions are reinvested at actual reinvestment prices. Total return calculated for a period of less than one year is not annualized.
(c) Annualized.
(d) Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions.
See Notes to Financial Statements.
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![]() | NOTES TO FINANCIAL STATEMENTS | |
November 30, 2013 |
1. ORGANIZATION
The ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). As of November 30, 2013, the Trust consists of nineteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the U.S. Equity High Volatility Put Write Index Fund (the “Fund”), which commenced operations on February 28, 2013. The investment objective of the Fund is to seek investment results that correspond generally to the performance, before the Fund’s fees and expenses, of the NYSE Arca U.S. Equity High Volatility Put Write Index (the “Index”). The Index reflects the performance of a portfolio of exchange-traded put options on high volatility stocks.
The Fund’s Shares (“Shares”) are listed on the New York Stock Exchange (“NYSE”) Arca. The Fund issues and redeems Shares, at net asset value (“NAV”) in blocks of 100,000 Shares, each of which is called a “Creation Unit.” Creation Units of the Fund are issued and redeemed principally in cash. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates.
A. Portfolio Valuation
The Fund’s NAV is determined daily, as of the close of the NYSE, usually 4:00 p.m. Eastern time, each day the NYSE is open for trading. The NAV is computed by dividing the value of the Fund’s portfolio securities, cash and other assets (including accrued interest), less all liabilities (including accrued expenses), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the National Association of Securities Dealers Automated Quotation (“NASDAQ”) exchange are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and asked prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the closing bid prices. Treasury Bills are typically valued at the mean between the evaluated bid and ask prices formulated by an independent pricing service.
The Fund’s listed put options are valued at the mean of the most recent bid and asked prices.
The Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Fund may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the closing sale prices on the applicable exchange and fair value prices may not reflect the actual value of a security. A variety of factors may be considered in determining the fair value of such securities.
B. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
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NOTES TO FINANCIAL STATEMENTS |
November 30, 2013 |
C. Dividends and Distributions to Shareholders
Dividends from net investment income, if any, and any net short-term capital gains are distributed to shareholders following each 60 day period. Any other net income or capital gains will be distributed at least annually. Dividends may be declared and paid more frequently to improve Index tracking or to comply with the distribution requirements of the Internal Revenue Code. In addition, the Fund intends to distribute, at the end of each 60-day period out of net investment income and/or net short-term capital gains, an amount of cash equal to 1.5% of the Fund’s net assets at the end of such 60-day period. If the Fund’s net investment income and net short-term capital gains are insufficient to support a 1.5% distribution in any 60-day period, the distribution will be reduced by the amount of the shortfall. As a result of the Fund’s investment strategy, it is not expected that the Fund will have income from long-term capital gains.
D. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations.
For the period ended November 30, 2013, permanent book and tax differences resulting primarily from book/tax distribution differences and net operating loss offset to short-term term capital gains were identified and reclassified among the components of the Fund’s net assets as follows:
Undistributed Net Investment Income | Accumulated Net Realized Loss | Paid-in Capital | ||||||||||
U.S. Equity High Volatility Put Write Index Fund | $ | 602,509 | $ | (602,509 | ) | $ | – |
Distributions from net investment income and capital gains are determined in accordance with income tax regulations, which may differ from U.S. GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterization of distributions made by the Fund.
The tax character of the distributions paid was as follows:
Period Ended November 30, 2013 Distributions paid from: Ordinary Income | ||||
U.S. Equity High Volatility Put Write Index Fund | $ | 573,349 | ||
As of November 30, 2013, the components of distributable earnings on a tax basis were as follows: | ||||
Unrealized Appreciation on Investments | $ | 281,127 | ||
Other Cumulative Effect of Timing Differences | (43,057 | ) | ||
Total | $ | 238,070 | ||
As of November 30, 2013, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
U.S. Equity High Volatility Put Write Index Fund | ||||
Cost of investments for income tax purposes | $ | 29,097,615 | ||
Gross Appreciation (excess of value over tax cost) | $ | 355,819 | ||
Gross Depreciation (excess of tax cost over value) | (354,956 | ) | ||
Net Appreciation of Derivatives | $ | 280,264 | ||
Net Unrealized Appreciation | $ | 281,127 | ||
The Fund elects to defer to the period ending November 30, 2014, late year ordinary losses in the amount of $43,057.
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November 30, 2013 |
E. Income Taxes
No provision for income taxes are included in the accompanying financial statements, as the Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies.
The Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the period ended November 30, 2013, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is generally three years after the filing of the tax return. Being that the Fund commenced operations on February 28, 2013, no tax returns have been filed as of the date of this report.
F. Fair Value Measurements
The Fund discloses the classification of fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Fund’s investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy.
Investments in open-end mutual funds are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy. Treasury BIlls are typically valued at the mean between the evaluated bid and ask prices formulated by an independent pricing service and are categorized as Level 1 in the heirarchy, due to their active trading, short term maturity and liquidity.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; | |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and | |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
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November 30, 2013 |
The following is a summary of the inputs used to value the Fund’s investments at November 30, 2013:
Investments in Securities at Value | Level 1 – Unadjusted Quoted Prices | Level 2 – Other Significant Observable Inputs | Level 3 – Significant Unobservable Inputs | Total | ||||||||||||
Assets | ||||||||||||||||
Short Term Investments | $ | 29,098,478 | $ | – | $ | – | $ | 29,098,478 | ||||||||
TOTAL | $ | 29,098,478 | $ | – | $ | – | $ | 29,098,478 | ||||||||
Other Financial Instruments* | ||||||||||||||||
Liabilities | ||||||||||||||||
Written Option Contracts | $ | (759,064 | ) | $ | – | $ | – | $ | (759,064 | ) | ||||||
TOTAL | $ | (759,064 | ) | $ | – | $ | – | $ | (759,064 | ) | ||||||
* | Other financial instruments are instruments not reflected in the Schedule of Investments, such as written option contracts. |
The Fund recognizes transfers between levels as of the end of the period. For the period ended November 30, 2013, the Fund did not have any transfers between Level 1 and Level 2 securities. The Fund did not have any securities which used significant unobservable inputs (Level 3) in determining fair value.
G. Derivative Instruments and Hedging Activities: The following discloses the Fund’s use of derivative instruments and hedging activities.
The Fund’s investment objective permits the Fund to purchase derivative contracts including written options. In doing so, the Fund will employ strategies in differing combinations to permit them to increase, decrease, or change the level or types of exposure to market factors. Central to those strategies are features inherent to derivatives that make them more attractive for this purpose than equity or debt securities; they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This may allow the Fund to pursue its objectives more quickly and efficiently than if it were to make direct purchases or sales of securities capable of affecting a similar response to market factors.
Market Risk Factors: In pursuit of the Fund’s investment objective, the Fund will use derivatives to increase or decrease its exposure to the following market risk factors:
Equity Risk: The value of the options sold by the Fund is based on the value of the stocks underlying such options. Accordingly, the Fund is exposed to equity risk, which is the risk that the value of the stocks underlying options written by the Fund will fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of such stock participate, or factors relating to specific companies. In such event, the value of the options sold by the Fund will likely decline. Additionally, if the value of the stocks underlying the options sold by the Fund increases, the Fund’s returns will not increase accordingly.
The Fund will seek to track the performance of the Index by selling listed 60-day put options in proportion to their weightings in the Index. By selling an option, the Fund will receive premiums from the buyer of the option, which will increase the Fund’s return if the option is not exercised and thus expires worthless. However, if the option’s underlying stock declines below the strike price, the option will finish in-the-money and the Fund will be required to buy the underlying stock at the strike price, effectively paying the buyer the difference between the strike price and the closing price. Therefore, by writing a put option, the Fund is exposed to the amount by which the price of the underlying stock is less than the strike price. Accordingly, the potential return to the Fund is limited to the amount of option premiums it receives, while the Fund can potentially lose up to the entire strike price of each option it sells. Further, if the value of the stocks underlying the options sold by the Fund increases, the Fund’s returns will not increase accordingly.
As the seller of a listed put option, the Fund incurs an obligation to buy the underlying instrument from the purchaser of the option at the option’s strike price, upon exercise by the option purchaser. If a listed put option sold by the Fund is exercised prior to the end of a 60-day period, the Fund will buy the underlying stock at the time of exercise and at the strike price, and will hold the stock until the end of the 60-day period.
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November 30, 2013 |
Each put option sold by the Fund will be covered through investments in three month Treasury bills at least equal to the Fund’s maximum liability under the option (i.e., the strike price). Based on requirements and agreements with certain exchanges and third party broker-dealers, the Fund has requirements to deliver securities as collateral for certain investments. Securities collateral that has been pledged to cover obligations of the Fund is noted on the Schedule of Investments.
Every 60 days, the options included within the Index are exercised or expire and new option positions are established, and the Fund will enter into new option positions accordingly and sell any underlying stocks it owns as a result of the Fund’s prior option positions having been exercised. This 60-day cycle likely will cause the Fund to have frequent and substantial portfolio turnover. If the Fund receives additional inflows (and issues more Shares accordingly in large numbers known as “Creation Units,” as further defined herein) during a 60-day period, the Fund will sell additional listed put options which will be exercised or expire at the end of such 60-day period. Conversely, if the Fund redeems Shares in Creation Unit size during a 60-day period, the Fund will terminate the appropriate portion of the options it has sold accordingly.
Put Option Risk: Options are generally subject to volatile swings in price based on changes in value of the underlying instrument, and the options written by the Fund may be particularly subject to this risk because the underlying stocks are selected by the Index Provider to have high volatility. The Fund will incur a form of economic leverage through its use of options, which will increase the volatility of the Fund’s returns and may increase the risk of loss to the Fund. While the Fund will collect premiums on the options it writes, the Fund’s risk of loss if one or more of its options is exercised and expires in-the-money may substantially outweigh the gains to the Fund from the receipt of such option premiums. Moreover, the options sold by the Fund may have imperfect correlation to the returns of their underlying stocks.
Implied Volatility Risk: When the Fund sells a listed put option, it gains the amount of the premium it receives, but also incurs a corresponding liability representing the value of the option it has sold (until the option is exercised and finishes in the money or expires worthless). The value of the options in which the Fund invests is partly based on the volatility used by market participants to price such options (i.e., implied volatility). Accordingly, increases in the implied volatility of such options will cause the value of such options to increase (even if the prices of the options’ underlying stocks do not change), which will result in a corresponding increase in the liabilities of the Fund under such options and thus decrease the Fund’s NAV. The Fund is therefore exposed to implied volatility risk before the options expire or are exercised. This is the risk that the value of the implied volatility of the options sold by the Fund will increase due to general market and economic conditions, perceptions regarding the industries in which the issuers of such stock participate, or factors relating to specific companies.
Transactions in written option contracts during the period ended November 30, 2013, were as follows:
Written Put Options | ||||||||||
Number of Contracts | Premiums Received | |||||||||
Options outstanding at February 28, 2013 | – | $ | – | |||||||
Options written | (20,191 | ) | 1,697,186 | |||||||
Options expired | 11,696 | (584,573 | ) | |||||||
Options closed | 1,065 | (73,285 | ) | |||||||
Options outstanding at November 30, 2013 | (7,430 | ) | $ | 1,039,328 | ||||||
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Market Value at November 30, 2013 | $ | (759,064 | ) | |||||||
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The effect of derivatives instruments on the Statement of Assets and Liabilities as of November 30, 2013:
Liability Derivatives | ||||||||
Risk Exposure | Statement of Assets and Liabilities Location | Fair Value | ||||||
Equity Contracts (Written Options) | Options written, at value | $ | 759,064 |
The effect of derivatives instruments on the Statement of Operations for the period ended November 30, 2013:
Risk Exposure | Statement of Operations Location | Realized Gain/(Loss) on Derivatives Recognized in Income | Change in Unrealized Gain/(Loss) on Derivatives Recognized in Income | |||||||
Equity Contracts (Written Options) | Net realized gain on written option contracts/Net change in unrealized appreciation on written option contracts | $ | 602,509 | $ | 280,264 |
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NOTES TO FINANCIAL STATEMENTS |
November 30, 2013 |
The average written option contracts volume and the absolute average notional value during the period ended November 30, 2013, were as follows:
Average Written Option Contract Volume | Average Written Option Contract Notional Value | |
3,449 | $ 224,185 |
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Investment Adviser”) acts as the Fund’s investment adviser pursuant to an advisory agreement with the Trust on behalf of the Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Fund pays the Investment Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.95% of the Fund’s average daily net assets. From time to time, the Investment Adviser may waive all or a portion of its fee.
Out of the unitary management fee, the Investment Adviser pays substantially all expenses of the Fund, including the licensing fee of the Index provider, and the cost of transfer agency, custody, fund administration, legal, audit, trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Fund’s business. In addition, the Investment Adviser’s unitary management fee is designed to compensate the Investment Adviser for providing services for the Fund.
Rich Investment Solutions, LLC acts as the Fund’s sub-adviser (“Sub-Adviser”) pursuant to a sub-advisory agreement with the Investment Adviser (the ‘‘Sub-Advisory Agreement’’). Pursuant to the Sub-Advisory Agreement, the Adviser pays the Sub-Adviser on a monthly basis a portion of the advisory fees it receives from the Fund, on an annual rate of 0.80% of average net assets.
ALPS Fund Services, Inc. (“ALPS”), an affiliate of the Investment Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Investment Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) is paid a quarterly retainer of $5,000, $3,750 for each regularly scheduled Board meeting attended and $1,500 for each special meeting held outside of regularly scheduled meetings.
4. PURCHASES AND SALES OF SECURITIES
For the period ended November 30, 2013, the cost of purchases and proceeds from sales, excluding short-term investments and written options, were as follows:
Fund | Purchases of Securities | Proceeds From Sales of Securities | ||||||||
U.S. Equity Volatility Put Write Index Fund | $ – | $ – |
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by the Fund on a cash basis only in Creation Unit size aggregations of 100,000. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Fund.
6. INDEMNIFICATIONS
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
7. NEW ACCOUNTING PRONOUNCEMENTS
In June 2013, the FASB issued ASU No. 2013-08, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The FASB standard identifies characteristics a company must assess to determine whether it is considered an investment company for financial reporting purposes. This ASU is effective for fiscal years beginning after December 15, 2013. The Fund is currently reviewing the requirements and believes the adoption of this ASU will not have a material impact on its financial statements.
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![]() | ADDITIONAL INFORMATION | |
November 30, 2013 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
A description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies and information regarding how the Fund voted proxies related to portfolio securities during the most recent 12-month period ended June 30th is available without charge, (1) on the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov; (2) upon request, by calling (toll-free) 1-866-513-5856; and (3) on the Trust’s website located at http://www.alpsfunds.com.
PORTFOLIO HOLDINGS
The Trust will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q will be available (1) on the SEC’s website at http://www.sec.gov; (2) by calling (toll-free) 1-866-513-5856; (3) on the Trust’s website located at http://www.alpsfunds.com; and (4) for review and copying at the SEC’s Public Reference Room (“PRR”) in Washington D.C. Information regarding the operation of the PRR may be obtained by calling (toll-free) 1-800-732-0330.
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TRUSTEES & OFFICERS |
November 30, 2013 (Unaudited) |
INDEPENDENT TRUSTEES
Name, Address and Year of Birth of Trustee* | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustees*** | Other Directorships Held by Trustees | |||||
Mary K. Anstine, 1940 | Trustee | Since March 2008 | Ms. Anstine was President/Chief Executive Officer of HealthONE Alliance, Denver, Colorado, and former Executive Vice President of First Interstate Bank of Denver. Ms. Anstine is also Trustee/Director of the following: AV Hunter Trust; Colorado Uplift Board. Ms. Anstine was formerly a Director of the Trust Bank of Colorado (later purchased and now known as Northern Trust Bank), HealthONE and Denver Area Council of the Boy Scouts of America and a member of the American Bankers Association Trust Executive Committee. | 41 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder, Chief Operations Officer and Chief Financial Officer of Green Alpha Advisors, LLC. Prior to joining Green Alpha Advisors, Mr. Deems was CFO and Treasurer of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC, a private investment fund, and Sutton Place Management, LLC, an administrative services company, from 2004 to June 2007. Prior to this, Mr. Deems served as Controller of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC and Sutton Place Management, LLC. | 41 | Mr. Deems is a Trustee of Financial Investors Trust (30 funds); ALPS Variable Investment Trust (7 funds); and Reaves Utility Income Fund. | |||||
Rick A. Pederson, 1952 | Trustee | Since March 2008 | Mr. Pederson is President, Foundation Properties, Inc. (a real estate investment management company), 1994 - present; Advisory Committee, Bow River Capital Partners (private equity management), 2003 - present; Advisor, Pauls Corporation (real estate investment management and development), 2008 - present; Chairman, Ross Consulting Group (real estate consulting services) 1983- 2013; Advisory Board, Neenan Company (construction services) 2002-present; Board Member, Urban Land Conservancy (a not-for-profit organization), 2004 – present; Director, National Western Stock Show (not-for-profit organization). | 22 | Mr. Pederson is Trustee of Westcore Trust (12 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
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![]() | TRUSTEES & OFFICERS | |
November 30, 2013 (Unaudited) |
INTERESTED TRUSTEE
Name, Address and Year of Birth of Management Trustee* | Position(s) with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of in Fund Complex | Other Directorships Held by Trustees | |||||
Thomas A. Carter, 1966 | Trustee and President | Since March 2008 | Mr. Carter joined ALPS Fund Services, Inc. (“ALPS”) in 1994 and is currently President and Director of ALPS Advisors, Inc. (“AAI”), ALPS Distributors, Inc. (“ADI”) and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”). Because of his position with AHI, ALPS, ADI, APSD and AAI, Mr. Carter is deemed an affiliate of the Fund as defined under the 1940 Act. Before joining ALPS, Mr. Carter was with Deloitte & Touché LLP, where he worked with a diverse group of clients, primarily within the financial services industry. Mr. Carter is a Certified Public Accountant and received his Bachelor of Science in Accounting from the University of Colorado at Boulder.
| 29 | Mr. Carter is a Trustee of ALPS Variable Investment Trust (7 funds); and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
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TRUSTEES & OFFICERS |
November 30, 2013 (Unaudited) |
OFFICERS
Name, Address and Year of Birth of Officer* | Position(s) Held with Trust | Length of Time Served** | Principal Occupation(s) During Past 5 Years | |||
Melanie Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars currently serves as a Deputy Chief Compliance Officer with ALPS. Prior to joining ALPS in September 2009, Ms. Zimdars served as Principal Financial Officer, Treasurer and Secretary for the Wasatch Funds from February 2007 to December 2008. From November 2006 to February 2007, she served as Assistant Treasurer for the Wasatch Funds and served as a Senior Compliance Officer for Wasatch Advisors, Inc. since 2005. Because of her position with ALPS, Ms. Zimdars is deemed an affiliate of the Trust as defined under the 1940 Act. Ms. Zimdars is also the CCO of ALPS Variable Investment Trust, Liberty All-Star Growth Fund, Inc., Liberty All-Star Equity Fund and BPV Family of Funds.
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William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer, AAI (since 2006); President of the Liberty All-Star Funds (since April 1999); Senior Vice President (2005-2006), Banc of America Investment Advisors, Inc. Because of his position with AAI, Mr. Parmentier is deemed an affiliate of the Trust as defined under the 1940 Act.
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Patrick D. Buchanan, 1972 | Treasurer | Since June 2012 | Mr. Buchanan is Vice President of AAI. Mr. Buchanan joined ALPS in 2007 and because of his position with AAI, he is deemed an affiliate of the Trust as defined under the 1940 Act. Mr. Buchanan is also Treasurer of ALPS Variable Investment Trust and the Principal Real Estate Income Fund.
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Erin D. Nelson, 1977 | Secretary | Since October 2013 | Ms. Nelson is Vice President and Assistant General Counsel of AAI, ALPS Fund Services, Inc., ALPS Distributors, Inc., and ALPS Portfolio Solutions Distributor, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson has served as Secretary of the Clough Global Allocation Fund since 2004, Clough Global Equity Fund since 2005, Clough Global Opportunities Fund since 2006, Liberty All-Star Equity Fund since 2013 and Liberty All-Star Growth Fund since 2013. Ms. Nelson received her Bachelor of Arts in Political Science, magna cum laude, from the University of New Hampshire and Juris Doctorate from the University of Denver.
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Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Senior Paralegal. Prior to joining ALPS, Ms. Craig was Legal Manager at Janus Capital Management LLC and served as Assistant Secretary of Janus Investment Fund, Janus Adviser Series and Janus Aspen Series. Because of her position with ALPS, Ms. Craig is deemed an affiliate of the Trust as defined under the 1940 Act.
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* The business address of each Officer is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203.
** This is the period for which the Officer began serving the Trust. Each Officer serves an indefinite term, until his successor is elected.
www.alpsfunds.com | 21 | |
Table of Contents
This report has been prepared for shareholders of the ETF described herein and may be distributed to others only if preceded or accompanied by a prospectus.
ALPS Portfolio Solutions Distributor, Inc., distributor for the ETF.
Table of Contents
Table of Contents
ALPS SECTOR DIVIDEND DOGS SERIES | ||
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7 | ||||
8 | ||||
Financial Statements | ||||
9 | ||||
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30 | ||||
Board Considerations Regarding Approval of Investment Advisory Agreement | 31 | |||
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Table of Contents
ALPS SECTOR DIVIDEND DOGS ETF | Performance Overview | |
November 30, 2013 (Unaudited) |
Investment Objective
The Fund seeks investment results that replicate as closely as possible, before fees and expenses, the performance of the S-Network Sector Dividend Dogs Index (the “Underlying Index”). The Shares of the Fund are listed and trade on the New York Stock Exchange (“NYSE”) Arca under the ticker symbol SDOG. The Fund generally will invest in all of the securities that comprise the Index in proportion to their weightings in the Index. The Fund began trading on June 29, 2012.
The Index is a rules based index intended to give investors a means of tracking the overall performance of the highest dividend paying stocks (i.e. “Dividend Dogs”) in the S&P 500® on a sector-by-sector basis. “Dividend Dogs“Industrtion Standard (“GICS”) sectors that make up the S&P 500® which offer the highest dividend yields.
Performance Overview
ALPS Sector Dividend Dogs ETF (SDOG) for the one year period ended November 29, 2013 generated a total return of 31.66% in-line with the Fund’s Underlying Index, net of fees, which returned 32.34% and outperforming the S&P 500® which returned 30.28% for the same period.
The trailing twelve month yield for the fund’s constituents as of 11/29/2013 was 4.03% vs. 1.90% on the S&P 500®.
Compared to the S&P 500® the Fund had a small negative impact (-2.65%) from sector allocation which was largely driven by the modest overweight resulting from the equal sector weight strategy in more interest rate sensitive sectors of Utilities and Telecommunications. Off-setting this underperformance was the strong outperformance (+4.84%) that came from security selection.
The best performing stocks for the period were Best Buy Co. Inc. (Ticker: BBY), which increased 256.98%; Pitney Bowes, Inc. (Ticker: PBI), which increased 119.37%; and Safeway Inc. (Ticker: SWY), which increased 98.31%. The worst performing stocks were Cliffs Natural Resources Inc. (Ticker: CLF), which decreased 27.53%; HCP Inc. (Ticker: HCP), which decreased 14.66%; and CenturyLink, Inc. (Ticker: CTL), which decreased 14.09%.
Looking forward we believe the Fund’s strategy of annually selecting the five highest yielding securities in each of the ten sectors in the S&P 500® will provide high yield relative to the S&P 500®, potential for market participation in all economic cycles through equal sector weighting, and a deep value portfolio of securities as identified through high yield relative to their sector peers.
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Annual | November 30, 2013 |
Table of Contents
ALPS SECTOR DIVIDEND DOGS ETF | Performance Overview | |
November 30, 2013 (Unaudited) |
Average Annual Total Returns as of November 30, 2013
1 Year | Since Inception* | |||
NAV | 31.66% | 28.08% | ||
Market Price** | 31.55% | 28.10% | ||
S-Network Sector Dividend Dogs Index*** | 32.34% | 28.69% | ||
S&P 500® Index**** | 30.30% | 24.66% |
Total Expense Ratio (per the current prospectus) 0.40%.
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For most current month-end performance data please visit www.alpsfunds.com.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
S-Network Sector Dividend Dogs Index is a portfolio of fifty stocks derived from the S&P 500® Index. An investor cannot invest directly in an index.
* | The Fund Commencement Date is June 29,2012. Total return for a period of less than one year is not annualized. |
** | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
*** | The S-Network Sector Dividend Dogs Index (Ticker: SDOGX) is designed to serve as a fair, impartial and transparent measure of the performance of US large cap equities with above average dividend yields. |
**** | The S&P 500® is a large cap U.S. equities index that includes 500 leading companies and captures approximately 80% coverage of available market capitalization. |
An investor cannot invest directly in an index.
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Table of Contents
ALPS SECTOR DIVIDEND DOGS ETF | Performance Overview | |
November 30, 2013 (Unaudited) |
Top 10 Holdings* as of November 30, 2013
Pitney Bowes, Inc. | 2.6 | % | ||
Safeway, Inc. | 2.4 | % | ||
Seagate Technology Plc | 2.3 | % | ||
Bristol-Myers Squibb Co. | 2.2 | % | ||
Northrop Grumman Corp. | 2.2 | % | ||
Lorillard, Inc. | 2.2 | % | ||
Cliffs Natural Resources, Inc. | 2.2 | % | ||
CME Group, Inc. | 2.2 | % |
Raytheon Co. | 2.1 | % | ||
Cincinnati Financial Corp. | 2.1 | % | ||
Percent of Total Investments in Top Ten Holdings: | 22.5 | % |
* | % of Total Investments. |
Holdings are subject to change.
Growth of $10,000 as of November 30, 2013
Comparison of Change in Value of $10,000 Investment in ALPS Sector Dividend Dogs ETF and S-Net Sector Dividend Dogs Index.
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
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Table of Contents
ALPS INTERNATIONAL SECTOR DIVIDEND DOGS ETF | Performance Overview | |
November 30, 2013 (Unaudited) |
Investment Objective
The Fund seeks investment results that replicate as closely as possible, before fees and expenses, the performance of the S-Network International Sector Dividend Dogs Index (the “Underlying Index”). The Shares of the Fund are listed and trade on the New York Stock Exchange (“NYSE”) Arca under the ticker symbol IDOG. The Fund generally will invest in all of the securities that comprise the index in proportion to their weightings in the index. The Fund began trading on June 28, 2013.
The Underlying Index constituents with the highest dividend yield in their respective sectors providing the potential for price appreciation as market forces bring their yield into line with the overall market.
Performance Overview
ALPS International Sector Dividend Dogs ETF (IDOG) for the five month period ended November 29, 2013 generated a total return of 17.72% in-line with the Fund’s Net Total Return Index, net of fees, which returned 18.40% and underperformed the MSCI EAFE® which returned 30.28% for the same period.
The trailing twelve month yield for the fund’s constituents as of 11/29/2013 was 5.00% vs. 2.87% on the MSCI EAFE®.
Compared to the MSCI EAFE® the fund had a small positive impact (+0.06%) from sector allocation which was largely driven by the modest overweight resulting from the equal sector weight strategy in the Materials and Utilities sectors. Augmenting the positive sector allocation effect was the strong outperformance (+3.33%) that came from security selection.
The best performing stocks for the period were UPM-Kymmene Oyj (Ticker: UPM1V FH), which increased 70.13%; Arcelormittal (Ticker: MT NA), which increased 54.91%; and Stora Enso Oyj (Ticker: STERV FI), which increased 47.87%. The worst performing stocks were Israel Chemicals Ltd (Ticker: ICL IT), which decreased 13.66%; Delhaize Group (Ticker: DELB BB), which decreased 5.39%; and Orkla ASA (Ticker: ORK NO), which decreased 4.34%.
Looking forward we believe the Fund’s strategy of annually selecting the five highest yielding securities in each of the ten sectors in the S-Net Developed Markets (Ex NAS) Index will provide high yield relative to the MSCI EAFE®, potential for market participation in all economic cycles through equal sector weighting, and a deep value portfolio of securities as identified through high yield relative to their sector peers.
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Table of Contents
ALPS INTERNATIONAL SECTOR DIVIDEND DOGS ETF | Performance Overview | |
November 30, 2013 (Unaudited) |
Average Annual Total Returns as of November 30, 2013
Since Inception* | ||
NAV | 17.72% | |
Market Price** | 18.24% | |
S-Network International Sector Dividend Dogs Index*** | 18.40% | |
MSCI EAFE NR | 16.32% |
Total Expense Ratio (per the current prospectus) 0.50%.
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For most current month-end performance data please visit www.alpsfunds.com.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
S-Network Sector International Dividend Dogs Index is a portfolio of fifty stocks derived from the S&P 500® Index. An investor cannot invest directly in an index.
* | The Fund Commencement Date is June 28, 2013. Total return for a period of less than one year is not annualized. |
** | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
*** | The S-Network International Sector Dividend Dogs Index (Ticker: IDOGX) is designed to serve as a fair, impartial and transparent measure of the performance of International large cap equities with above average dividend yields. |
An investor cannot invest directly in an index.
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Annual | November 30, 2013 |
Table of Contents
ALPS INTERNATIONAL SECTOR DIVIDEND DOGS ETF | Performance Overview | |
November 30, 2013 (Unaudited) |
Top 10 Holdings* as of November 30, 2013
ArcelorMittal | 2.4% | |
Hoya Corp. | 2.3% | |
Belgacom SA | 2.2% | |
UPM-Kymmene OYJ | 2.2% | |
Banco Santander SA | 2.2% | |
Vinci SA | 2.2% | |
Snam SpA | 2.2% | |
Orange SA | 2.1% |
Hennes & Mauritz AB, Class B | 2.1% | |
Stora Enso OYJ, Class R | 2.1% | |
Percent of Total Investments in Top Ten Holdings: | 22.0% |
* | % of Total Investments. |
Holdings are subject to change.
Growth of $10,000 as of November 30, 2013
Comparison of Change in Value of $10,000 Investment in ALPS International Sector Dividend Dogs ETF and S-Net International Sector Dividend Dogs Index.
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
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Table of Contents
ALPS SECTOR DIVIDEND DOGS SERIES | Disclosure of Fund Expenses | |
November 30, 2013 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, and (2) ongoing costs, including management fees and other Fund expenses. These examples are 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 funds. It is based on an investment of $1,000 invested at the beginning of the (six month) period and held through November 30, 2013.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred 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 first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second line 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 costs were included, your costs would have been higher.
Beginning Account 6/1/13 | Ending Account 11/30/13 | Expense Ratio(a) | Expenses Paid During the Period 6/1/13 - 11/30/13(b) | |||||||||||||
ALPS Sector Dividend Dogs ETF | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,110.80 | 0.40% | $ | 2.12 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,023.06 | 0.40% | $ | 2.03 | |||||||||
ALPS International Sector Dividend Dogs ETF | ||||||||||||||||
Actual(c) | $ | 1,000.00 | $ | 1,177.20 | 0.50% | $ | 2.33 | |||||||||
Hypothetical | $ | 1,000.00 | $ | 1,022.56 | 0.50% | $ | 2.54 |
(a) | Annualized, based on the Fund’s most recent fiscal half-year expenses. |
(b) | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (183), then divided by 365. |
(c) | Note the actual expense paid during the period is based on commencement date of June 28, 2013. |
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Table of Contents
ALPS SECTOR DIVIDEND DOGS SERIES | Registered Public Accounting Firm | |
To the Board of Trustees and Shareholders of ALPS ETF Trust:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of ALPS Sector Dividend Dogs ETF and ALPS International Sector Dividend Dogs ETF, two of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2013, and the related statement of operations for the year then ended, the statement of changes in net assets, and the financial highlights for the year ended November 30, 2013 and for the period June 29, 2012 (Commencement) to November 30, 2012 for the ALPS Sector Dividend Dogs ETF, and the related statements of operations, changes in net assets, and the financial highlights for the period June 28, 2013 (Commencement) to November 30, 2013 for the ALPS International Sector Dividend Dogs ETF. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2013, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of ALPS Sector Dividend Dogs ETF and ALPS International Sector Dividend Dogs of the ALPS ETF Trust as of November 30, 2013, and the results of their operations, the changes in their net assets and the financial highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 27, 2014
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Table of Contents
ALPS SECTOR DIVIDEND DOGS ETF | Schedule of Investments | |
November 30, 2013 |
Security Description | Shares | Value | ||||||
| ||||||||
COMMON STOCK (99.34%) | ||||||||
Consumer Discretionary (9.62%) | ||||||||
Best Buy Co., Inc. | 229,586 | $ | 9,309,712 | |||||
Cablevision Systems Corp., Class A | 497,985 | 8,351,208 | ||||||
Gannett Co., Inc. | 344,887 | 9,332,642 | ||||||
H&R Block, Inc. | 322,666 | 8,999,155 | ||||||
Leggett & Platt, Inc. | 286,823 | 8,664,923 | ||||||
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Total Consumer Discretionary | 44,657,640 | |||||||
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Consumer Staples (10.15%) | ||||||||
Altria Group, Inc. | 252,335 | 9,331,348 | ||||||
Avon Products, Inc. | 423,595 | 7,552,699 | ||||||
Lorillard, Inc. | 199,657 | 10,248,394 | ||||||
Reynolds American, Inc. | 180,188 | 9,090,485 | ||||||
Safeway, Inc. | 311,721 | 10,900,883 | ||||||
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Total Consumer Staples | 47,123,809 | |||||||
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Energy (9.44%) | ||||||||
Chevron Corp. | 70,830 | 8,672,425 | ||||||
ConocoPhillips | 126,992 | 9,245,017 | ||||||
Diamond Offshore Drilling, Inc. | 136,477 | 8,195,444 | ||||||
Kinder Morgan, Inc. | 250,629 | 8,907,355 | ||||||
Spectra Energy Corp. | 261,769 | 8,782,350 | ||||||
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Total Energy | 43,802,591 | |||||||
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Financials (9.65%) | ||||||||
Cincinnati Financial Corp. | 188,796 | 9,894,798 | ||||||
CME Group, Inc. | 121,523 | 9,958,810 | ||||||
HCP, Inc., REIT | 212,204 | 7,802,741 | ||||||
Health Care REIT, Inc. | 142,350 | 7,970,177 | ||||||
People’s United Financial, Inc. | 607,172 | 9,192,584 | ||||||
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Total Financials | 44,819,110 | |||||||
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Health Care (10.12%) | ||||||||
Bristol-Myers Squibb Co. | 201,767 | 10,366,789 | ||||||
Eli Lilly & Co. | 164,955 | 8,284,040 | ||||||
Johnson & Johnson | 99,282 | 9,398,034 | ||||||
Merck & Co., Inc. | 183,947 | 9,166,079 | ||||||
Pfizer, Inc. | 308,344 | 9,783,755 | ||||||
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Total Health Care | 46,998,697 | |||||||
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Table of Contents
ALPS SECTOR DIVIDEND DOGS ETF | Schedule of Investments | |
November 30, 2013 |
Security Description | Shares | Value | ||||||
| ||||||||
Industrials (11.13%) | ||||||||
Lockheed Martin Corp. | 69,078 | $ | 9,786,280 | |||||
Northrop Grumman Corp. | 91,377 | 10,296,361 | ||||||
Pitney Bowes, Inc. | 510,496 | 11,828,192 | ||||||
Raytheon Co. | 111,995 | 9,931,717 | ||||||
Waste Management, Inc. | 214,950 | 9,818,916 | ||||||
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Total Industrials | 51,661,466 | |||||||
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Information Technology (10.41%) | ||||||||
CA, Inc. | 289,251 | 9,545,283 | ||||||
Intel Corp. | 374,983 | 8,939,595 | ||||||
Microchip Technology, Inc. | 221,992 | 9,610,033 | ||||||
Paychex, Inc. | 217,947 | 9,530,822 | ||||||
Seagate Technology Plc | 218,420 | 10,711,317 | ||||||
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Total Information Technology | 48,337,050 | |||||||
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Materials (9.70%) | ||||||||
Cliffs Natural Resources, Inc. | 398,274 | 9,960,833 | ||||||
EI du Pont de Nemours & Co. | 149,240 | 9,160,351 | ||||||
MeadWestvaco Corp. | 227,907 | 8,001,815 | ||||||
Nucor Corp. | 181,968 | 9,291,286 | ||||||
The Dow Chemical Co. | 220,458 | 8,611,089 | ||||||
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Total Materials | 45,025,374 | |||||||
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Telecommunication Services (9.55%) | ||||||||
AT&T, Inc. | 256,127 | 9,018,232 | ||||||
CenturyLink, Inc. | 271,787 | 8,343,861 | ||||||
Frontier Communications Corp. | 2,020,789 | 9,457,293 | ||||||
Verizon Communications, Inc. | 184,007 | 9,130,427 | ||||||
Windstream Holdings, Inc. | 1,038,017 | 8,376,797 | ||||||
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Total Telecommunication Services | 44,326,610 | |||||||
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Utilities (9.57%) | ||||||||
Ameren Corp. | 267,471 | 9,588,835 | ||||||
Entergy Corp. | 139,313 | 8,622,082 | ||||||
Exelon Corp. | 291,351 | 7,840,255 | ||||||
Pepco Holdings, Inc. | 483,745 | 9,229,855 | ||||||
TECO Energy, Inc. | 537,653 | 9,161,607 | ||||||
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Total Utilities | 44,442,634 | |||||||
|
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TOTAL COMMON STOCK | 461,194,981 | |||||||
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Table of Contents
ALPS SECTOR DIVIDEND DOGS ETF | Schedule of Investments | |
November 30, 2013 |
Security Description | 7 Day Yield | Shares | Value | |||||||||
| ||||||||||||
SHORT TERM INVESTMENTS (0.31%) | ||||||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(a) | 1,450,188 | $ | 1,450,188 | ||||||||
|
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TOTAL SHORT TERM INVESTMENTS | 1,450,188 | |||||||||||
|
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TOTAL INVESTMENTS (99.65%) | $ | 462,645,169 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (0.35%) | 1,631,653 | |||||||||||
|
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NET ASSETS (100.00%) | $ | 464,276,822 | ||||||||||
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(a) | Less than 0.0005%. |
Common Abbreviations:
Plc - Public Limited Company.
REIT - Real Estate Investment Trust.
See Notes to Financial Statements.
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Table of Contents
ALPS INTERNATIONAL SECTOR DIVIDEND DOGS ETF | Schedule of Investments | |
November 30, 2013 |
Security Description | Shares | Value | ||||||
| ||||||||
COMMON STOCK (99.48%) | ||||||||
Australia (9.46%) | ||||||||
Amcor, Ltd. | 145,761 | $ | 1,464,775 | |||||
National Australia Bank, Ltd. | 47,470 | 1,494,185 | ||||||
Wesfarmers, Ltd. | 37,737 | 1,474,306 | ||||||
Westpac Banking Corp. | 49,598 | 1,484,419 | ||||||
Woolworths, Ltd. | 45,701 | 1,401,481 | ||||||
|
| |||||||
7,319,166 | ||||||||
|
| |||||||
Belgium (4.04%) | ||||||||
Belgacom SA | 58,315 | 1,732,953 | ||||||
Delhaize Group SA | 23,920 | 1,394,201 | ||||||
|
| |||||||
3,127,154 | ||||||||
|
| |||||||
Bermuda (1.73%) | ||||||||
Li & Fung, Ltd. | 984,880 | 1,341,537 | ||||||
|
| |||||||
Chile (1.97%) | ||||||||
Enersis SA | 63,225 | 1,521,476 | ||||||
|
| |||||||
Finland (10.07%) | ||||||||
Fortum OYJ | 67,674 | 1,548,537 | ||||||
Metso OYJ | 35,512 | 1,437,002 | ||||||
Nokian Renkaat OYJ | 29,173 | 1,443,309 | ||||||
Stora Enso OYJ, Class R | 165,389 | 1,633,799 | ||||||
UPM-Kymmene OYJ | 104,052 | 1,729,157 | ||||||
|
| |||||||
7,791,804 | ||||||||
|
| |||||||
France (8.16%) | ||||||||
GDF Suez | 60,996 | 1,414,792 | ||||||
Orange SA* | 126,106 | 1,647,565 | ||||||
Total SA | 25,816 | 1,564,346 | ||||||
Vinci SA | 26,296 | 1,690,977 | ||||||
|
| |||||||
6,317,680 | ||||||||
|
| |||||||
Germany (4.07%) | ||||||||
Daimler AG, Registered Shares | 19,313 | 1,600,801 | ||||||
E.ON SE | 80,546 | 1,549,761 | ||||||
|
| |||||||
3,150,562 | ||||||||
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Table of Contents
ALPS INTERNATIONAL SECTOR DIVIDEND DOGS ETF | Schedule of Investments | |
November 30, 2013 |
Security Description | Shares | Value | ||||||
| ||||||||
Great Britain (11.66%) | ||||||||
Aviva Plc | 225,785 | $ | 1,586,069 | |||||
BAE Systems Plc | 209,080 | 1,462,222 | ||||||
GlaxoSmithKline Plc | 57,207 | 1,515,055 | ||||||
Imperial Tobacco Group Plc | 40,502 | 1,540,207 | ||||||
Royal Dutch Shell Plc, Class A | 44,859 | 1,501,009 | ||||||
Tesco Plc | 249,327 | 1,419,556 | ||||||
|
| |||||||
9,024,118 | ||||||||
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Israel (4.05%) | ||||||||
Bezeq The Israeli Telecommunication Corp., Ltd. | 929,983 | 1,555,253 | ||||||
Israel Chemicals, Ltd. | 185,383 | 1,580,124 | ||||||
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3,135,377 | ||||||||
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Italy (2.18%) | ||||||||
Snam SpA | 313,554 | 1,687,194 | ||||||
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Japan (17.68%) | ||||||||
Canon, Inc. | 45,607 | 1,518,082 | ||||||
Daiichi Sankyo Co., Ltd. | 76,880 | 1,410,849 | ||||||
Eisai Co., Ltd. | 35,402 | 1,382,283 | ||||||
Hoya Corp. | 65,394 | 1,768,820 | ||||||
ITOCHU Corp. | 120,433 | 1,518,858 | ||||||
Nippon Electric Glass Co., Ltd. | 273,376 | 1,470,352 | ||||||
Takeda Pharmaceutical Co., Ltd. | 31,402 | 1,524,963 | ||||||
TonenGeneral Sekiyu KK | 158,529 | 1,531,980 | ||||||
Trend Micro, Inc. | 39,752 | 1,556,011 | ||||||
|
| |||||||
13,682,198 | ||||||||
|
| |||||||
Luxembourg (2.34%) | ||||||||
ArcelorMittal | 105,165 | 1,811,958 | ||||||
|
| |||||||
New Zealand (1.92%) | ||||||||
Telecom Corp. of New Zealand | 795,411 | 1,488,346 | ||||||
|
| |||||||
Norway (1.97%) | ||||||||
Orkla ASA | 196,354 | 1,528,054 | ||||||
|
| |||||||
Portugal (4.00%) | ||||||||
EDP - Energias de Portugal SA | 408,665 | 1,546,501 | ||||||
Portugal Telecom SGPS SA | 344,804 | 1,549,402 | ||||||
|
| |||||||
3,095,903 | ||||||||
|
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Table of Contents
ALPS INTERNATIONAL SECTOR DIVIDEND DOGS ETF | Schedule of Investments | |
November 30, 2013 |
Security Description | Shares | Value | ||||||
| ||||||||
Singapore (2.02%) | ||||||||
Singapore Press Holdings, Ltd. | 461,551 | $ | 1,566,886 | |||||
|
| |||||||
Spain (4.23%) | ||||||||
Banco Santander SA | 191,971 | 1,706,751 | ||||||
Repsol SA | 59,737 | 1,569,036 | ||||||
|
| |||||||
3,275,787 | ||||||||
|
| |||||||
Sweden (3.86%) | ||||||||
Hennes & Mauritz AB, Class B | 38,691 | 1,639,812 | ||||||
Telefonaktiebolaget LM Ericsson, Class B | 108,257 | 1,348,395 | ||||||
|
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2,988,207 | ||||||||
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Switzerland (4.07%) | ||||||||
Novartis AG | 19,321 | 1,527,305 | ||||||
Zurich Insurance Group AG | 5,814 | 1,622,199 | ||||||
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3,149,504 | ||||||||
|
| |||||||
TOTAL COMMON STOCK | 77,002,912 | |||||||
|
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Security Description | 7 Day Yield | Shares | Value | |||||||||
| ||||||||||||
SHORT TERM INVESTMENTS (0.05%) | ||||||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(a) | 42,214 | $ | 42,214 | ||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS | 42,214 | |||||||||||
|
| |||||||||||
TOTAL INVESTMENTS (99.53%) | $ | 77,045,126 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (0.47%) | 366,139 | |||||||||||
|
| |||||||||||
NET ASSETS (100.00%) | $ | 77,411,265 | ||||||||||
|
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* | Non-income producing security. |
(a) | Less than 0.0005%. |
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ALPS INTERNATIONAL SECTOR DIVIDEND DOGS ETF | Schedule of Investments | |
November 30, 2013 |
Common Abbreviations:
AB - Aktiebolag is the Swedish term for corporation. |
AG - Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e., owned by shareholders. |
ASA - Allmennaksjeselskap is the Norwegian term for public limited company. |
KK - Kabushiki Kaisha, Stock Company in Japan. |
Ltd. - Limited. |
OYJ - Osakeyhtio is the Finnish term for public limited company. |
Plc - Public Limited Company. |
SA - Generally designated corporations in various countries, mostly those employing civil law. |
SE - SE Regulation is a European Company which can operate on a Europe-wide basis and be governed by Community law directly appliciable in all Member States. |
SpA - Societa per Azioni is an Italian shared company. |
See Notes to Financial Statements.
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Table of Contents
ALPS SECTOR DIVIDEND DOGS SERIES | Statements of Assets & Liabilities | |
November 30, 2013 |
ALPS Sector Dividend Dogs ETF | ALPS International Sector Dividend Dogs ETF | |||||||
ASSETS: | ||||||||
Investments, at value | $ | 462,645,169 | $ | 77,045,126 | ||||
Cash | 18,402 | 174,290 | ||||||
Foreign currency, at value (Cost $– and $64,019) | – | 63,327 | ||||||
Receivable for shares sold | – | 11,121 | ||||||
Foreign tax reclaims | – | 6,924 | ||||||
Dividends receivable | 1,762,469 | 169,100 | ||||||
Total Assets | 464,426,040 | 77,469,888 | ||||||
LIABILITIES: | ||||||||
Payable for investments purchased | – | 31,174 | ||||||
Payable to adviser | 149,218 | 27,449 | ||||||
Total Liabilities | 149,218 | 58,623 | ||||||
NET ASSETS | $ | 464,276,822 | $ | 77,411,265 | ||||
NET ASSETS CONSIST OF: | ||||||||
Paid-in capital | $ | 423,607,407 | $ | 74,453,116 | ||||
Accumulated net investment income | 666,157 | 111,295 | ||||||
Accumulated net realized gain on investments and foreign currency transactions | (1,552,130 | ) | (7,160 | ) | ||||
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | 41,555,388 | 2,854,014 | ||||||
NET ASSETS | $ | 464,276,822 | $ | 77,411,265 | ||||
INVESTMENTS, AT COST | $ | 421,089,782 | $ | 74,187,696 | ||||
PRICING OF SHARES | ||||||||
Net Assets | $ | 464,276,822 | $ | 77,411,265 | ||||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 13,750,361 | 2,650,002 | ||||||
Net Asset Value, offering and redemption price per share | $ | 33.76 | $ | 29.21 |
See Notes to Financial Statements.
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Table of Contents
ALPS SECTOR DIVIDEND DOGS SERIES | Statements of Operations | |
For the Year Ended November 30, 2013 |
ALPS Sector Dividend Dogs ETF | ALPS International Sector Dividend Dogs ETF(a) | |||||||
INVESTMENT INCOME: | ||||||||
Dividends* | $ | 9,964,461 | $ | 443,899 | ||||
Total Investment Income | 9,964,461 | 443,899 | ||||||
EXPENSES: | ||||||||
Investment adviser fees | 1,006,159 | 66,287 | ||||||
Total Expenses | 1,006,159 | 66,287 | ||||||
NET INVESTMENT INCOME | 8,958,302 | 377,612 | ||||||
REALIZED AND UNREALIZED GAIN/(LOSS): | ||||||||
Net realized gain on investments | 8,873,580 | 130,316 | ||||||
Net realized loss on foreign currency transactions | – | (1,481 | ) | |||||
Net change in unrealized appreciation on investments | 41,587,324 | 2,857,430 | ||||||
Net change in unrealized depreciation on translation of assets and liabilities denominated in foreign currencies | – | (3,416 | ) | |||||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 50,460,904 | 2,982,849 | ||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 59,419,206 | $ | 3,360,461 | ||||
* Net of foreign tax withholding | $ | – | $ | 52,363 |
(a) | The Fund commenced operations on June 28, 2013. |
See Notes to Financial Statements.
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Table of Contents
ALPS SECTOR DIVIDEND DOGS ETF | Statements of Changes in Net Assets | |
For the Year Ended November 30, 2013 | For the Period June 29, 2012 (Commencement) to November 30, 2012 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 8,958,302 | $ | 733,532 | ||||
Net realized gain on investments | 8,873,580 | 319,121 | ||||||
Net change in unrealized appreciation/ (depreciation) on investments | 41,587,324 | (31,936 | ) | |||||
Net increase in net assets resulting from operations | 59,419,206 | 1,020,717 | ||||||
Net Equalization Credits | 1,073,302 | 238,003 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (8,610,531 | ) | (415,871 | ) | ||||
Total distributions | (8,610,531 | ) | (415,871 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 401,422,165 | 63,519,127 | ||||||
Dividends reinvested | 11,589 | – | ||||||
Cost of shares redeemed | (50,733,792 | ) | (1,355,788 | ) | ||||
Net income equalization (Note 2) | (1,073,302 | ) | (238,003 | ) | ||||
Net increase from share transactions | 349,626,660 | 61,925,336 | ||||||
Net increase in net assets | 401,508,637 | 62,768,185 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 62,768,185 | – | ||||||
End of year* | $ | 464,276,822 | $ | 62,768,185 | ||||
* Including accumulated net investment income of: | $ | 666,157 | $ | 317,661 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 2,350,002 | – | ||||||
Shares sold | 13,100,000 | 2,400,002 | ||||||
Shares reinvested | 359 | – | ||||||
Shares redeemed | (1,700,000 | ) | (50,000 | ) | ||||
Shares outstanding, end of period | 13,750,361 | 2,350,002 | ||||||
See Notes to Financial Statements.
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ALPS INTERNATIONAL SECTOR DIVIDEND DOGS ETF | Statement of Changes in Net Assets | |
For the Period June 28, 2013 (Commencement) to November 30, 2013 | ||||
OPERATIONS: | ||||
Net investment income | $ | 377,612 | ||
Net realized gain on investments and foreign currency transactions | 128,835 | |||
Net change in unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | 2,854,014 | |||
Net increase in net assets resulting from operations | 3,360,461 | |||
Net Equalization Credits | 155,512 | |||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||
From net investment income | (264,835 | ) | ||
Total distributions | (264,835 | ) | ||
CAPITAL SHARE TRANSACTIONS: | ||||
Proceeds from sale of shares | 75,749,861 | |||
Cost of shares redeemed | (1,434,222 | ) | ||
Net income equalization (Note 2) | (155,512 | ) | ||
Net increase from share transactions | 74,160,127 | |||
Net increase in net assets | 77,411,265 | |||
NET ASSETS: | ||||
Beginning of period | – | |||
End of period* | $ | 77,411,265 | ||
* Including accumulated net investment income of: | $ | 111,295 | ||
OTHER INFORMATION: | ||||
CAPITAL SHARE TRANSACTIONS: | ||||
Beginning shares | – | |||
Shares sold | 2,700,002 | |||
Shares redeemed | (50,000 | ) | ||
Shares outstanding, end of period | 2,650,002 | |||
See Notes to Financial Statements.
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Table of Contents
ALPS SECTOR DIVIDEND DOGS ETF | Financial Highlights | |
For a share outstanding throughout the periods presented |
For the Year Ended November 30, 2013 | For the Period June 29, 2012 (Commencement) to November 30, 2012 | |||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 26.71 | $ | 25.00 | ||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||
Net investment income(a) | 1.12 | 0.59 | ||||||
Net realized and unrealized gain | 7.14 | 1.41 | ||||||
Total from investment operations | 8.26 | 2.00 | ||||||
DISTRIBUTIONS: | ||||||||
From net investment income | (1.21 | ) | (0.29 | ) | ||||
Total distributions | (1.21 | ) | (0.29 | ) | ||||
NET INCREASE IN NET ASSET VALUE | 7.05 | 1.71 | ||||||
NET ASSET VALUE, END OF YEAR | $ | 33.76 | $ | 26.71 | ||||
TOTAL RETURN(b) | 31.66 | % | 7.99 | % | ||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||
Net assets, end of period (000s) | $ | 464,277 | $ | 62,768 | ||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||
Expenses | 0.40 | % | 0.40 | %(c) | ||||
Net investment income | 3.58 | % | 5.31 | %(c) | ||||
PORTFOLIO TURNOVER RATE(d) | 8 | % | 0 | % | ||||
Undistributed net investment income included in price of units issued and redeemed(a)(e) | $ | 0.13 | $ | 0.19 |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. |
(e) | The per share amount of equalization is presented to show the impact of equalization on distributable earnings per share. |
See Notes to Financial Statements.
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ALPS INTERNATIONAL SECTOR DIVIDEND DOGS ETF | Financial Highlights | |
For a share outstanding throughout the period presented |
For the Period June 28, 2013 (Commencement) to November 30, 2013 | ||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 25.00 | ||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||
Net investment income(a) | 0.34 | |||
Net realized and unrealized gain | 4.08 | |||
Total from investment operations | 4.42 | |||
DISTRIBUTIONS: | ||||
From net investment income | (0.21 | ) | ||
Total distributions | (0.21 | ) | ||
NET INCREASE IN NET ASSET VALUE | 4.21 | |||
NET ASSET VALUE, END OF YEAR | $ | 29.21 | ||
TOTAL RETURN(b) | 17.72 | % | ||
RATIOS/SUPPLEMENTAL DATA: | ||||
Net assets, end of period (000s) | $ | 77,411 | ||
RATIOS TO AVERAGE NET ASSETS: | ||||
Expenses | 0.50 | %(c) | ||
Net investment income | 2.87 | %(c) | ||
PORTFOLIO TURNOVER RATE(d) | 2 | % | ||
Undistributed net investment income included in price of units issued and redeemed(a)(e) | $ | 0.14 |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. |
(e) | The per share amount of equalization is presented to show the impact of equalization on distributable earnings per share. |
See Notes to Financial Statements.
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Table of Contents
ALPS SECTOR DIVIDEND DOGS SERIES | Notes to Financial Statements | |
November 30, 2013 |
1. Organization
The ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). As of November 30, 2013, the Trust consists of nineteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the ALPS Sector Dividend Dogs ETF and the ALPS International Sector Dividend Dogs ETF (each a “Fund” and collectively, the “Funds”).
The investment objective of the ALPS Sector Dividend Dogs ETF is to seek investment results that replicate as closely as possible, before fees and expenses, the performance of the S-Network Sector Dividend Dogs Index. The ALPS Sector Dividend Dogs ETF commenced operations on June 29, 2012.
The investment objective of the ALPS International Sector Dividend Dogs ETF is to seek investment results that replicate as closely as possible, before fees and expenses, the performance of the S-Network International Sector Dividend Dogs Index. The ALPS International Sector Dividend Dogs ETF commenced operations on June 28, 2013.
The Funds’ Shares (“Shares”) are listed on the New York Stock Exchange (“NYSE”) Arca. Each Fund issues and redeems Shares, at net asset value (“NAV”) in blocks of 50,000 Shares, each of which is called a “Creation Unit.” Creation Units are issued and redeemed principally in-kind for securities included in a specified index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates.
A. Portfolio Valuation
Each Fund’s NAV is determined daily, as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the National Association of Securities Dealers Automated Quotation (“NASDAQ”) exchange are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and asked prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are
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ALPS SECTOR DIVIDEND DOGS SERIES | Notes to Financial Statements | |
November 30, 2013 |
valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the closing bid prices.
The Funds’ investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Funds may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the closing sale prices on the applicable exchange and fair value prices may not reflect the actual value of a security. A variety of factors may be considered in determining the fair value of such securities.
B. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
C. Foreign Securities
The ALPS International Sector Dogs ETF may directly purchase securities of foreign issuers. Investing in securities of foreign issuers involves special risks not typically associated with investing in securities of U.S. issuers. The risks include possible reevaluation of currencies, the inability to repatriate foreign currency, less complete financial information about companies and possible future adverse political and economic developments.
Moreover, securities of many foreign issuers and their markets may be less liquid and their prices more volatile than those of securities of comparable U.S. issuers.
D. Foreign Currency Translation
The books and records of the Funds are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. The portion of realized and unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed and is included in realized and unrealized gains or losses on investments, when applicable.
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ALPS SECTOR DIVIDEND DOGS SERIES | Notes to Financial Statements | |
November 30, 2013 |
E. Dividends and Distributions to Shareholders
Dividends from net investment income for each Fund, if any, are declared and paid quarterly or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Funds, if any, are distributed at least annually.
F. Equalization
Each Fund follows the accounting practice known as “Equalization” by which a portion of the proceeds from sales and costs of reacquiring the Funds’ shares, equivalent on a per share basis to the amount of distributable net investment income on the date of the transaction, is credited or charged to undistributed net investment income. As a result, undistributed net investment income per share is unaffected by sales or reacquisitions of the Funds’ shares. Amounts related to Equalization can be found on the Statement of Changes in Net Assets.
G. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to a Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations.
For the year/period ended November 30, 2013, permanent book and tax differences resulting primarily from in-kind transactions were identified and reclassified among the components of each Fund’s net assets as follows:
Undistributed Net Investment Income/Loss | Accumulated Net Realized Loss | Paid-in Capital | ||||||||||
ALPS Sector Dividend Dogs ETF | $ | 725 | $ | (10,425,710 | ) | $ | 10,424,985 | |||||
ALPS International Sector Dividend Dogs ETF | $ | (1,482 | ) | $ | (135,995 | ) | $ | 137,477 | ||||
At November 30, 2013, the Funds had available for tax purposes unused capital loss carryforwards as follows: | ||||||||||||
Short-Term | Long-Term | |||||||||||
ALPS Sector Dividend Dogs ETF | $ | 235,157 | $ | – | ||||||||
ALPS International Sector Dividend Dogs ETF | $ | – | $ | – |
Distributions from net investment income and capital gains are determined in accordance with income tax regulations, which may differ from U.S. GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by a Fund, timing differences and differing characterization of distributions made by a Fund.
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ALPS SECTOR DIVIDEND DOGS SERIES | Notes to Financial Statements | |
November 30, 2013 |
The tax character of the distributions paid for the period ended November 30, 2013, was as follows:
Ordinary Income | Long-Term Capital Gain | |||||||
ALPS Sector Dividend Dogs ETF | $ | 8,609,806 | $ | 725 | ||||
ALPS International Sector Dividend Dogs ETF | $ | 264,835 | $ | – |
As of November 30, 2013, the components of distributable earnings on a tax basis for the Funds were as follows:
Undistributed Net Investment Income | Accumulated Capital Losses | Net Unrealized Appreciation on Investments | Total | |||||||||||||
ALPS Sector Dividend Dogs ETF | $ | 666,157 | $ | (235,157 | ) | $ | 40,238,415 | $ | 40,669,415 | |||||||
ALPS International Sector Dividend Dogs ETF | $ | 115,239 | $ | – | $ | 2,842,910 | $ | 2,958,149 |
As of November 30, 2013, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/ (depreciation) on investments were as follows:
ALPS Sector Dividend DOGS ETF | ALPS International Dogs ETF | |||||||
Cost of investments for income tax purposes | $ | 422,406,754 | $ | 74,198,800 | ||||
Gross Appreciation (excess of value over tax cost) | $ | 50,455,388 | $ | 3,284,402 | ||||
Gross Depreciation (excess of tax cost over value) | (10,216,973 | ) | (438,076 | ) | ||||
Net Depreciation of Foreign Currency | – | (3,416 | ) | |||||
Net Unrealized Appreciation | $ | 40,238,415 | $ | 2,842,910 | ||||
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales.
H. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as each Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies.
Each Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
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ALPS SECTOR DIVIDEND DOGS SERIES | Notes to Financial Statements | |
November 30, 2013 |
As of and during the year ended November 30, 2013, each Fund did not have a liability for any unrecognized tax benefits. Each Fund files U.S. federal, state, and local tax returns as required. Each Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is generally three years after the filing of the tax return. Being that the ALPS International Sector Dividend Dogs ETF commenced operations on June 28, 2013, no tax returns have been filed as of the date of this report.
I. Fair Value Measurements
Each Fund discloses the classification of fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Funds’ investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy.
Investments in open-end mutual funds are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the each Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; | |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
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Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value each Fund’s investments at November 30, 2013:
ALPS Sector Dividend Dogs ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks* | $ | 461,194,981 | $ | – | $ | – | $ | 461,194,981 | ||||||||
Short Term Investments | 1,450,188 | – | – | 1,450,188 | ||||||||||||
TOTAL | $ | 462,645,169 | $ | – | $ | – | $ | 462,645,169 | ||||||||
ALPS International Sector Dividend Dogs ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks* | $ | 77,002,912 | $ | – | $ | – | $ | 77,002,912 | ||||||||
Short Term Investments | 42,214 | – | – | 42,214 | ||||||||||||
TOTAL | $ | 77,045,126 | $ | – | $ | – | $ | 77,045,126 | ||||||||
* | For detailed sector descriptions, see the accompanying Schedule of Investments. |
The Funds recognize transfers between levels as of the end of the period. For the year ended November 30, 2013, the Funds did not have any transfers between Level 1 and Level 2 securities. The Funds did not have any securities which used significant unobservable inputs (Level 3) in determining fair value.
3. Investment Advisory Fee and Other Affiliated Transactions
ALPS Advisors, Inc. (the “Investment Adviser”) acts as the Funds’ investment adviser pursuant to advisory agreements with the Trust on behalf of each Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, each Fund pays the Investment Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rates below, based on each Fund’s average daily net assets. From time to time, the Investment Adviser may waive all or a portion of its fee.
Fund | Advisory Fee | |
ALPS Sector Dividend Dogs ETF | 0.40% | |
ALPS International Sector Dividend Dogs ETF | 0.50% |
Out of the unitary management fee, the Investment Adviser pays substantially all expenses of each Fund, including the licensing fee of the Index provider, and the cost of transfer agency,
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ALPS SECTOR DIVIDEND DOGS SERIES | Notes to Financial Statements | |
November 30, 2013 |
custody, fund administration, legal, audit, trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Funds’ business. In addition, the Investment Adviser’s unitary management fee is designed to compensate the Investment Adviser for providing services for the Funds.
ALPS Fund Services, Inc. (“ALPS”), an affiliate of the Investment Adviser, is the administrator for the Funds.
Each Trustee who is not an officer or employee of the Investment Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) is paid a quarterly retainer of $5,000, $3,750 for each regularly scheduled Board meeting attended and $1,500 for each special meeting held outside of regularly scheduled meetings.
4. Purchases and Sales of Securities
For the year ended November 30, 2013, the cost of purchases and proceeds from sales of investment securities, excluding short-term investments and in-kind transactions, were as follows:
Purchases | Sales | |||||||
ALPS Sector Dividend Dogs ETF | $ | 58,648,882 | $ | 21,205,358 | ||||
ALPS International Sector Dividend Dogs ETF | $ | 1,262,047 | $ | 810,752 |
For the year ended November 30, 2013, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Purchases | Sales | |||||||
ALPS Sector Dividend Dogs ETF | $ | 360,500,483 | $ | 48,944,056 | ||||
ALPS International Sector Dividend Dogs ETF | $ | 74,215,841 | $ | 651,971 |
Gains on in-kind transactions are not considered taxable for federal income tax purposes.
5. Capital Share Transactions
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Funds. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the net asset value per unit of each 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 AP or as a result of other market circumstances.
6. Indemnifications
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the
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ALPS SECTOR DIVIDEND DOGS SERIES | Notes to Financial Statements | |
November 30, 2013 |
normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
7. New Accounting Pronouncements
In June 2013, the FASB issued ASU No. 2013-08, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The FASB standard identifies characteristics a company must assess to determine whether it is considered an investment company for financial reporting purposes. This ASU is effective for fiscal years beginning after December 15, 2013. The Funds are currently reviewing the requirements and believe the adoption of this ASU will not have a material impact on the financial statements.
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ALPS SECTOR DIVIDEND DOGS SERIES | Additional Information | |
November 30, 2013 (Unaudited) |
Proxy Voting Policies And Procedures
A description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies and information regarding how the Fund voted proxies related to portfolio securities during the most recent 12-month period ended June 30th is available without charge, (1) on the Securities and Exchange Commission’s (“SEC”) website at http://www.sec. gov; (2) upon request, by calling (toll-free) 1-866-513-5856; and (3) on the Trust’s website located at http://www.alpsfunds.com.
Portfolio Holdings
The Trust will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q will be available (1) on the SEC’s website at http:// www.sec.gov; (2) by calling (toll-free) 1-866-513-5856; (3) on the Trust’s website located at http://www.alpsfunds. com; and (4) for review and copying at the SEC’s Public Reference Room (“PRR”) in Washington D.C. Information regarding the operation of the PRR may be obtained by calling (toll-free) 1-800-732-0330.
Tax Designations
Pursuant to Section 853(c) of the Internal Revenue Code, the following Fund designates the following:
Foreign Taxes Paid | Foreign Source Income | |||||||
ALPS International Sector Dividend Dogs ETF | $ | 25,402 | $ | 324,288 |
The following Fund designates for federal income purposes for distributions made during the calendar year ended December 31, 2012:
Qualified Dividend Income | Dividend Received Dedution | |||
ALPS Sector Dividend Dogs ETF | 73.44% | 76.98% |
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ALPS SECTOR DIVIDEND DOGS SERIES | Board Considerations Regarding Approval of Investment Advisory Agreement | |
November 30, 2013 (Unaudited) |
At an in-person meeting held on June 10, 2013, the Board of Trustees of the Trust (the “Board”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve the Advisory Agreement between the Trust and ALPS Advisors, Inc. (the “Adviser”) with respect to the ALPS International Sector Dividend Dogs (the “IDOG ETF”). The Independent Trustees also met separately to consider the Advisory Agreement.
In evaluating whether to approve the Advisory Agreement for the IDOG ETF, the Board considered numerous factors, as described below.
With respect to the nature, extent and quality of the services to be provided by the Adviser under the Advisory Agreement, representatives from the Adviser presented the Adviser’s material regarding consideration of renewal of the Advisory Agreement. The Independent Trustees noted that included in the Board materials were responses by the Adviser to a questionnaire drafted by legal counsel to the Trust to assist the Board in evaluating whether to approve the Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the services proposed to be provided under the Advisory Agreement, the proposed investment parameters of the index for the IDOG ETF, financial information regarding the Adviser, its parent company, information describing the Adviser’s current organizations and the background and experience of the persons who would be responsible for the day-to-day management of the IDOG ETF, the nature and quality of services provided to other exchange-traded (“ETFs”), open-end and closed-end funds by the Adviser. Based upon their review, the Independent Trustees concluded that the Adviser was qualified to oversee the services to be provided by other service providers and that the services to be provided by the Adviser to the IDOG ETF are expected to be satisfactory.
The Independent Trustees noted the services to be provided by the Adviser for the proposed annual advisory fee of 0.50% of the IDOG ETF’s average daily net assets. The Independent Trustees noted that the advisory fees proposed for the IDOG ETF were unitary fees pursuant to which the Adviser will assume all expense of the IDOG ETF (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than payments under the Advisory Agreement, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses. Based on its review, the Independent Trustees concluded that the expected profitability of the IDOG ETF to the Adviser was not unreasonable.
The Independent Trustees also reviewed comparative fee information, including data from Lipper Analytical Services (“Lipper”). The Independent Trustees noted that Lipper’s report contained information regarding comparisons of the proposed cost and expense structures of the IDOG ETF with other funds’ cost and expense structures. The Independent Trustees noted the services to be provided by the Adviser for the annual advisory fee of 0.50% of the IDOG ETF’s average daily net assets. The Independent Trustees also considered that the advisory fee was a unitary one and that, as set forth above, the Adviser had agreed to pay all of the IDOG ETF’s expenses (except for interest expenses, marketing fees, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses such as litigation and other expenses not incurred in the ordinary course of the IDOG ETF’s business) out of the unitary
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November 30, 2013 (Unaudited) |
fee. The Independent Trustees considered that, taking into account the impact of the IDOG ETF’s unitary advisory fee, the IDOG ETF’s expense ratio was expected to be at the median of the Lipper peer group. Based on the foregoing and the other information available to them, the Independent Trustees concluded that the advisory fee for the IDOG ETF was reasonable under the circumstances and in light of the quality of services provided.
The Independent Trustees also considered other benefits that may be realized by the Adviser from its relationship with the IDOG ETF and concluded that the advisory fee was reasonable taking into account such benefits. The Independent Trustees considered the extent to which economies of scale would be realized as the IDOG ETF grows and whether fee level reflects a reasonable sharing of such economies of scale for the benefit of the Fund’s investors. Because the IDOG ETF is newly organized, the Independent Trustees reviewed the unitary advisory fee proposed for IDOG ETF and anticipated expenses of the Fund and determined to review economies of scale in the future when the IDOG ETF had attracted assets.
Based on consideration of all factors deemed relevant, the Independent Trustees determined that approval of the Advisory Agreement was in the best interests of the IDOG ETF. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
In voting to approve the Advisory Agreement, the Trustees, including the Independent Trustees, concluded that the terms of the Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Trustees considered relevant in the exercise of their reasonable business judgment.
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ALPS SECTOR DIVIDEND DOGS SERIES | Trustees & Officers | |
November 30, 2013 (Unaudited) |
Independent Trustees
Name, Address and Year of Birth of Trustee* | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of in Fund | Other Directorships Held by Trustees | |||||
Mary K. Anstine, 1940 | Trustee | Since March 2008 | Ms. Anstine was President/Chief Executive Officer of HealthONE Alliance, Denver, Colorado, and former Executive Vice President of First Interstate Bank of Denver. Ms. Anstine is also Trustee/ Director of the following: AV Hunter Trust; Colorado Uplift Board. Ms. Anstine was formerly a Director of the Trust Bank of Colorado (later purchased and now known as Northern Trust Bank), HealthONE and Denver Area Council of the Boy Scouts of America and a member of the American Bankers Association Trust Executive Committee. | 41 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder, Chief Operations Officer and Chief Financial Officer of Green Alpha Advisors, LLC. Prior to joining Green Alpha Advisors, Mr. Deems was CFO and Treasurer of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC, a private investment fund, and Sutton Place Management, LLC, an administrative services company, from 2004 to June 2007. Prior to this, Mr. Deems served as Controller of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC and Sutton Place Management, LLC. | 41 | Mr. Deems is a Trustee of Financial Investors Trust (30 funds); ALPS Variable Investment Trust (7 funds); and Reaves Utility Income Fund. |
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ALPS SECTOR DIVIDEND DOGS SERIES | Trustees & Officers | |
November 30, 2013 (Unaudited) |
Independent Trustees (continued)
Name, Address and Year of Birth of Trustee* | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of in Fund | Other Directorships Held by Trustees | |||||
Rick A. Pederson, 1952 | Trustee | Since March 2008 | Mr. Pederson is President, Foundation Properties, Inc. (a real estate investment management company), 1994 - present; Advisory Committee, Bow River Capital Partners (private equity management), 2003 - present; Advisor, Pauls Corporation (real estate investment management and development), 2008 - present; Chairman, Ross Consulting Group (real estate consulting services) 1983-2013; Advisory Board, Neenan Company (construction services) 2002-present; Board Member, Urban Land Conservancy (a not-for- profit organization), 2004 – present; Director, National Western Stock Show (not- for-profit organization). | 22 | Mr. Pederson is Trustee of Westcore Trust (12 funds) and Principal Real Estate Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
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Interested Trustee
Name, Address and Year of Birth of Management Trustee* | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of in Fund | Other Directorships Held by Trustees | |||||
Thomas A. Carter, 1966 | Trustee and President | Since March 2008 | Mr. Carter joined ALPS Fund Services, Inc. (“ALPS”) in 1994 and is currently President and Director of ALPS Advisors, Inc. (“AAI”), ALPS Distributors, Inc. (“ADI”) and ALPS Portfolio Solutions Distributors, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”). Because of his position with AHI, ALPS, ADI, APSD and AAI, Mr. Carter is deemed an affiliate of the Fund as defined under the 1940 Act. Before joining ALPS, Mr. Carter was with Deloitte & Touché LLP, where he worked with a diverse group of clients, primarily within the financial services industry. Mr. Carter is a Certified Public Accountant and received his Bachelor of Science in Accounting from the University of Colorado at Boulder. | 29 | Mr. Carter is a Trustee of ALPS Variable Investment Trust (7 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services |
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ALPS SECTOR DIVIDEND DOGS SERIES | Trustees & Officers | |
November 30, 2013 (Unaudited) |
Officers
Name, Address and Year of Birth of Officer* | Position(s) Held with Trust | Length of Time Served** | Principal Occupation(s) During Past 5 Years | |||
Melanie Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars currently serves as a Deputy Chief Compliance Officer with ALPS. Prior to joining ALPS in September 2009, Ms. Zimdars served as Principal Financial Officer, Treasurer and Secretary for the Wasatch Funds from February 2007 to December 2008. From November 2006 to February 2007, she served as Assistant Treasurer for the Wasatch Funds and served as a Senior Compliance Officer for Wasatch Advisors, Inc. since 2005. Because of her position with ALPS, Ms. Zimdars is deemed an affiliate of the Trust as defined under the 1940 Act. Ms. Zimdars is also the CCO of ALPS Variable Investment Trust, Liberty All-Star Growth Fund, Inc., Liberty All-Star Equity Fund and BPV Family of Funds. | |||
Patrick D. Buchanan, 1972 | Treasurer | Since June 2012 | Mr. Buchanan is Vice President of AAI. Mr. Buchanan joined ALPS in 2007 and because of his position with AAI, he is deemed an affiliate of the Trust as defined under the 1940 Act. Mr. Buchanan is also Treasurer of ALPS Variable Investment Trust and the Principal Real Estate Income Fund. | |||
William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer, AAI (since 2006); President of the Liberty All-Star Funds (since April 1999); Senior Vice President (2005-2006), Banc of America Investment Advisors, Inc. Because of his position with AAI, Mr. Parmentier is deemed an affiliate of the Trust as defined under the 1940 Act. | |||
Erin D. Nelson, 1977 | Secretary | Since October 2013 | Ms. Nelson is Vice President and Assistant General Counsel of AAI, ALPS Fund Services, Inc., ALPS Distributors, Inc., and ALPS Portfolio Solutions Distributor, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson has served as Secretary of the Clough Global Allocation Fund since 2004, Clough Global Equity Fund since 2005, Clough Global Opportunities Fund since 2006, Liberty All-Star Equity Fund since 2013 and Liberty All-Star Growth Fund since 2013. Ms. Nelson received her Bachelor of Arts in Political Science, magna cum laude, from the University of New Hampshire and Juris Doctorate from the University of Denver. | |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Senior Paralegal. Prior to joining ALPS, Ms. Craig was Legal Manager at Janus Capital Management LLC and served as Assistant Secretary of Janus Investment Fund, Janus Adviser Series and Janus Aspen Series. Because of her position with ALPS, Ms. Craig is deemed an affiliate of the Trust as defined under the 1940 Act. |
* | The business address of each Officer is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Officer began serving the Trust. Each Officer serves an indefinite term, until his successor is elected. |
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ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF | ||||
ALPS | GS Momentum Builder® Multi-Asset Index ETF | ||||
ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF | ||||
ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF | ||||
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ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF | ||||
ALPS | GS Momentum Builder® Multi-Asset Index ETF | ||||
ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF | ||||
ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF | ||||
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ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF | ||||
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ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF | ||||
ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF | ||||
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MANAGER COMMENTARY | ||
November 30, 2013 (Unaudited) |
Since inception on December 20, 2012, ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF (GSRA) advanced 23.95% at fiscal year-end November 30, 2013. In the Momentum Builder series, ALPS | GS Momentum Builder® Multi-Asset Index ETF (GSMA) advanced 6.25%, while ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF (GSGO) and ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF (GSAX) were down 14.82% and 9.27%, respectively.
In the same period, the U.S. equity market was strong with the Russell 1000 up 25.7%.
GS Risk-Adjusted Return U.S. Large Cap Index (GSRARUS), which is tracked by GSRA, outperformed in 5 out of 6 months in the first half of 2013, with strong performance by stocks such as Vertex Pharmaceuticals (+105.5%), Werner Chilcott (+66.8%), Micron Technology (+96.6%) and Delta Air Lines (+87.2%) during the same period. In the first half, RUITR (Russell 1000 TR Index) was up 17.2% vs GSRARUS 19.9%. After the rebalance in June, notable performers included FedEx (+42.4%), Cognizant Technology Solutions (+44.7%) and Facebook (+97.1%), while laggards were Ariad Pharmaceuticals (-72.7%) and Newmont Mining (-27.5%).
In the Momentum Builder series, GSMA was the strongest performer among the three.
GSMA had large weights in the first quarter of 2013 to iShares MSCI EAFE Index ETF, iShares JPMorgan USD Emerging Markets Bond ETF, WisdomTree Emerging Markets Local Debt Fund, followed by iShares Russell 2000 Index ETF. During the second quarter we saw an increase in allocation to developed markets equity with iShares Russell 2000 Index ETF and iShares Dow Jones U.S. Real Estate ETF, followed by iShares iBoxx $ High Yield Corporate Bond ETF and iShares MSCI EAFE Index ETF. There was an increased allocation to cash assets combined with exposure to developed markets equity (iShares Russell 2000 Index ETF and iShares Russell 1000 Index ETF) in the third and fourth quarters.
GSGO returned -14.82% compared to -14.11% for the GS Momentum Builder Growth Markets Equities and U.S. Treasuries Index and -0.91% for the MSCI EM (Emerging Markets) TR Net Index. Most of the underperformance came in the second quarter with large drawdowns in Turkey (TUR), Indonesia (IDX) and Mexico (EWW) exposure in the portfolio starting in May. The rebalances in August and September resulted in 100% exposure to cash assets with an increase in volatility in emerging markets. This resulted in short term outperformance in September, but as the market turned, this outperformance reversed.
GSAX returned -9.27% compared to -8.41% for the GS Momentum Builder Asia Ex-Japan Equities and U.S. Treasuries Index and 4.43% for the MSCI AC (All Country) Asia Ex-Japan TR Net Index. The basket was fully allocated to cash assets in September this year and the underexposure to Asian markets when the market reversed further contributed to the drag of GSAX.
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ALPS | GS MOMENTUM BUILDER® GROWTH MARKETS EQUITIES AND U.S. TREASURIES INDEX ETF November 30, 2013 (Unaudited) |
The ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF (the “Fund”) seeks investment results that correspond generally, before fees and expenses, to the performance of the GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index (the “Index”). The Fund is a “fund of funds” as it principally invests its assets in the ETFs included in the Index (“Underlying ETFs”), instead of individual securities. The Underlying ETFs are also passively managed and seek investment results that correspond to their own indexes. The Underlying ETFs primarily invest in emerging markets equity securities and U.S. Treasury securities.
FUND PERFORMANCE as of November 30, 2013
Since Inception* | ||
ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF - NAV | -14.82% | |
ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF - Market Price** | -15.63% | |
GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index*** | -14.11% | |
MSCI EM TR Net Index**** | -0.91% |
Total Expense Ratio (per the current prospectus) 1.29%
Performance data quoted represent past performance. Past performance is no guarantee of future results so that shares, when redeemed may be worth more or less than their original cost. The investment return and principal value will fluctuate. Current performance may be higher or lower than the performance quoted. Call 1-866-759-5679 for current month end performance.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
* | Fund inception date of 12/20/2012. |
** | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
*** | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index holds ETFs whose underlying indexes track the equity markets of large emerging-markets countries and ETFs that track U.S. bond markets. |
**** | The MSCI EM (Emerging Markets) TR (Total Return) Net Index is a free float-adjusted market capitalization index that is designed to measure equity market performance of emerging markets. |
An investor cannot invest directly in an index.
TOP HOLDINGS (as a % of Total Net Assets) as of November 30, 2013
iShares® FTSE® China 25 Index Fund | 31.52 | % | ||
iShares® MSCI South Korea Capped ETF | 30.06 | % | ||
Market Vectors® Russia ETF | 28.57 | % | ||
iShares® Short Treasury Bond ETF | 4.96 | % | ||
SPDR® Barclays® 1-3 Month Treasury Bill ETF | 4.95 | % | ||
Top Ten Holdings | 100.06 | % |
Holdings are subject to change.
GROWTH OF $10,000 as of November 30, 2013
Comparison of Change in Value of $10,000 Investment in the Fund and the Index.
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
www.alpsfunds.com | 3 | |
Table of Contents
PERFORMANCE OVERVIEW | ||
ALPS | GS MOMENTUM BUILDER® MULTI-ASSET INDEX ETF November 30, 2013 (Unaudited) |
The ALPS | GS Momentum Builder® Multi-Asset Index ETF (the “Fund”) seeks investment results that closely correspond generally, before fees and expenses, to the performance of the GS Momentum Builder® Multi-Asset Index (the “Index”). The Fund is a fund of funds as it principally invests its assets in the ETFs included in the Index (“Underlying ETFs”), instead of individual securities. The Underlying ETFs are also passively managed and seek investment results that correspond to their own indexes (with the exception of one Underlying ETF which is actively managed). The Underlying ETFs invest across asset classes. The Underlying ETFs primarily invest in global equities, including emerging markets, as well as commodities, real estate and U.S. and international fixed income securities.
FUND PERFORMANCE as of November 30, 2013
Since Inception* | ||
ALPS | GS Momentum Builder®Multi-Asset Index ETF - NAV | 6.25% | |
ALPS | GS Momentum Builder®Multi-Asset Index ETF - Market Price** | 4.87% | |
GS Momentum Builder®Multi-Asset Index*** | 7.05% | |
60% S&P 500®Total Return Index and 40% Barclays US Aggregate Index | 15.76% |
Total Expense Ratio (per the current prospectus) 1.14%
Performance data quoted represent past performance. Past performance is no guarantee of future results so that shares, when redeemed may be worth more or less than their original cost. The investment return and principal value will fluctuate. Current performance may be higher or lower than the performance quoted. Call 1-866-759-5679 for current month end performance.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
* | Fund inception date of 12/20/2012. |
** | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
*** | GS Momentum Builder® Multi-Asset Index holds ETFs spanning across United States, developed and emerging equity markets, commodities, real estate, as well as global fixed income markets. |
S&P 500® Total Return Index (SPXTR) is a domestic equity index consisting of 500 stocks representing approximately 75% of the total U.S. equity market focusing on the large-cap sector of the U.S. equities market.
Barclay’s US Aggregate Index is a benchmark index composed of US securities in Treasury, Government-Related, Corporate, and Securitized sectors.
An investor cannot invest directly in an index.
TOP HOLDINGS (as a % of Total Net Assets) as of November 30, 2013
iShares®Russell 2000®Index Fund | 30.72 | % | ||
iShares® Russell 1000® Index Fund | 30.13 | % | ||
iShares® Short Treasury Bond ETF | 19.17 | % | ||
SPDR® Barclays® 1-3 Month Treasury Bill ETF | 19.16 | % | ||
iShares®MSCI EAFE Index Fund | 0.89 | % | ||
Top Holdings | 100.07 | % |
Holdings are subject to change.
GROWTH OF $10,000 as of November 30, 2013
Comparison of Change in Value of $10,000 Investment in the Fund and the Index.
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
4 | Annual Report | November 30, 2013 | |
Table of Contents
PERFORMANCE OVERVIEW |
ALPS | GS MOMENTUM BUILDER® ASIA EX-JAPAN EQUITIES AND U.S. November 30, 2013 (Unaudited) |
The ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF (the “Fund”) seeks investment results that correspond generally, before fees and expenses, to the performance of the GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index (the “Index”). The Fund is a fund of funds as it principally invests its assets in the ETFs included in the Index (“Underlying ETFs”), instead of individual securities. The Underlying ETFs are also passively managed and seek investment results that correspond to their own indexes. The Underlying ETFs invest primarily in securities of equity markets in Asia (excluding Japan) and U.S. Treasury securities.
FUND PERFORMANCE as of November 30, 2013
Since Inception* | ||
ALPS | GS Momentum Builder®Asia ex-Japan Equities and U.S. Treasuries Index ETF - NAV | -9.27% | |
ALPS | GS Momentum Builder®Asia ex-Japan Equities and U.S. Treasuries Index ETF - Market Price** | -8.91% | |
GS Momentum Builder®Asia Ex-Japan Equities and U.S. Treasuries Index*** | -8.41% | |
MSCI AC Asia Ex-Japan TR Net Index**** | 4.43% |
Total Expense Ratio (per the current prospectus) 1.22%
Performance data quoted represent past performance. Past performance is no guarantee of future results so that shares, when redeemed may be worth more or less than their original cost. The investment return and principal value will fluctuate. Current performance may be higher or lower than the performance quoted. Call 1-866-759-5679 for current month end performance.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
* | Fund inception date of 12/20/2012. |
** | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
*** | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index holds ETFs that track the following equity markets in Asia: India, China, Thailand, Taiwan, Hong Kong, Indonesia, Singapore, Malaysia, South Korea and Australia as well as shares of ETFs who track U.S. fixed income markets. |
**** | The MSCI AC (All Country) Asia ex–Japan TR (Total Return) Net Index is a free float-adjusted market capitalization weight-ed index that is designed to measure the equity market performance of Asia, excluding Japan. The MSCI AC Asia ex Japan Index consists of the following 10 developed and emerging market country indices: China, Hong Kong, India, Indonesia, Korea, Malaysia, Philippines, Singapore, Taiwan, and Thailand. |
An investor cannot invest directly in an index.
TOP HOLDINGS (as a % of Total Net Assets) as of November 30, 2013
iShares® MSCI South Korea Capped ETF | 30.21 | % | ||
iShares® MSCI Taiwan ETF | 29.78 | % | ||
iShares® MSCI Malaysia ETF | 29.51 | % | ||
iShares® FTSE® China 25 Index Fund | 10.56 | % | ||
Top Holdings | 100.06 | % |
Holdings are subject to change.
GROWTH OF $10,000 as of November 30, 2013
Comparison of Change in Value of $10,000 Investment in the Fund and the Index.
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
www.alpsfunds.com | 5 | |
Table of Contents
PERFORMANCE OVERVIEW | ||
ALPS | GS RISK-ADJUSTED RETURN U.S. LARGE CAP INDEX ETF November 30, 2013 (Unaudited) |
The ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF (the “Fund”) seeks investment results that correspond generally, before fees and expenses, to the performance of the GS Risk-Adjusted Return U.S. Large Cap Index (the “Index”). The Index includes U.S. securities within the Russell 1000® Index.
FUND PERFORMANCE as of November 30, 2013
Since Inception* | ||
ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF - NAV | 23.95% | |
ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF - Market Price** | 24.15% | |
GS Risk-Adjusted Return U.S. Large Cap Index*** | 24.64% |
Total Expense Ratio (per the current prospectus) 0.55%
Performance data quoted represent past performance. Past performance is no guarantee of future results so that shares, when redeemed may be worth more or less than their original cost. The investment return and principal value will fluctuate. Current performance may be higher or lower than the performance quoted. Call 1-866-759-5679 for current month end performance.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
* | Fund inception date of 12/20/2012. |
** | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
*** | Goldman Sachs Risk-Adjusted Return Index: designed to reflect the performance of a hypothetical portfolio of U.S. stocks that are anticipated to have the highest risk-adjusted returns based on a methodology developed by Goldman, Sachs & Co. |
An investor cannot invest directly in an index.
TOP TEN HOLDINGS (as a % of Total Net Assets) as of November 30, 2013
Facebook, Inc., Class A | 3.58 | % | ||
Cognizant Technology Solutions Corp., Class A | 2.63 | % | ||
FedEx Corp. | 2.58 | % | ||
DST Systems, Inc. | 2.38 | % | ||
Whiting Petroleum Corp. | 2.35 | % | ||
Medivation, Inc. | 2.35 | % | ||
Cytec Industries, Inc. | 2.33 | % | ||
Teleflex, Inc. | 2.31 | % | ||
IDEXX Laboratories, Inc. | 2.28 | % | ||
Carpenter Technology Corp. | 2.26 | % | ||
Top Ten Holdings | 25.05 | % |
Holdings are subject to change.
GROWTH OF $10,000 as of November 30, 2013
Comparison of Change in Value of $10,000 Investment in the Fund and the Index.
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6 | Annual Report | November 30, 2013 | |
Table of Contents
November 30, 2013 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, and (2) ongoing costs, including management fees and other Fund expenses. These examples are 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 funds. The example is based on an investment of $1,000 invested at the beginning of the (six month) period and held through November 30, 2013.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred 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 first line of the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning Account Value 6/1/13 | Ending Account 11/30/13 | Expense Ratio(a) | Expense Paid During Period 6/1/13 - 11/30/13(b) | |||||||||||||
ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 908.40 | 0.68 | % | $ | 3.25 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.66 | 0.68 | % | $ | 3.45 | ||||||||
ALPS | GS Momentum Builder® Multi-Asset Index ETF | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,068.30 | 0.68 | % | $ | 3.53 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.66 | 0.68 | % | $ | 3.45 | ||||||||
ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 945.90 | 0.68 | % | $ | 3.32 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.66 | 0.68 | % | $ | 3.45 | ||||||||
ALPS | GS Risk-Adjusted Return U.S Large Cap Index ETF | ||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,076.70 | 0.55 | % | $ | 2.86 | ||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.31 | 0.55 | % | $ | 2.79 |
(a) | Annualized, based on the Fund’s most recent fiscal half-year expenses. |
(b) | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (183), divided by 365. |
www.alpsfunds.com | 7 | |
Table of Contents
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM | ||
To the Board of Trustees and Shareholders of ALPS ETF Trust:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF, ALPS | GS Momentum Builder® Multi-Asset Index ETF, ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF, and ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF, four of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2013, and the related statements of operations, changes in net assets, and the financial highlights for the period December 20, 2012 (Commencement of Operations) to November 30, 2013. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2013, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF, ALPS | GS Momentum Builder® Multi-Asset Index ETF, ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF, and ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF of the ALPS ETF Trust as of November 30, 2013, the results of their operations, the changes in their net assets, and the financials highlights for the period December 20, 2013 (Commencement of Operations) to November 30, 2013, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 27, 2014
8 | Annual Report | November 30, 2013 | |
Table of Contents
ALPS | GS MOMENTUM BUILDER® GROWTH MARKETS EQUITIES AND U.S. TREASURIES INDEX ETF November 30, 2013 |
Security Description | Shares | Value | ||||||
EXCHANGE TRADED FUNDS (100.06%) | ||||||||
Debt Funds (9.91%) | ||||||||
iShares® Short Treasury Bond ETF | 951 | $ | 104,838 | |||||
SPDR® Barclays® 1-3 Month Treasury Bill ETF(1) | 2,289 | 104,768 | ||||||
|
| |||||||
Total Debt Funds | 209,606 | |||||||
|
| |||||||
Equity Funds (90.15%) | ||||||||
iShares® FTSE® China 25 Index Fund | 16,614 | 666,720 | ||||||
iShares® MSCI South Korea Capped ETF | 9,777 | 635,798 | ||||||
Market Vectors® Russia ETF | 21,427 | 604,241 | ||||||
|
| |||||||
Total Equity Funds | 1,906,759 | |||||||
|
| |||||||
TOTAL EXCHANGE TRADED FUNDS | ||||||||
(Cost $ 2,062,492) | 2,116,365 | |||||||
|
| |||||||
TOTAL INVESTMENTS (100.06%) | ||||||||
(Cost $ 2,062,492) | $ | 2,116,365 | ||||||
NET LIABILITIES LESS OTHER ASSETS (-0.06%) | (1,305 | ) | ||||||
|
| |||||||
NET ASSETS (100.00%) | $ | 2,115,060 | ||||||
|
|
(1) | Non-income producing security. |
Common Abbreviations:
ETF - Exchange Traded Fund.
FTSE - Financial Times and the London Stock Exchange.
MSCI - Morgan Stanley Capital International.
SPDR - Standard & Poor’s Depositary Receipt.
See Notes to Financial Statements.
www.alpsfunds.com | 9 | |
Table of Contents
SCHEDULE OF INVESTMENTS | ||
ALPS | GS MOMENTUM BUILDER® MULTI-ASSET INDEX ETF November 30, 2013 |
Security Description | Shares | Value | ||||||
EXCHANGE TRADED FUNDS (100.07%) | ||||||||
Debt Funds (38.32%) | ||||||||
iShares® Short Treasury Bond ETF | 4,574 | $ | 504,238 | |||||
SPDR® Barclays® 1-3 Month Treasury Bill ETF(1) | 11,013 | 504,065 | ||||||
|
| |||||||
Total Debt Funds | 1,008,303 | |||||||
|
| |||||||
Equity Funds (61.75%) | ||||||||
iShares® MSCI EAFE Index Fund | 354 | 23,449 | ||||||
iShares® Russell 1000® Index Fund | 7,852 | 792,659 | ||||||
iShares® Russell 2000® Index Fund | 7,121 | 808,305 | ||||||
|
| |||||||
Total Equity Funds | 1,624,413 | |||||||
|
| |||||||
TOTAL EXCHANGE TRADED FUNDS | ||||||||
(Cost $ 2,479,036) | 2,632,716 | |||||||
|
| |||||||
TOTAL INVESTMENTS (100.07%) | ||||||||
(Cost $ 2,479,036) | $ | 2,632,716 | ||||||
NET LIABILITIES LESS OTHER ASSETS (-0.07%) | (1,776 | ) | ||||||
|
| |||||||
NET ASSETS (100.00%) | $ | 2,630,940 | ||||||
|
|
(1) | Non-income producing security. |
Common Abbreviations:
EAFE - Europe, Australia, and Far East.
ETF - Exchange Traded Fund.
MSCI - Morgan Stanley Capital International.
SPDR - Standard & Poor’s Depositary Receipt.
See Notes to Financial Statements.
10 | Annual Report | November 30, 2013 | |
Table of Contents
SCHEDULE OF INVESTMENTS |
ALPS | GS MOMENTUM BUILDER® ASIA EX-JAPAN EQUITIES AND U.S. TREASURIES INDEX ETF November 30, 2013 |
Security Description | Shares | Value | ||||||
EXCHANGE TRADED FUNDS (100.06%) | ||||||||
Equity Funds (100.06%) | ||||||||
iShares® FTSE® China 25 Index Fund | 5,925 | $ | 237,770 | |||||
iShares® MSCI Malaysia ETF | 42,197 | 664,603 | ||||||
iShares® MSCI South Korea Capped ETF | 10,461 | 680,279 | ||||||
iShares® MSCI Taiwan ETF | 46,645 | 670,755 | ||||||
TOTAL EXCHANGE TRADED FUNDS | ||||||||
(Cost $ 2,185,436) | 2,253,407 | |||||||
|
| |||||||
TOTAL INVESTMENTS (100.06%) | ||||||||
(Cost $ 2,185,436) | $ | 2,253,407 | ||||||
NET LIABILITIES LESS OTHER ASSETS (-0.06%) | (1,416 | ) | ||||||
|
| |||||||
NET ASSETS (100.00%) | $ | 2,251,991 | ||||||
|
|
Common Abbreviations:
ETF - Exchange Traded Fund.
FTSE - Financial Times and the London Stock Exchange.
MSCI - Morgan Stanley Capital International.
See Notes to Financial Statements.
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Table of Contents
SCHEDULE OF INVESTMENTS | ||
ALPS | GS RISK-ADJUSTED RETURN U.S. LARGE CAP INDEX ETF November 30, 2013 |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.72%) | ||||||||
Basic Materials (8.84%) | ||||||||
Carpenter Technology Corp. | 1,154 | $ | 69,575 | |||||
Cytec Industries, Inc. | 801 | 71,673 | ||||||
Newmont Mining Corp. | 1,629 | 40,448 | ||||||
Royal Gold, Inc. | 1,006 | 45,360 | ||||||
Southern Copper Corp. | 1,787 | 44,854 | ||||||
|
| |||||||
Total Basic Materials | 271,910 | |||||||
|
| |||||||
Communications (2.05%) | ||||||||
SBA Communications Corp., Class A(1) | 742 | 63,196 | ||||||
|
| |||||||
Total Communications | 63,196 | |||||||
|
| |||||||
Consumer Discretionary (12.54%) | ||||||||
Comcast Corp., Class A | 1,386 | 69,120 | ||||||
Expedia, Inc. | 974 | 62,034 | ||||||
Foot Locker, Inc. | 1,648 | 64,091 | ||||||
Liberty Interactive Corp., Class A(1) | 2,432 | 68,291 | ||||||
Liberty Media Corp., Class A(1) | 446 | 68,443 | ||||||
Madison Square Garden Co., Class A(1) | 949 | 53,486 | ||||||
|
| |||||||
Total Consumer Discretionary | 385,465 | |||||||
|
| |||||||
Consumer Staples (11.54%) | ||||||||
Bunge, Ltd. | 802 | 64,256 | ||||||
Church & Dwight Co., Inc. | 929 | 60,617 | ||||||
Coca-Cola Co. | 1,385 | 55,663 | ||||||
ConAgra Foods, Inc. | 1,694 | 55,885 | ||||||
PepsiCo, Inc. | 696 | 58,785 | ||||||
Wal-Mart Stores, Inc. | 738 | 59,785 | ||||||
|
| |||||||
Total Consumer Staples | 354,991 | |||||||
|
| |||||||
Energy (9.76%) | ||||||||
Cobalt International Energy, Inc.(1) | 2,137 | 47,506 | ||||||
Newfield Exploration Co.(1) | 2,333 | 65,557 | ||||||
Peabody Energy Corp. | 2,880 | 52,416 | ||||||
QEP Resources, Inc. | 1,952 | 62,503 | ||||||
Whiting Petroleum Corp.(1) | 1,196 | 72,238 | ||||||
|
| |||||||
Total Energy | 300,220 | |||||||
|
| |||||||
Financial (8.74%) | ||||||||
American Campus Communities, Inc. | 1,359 | 44,072 | ||||||
American Tower Corp. | 726 | 56,461 | ||||||
Digital Realty Trust, Inc. | 970 | 45,823 | ||||||
Jones Lang LaSalle, Inc. | 615 | 60,098 | ||||||
Validus Holdings, Ltd. | 1,559 | 62,438 | ||||||
|
| |||||||
Total Financial | 268,892 | |||||||
|
| |||||||
Health Care (11.13%) | ||||||||
Ariad Pharmaceuticals, Inc.(1) | 3,178 | 15,413 | ||||||
Catamaran Corp.(1) | 1,160 | 52,931 | ||||||
Hologic, Inc.(1) | 2,709 | 60,655 | ||||||
IDEXX Laboratories, Inc.(1) | 673 | 70,100 | ||||||
Medivation, Inc.(1) | 1,146 | 72,209 | ||||||
Teleflex, Inc. | 724 | 71,176 | ||||||
|
| |||||||
Total Health Care | 342,484 | |||||||
|
|
12 | Annual Report | November 30, 2013 | |
Table of Contents
SCHEDULE OF INVESTMENTS |
ALPS | GS RISK-ADJUSTED RETURN U.S. LARGE CAP INDEX ETF November 30, 2013 |
Security Description | Shares | Value | ||||||||||
Industrial (11.55%) | ||||||||||||
ADT Corp. | 1,368 | $ | 55,486 | |||||||||
FedEx Corp. | 573 | 79,475 | ||||||||||
Iron Mountain, Inc. | 1,608 | 45,217 | ||||||||||
Joy Global, Inc. | 1,040 | 58,822 | ||||||||||
Quanta Services, Inc.(1) | 1,982 | 58,687 | ||||||||||
Republic Services, Inc. | 1,648 | 57,532 | ||||||||||
|
| |||||||||||
Total Industrial | 355,219 | |||||||||||
|
| |||||||||||
Technology (12.26%) | ||||||||||||
Cognizant Technology Solutions Corp., Class A(1) | 861 | 80,840 | ||||||||||
Crown Castle International Corp.(1) | 788 | 58,493 | ||||||||||
DST Systems, Inc. | 829 | 73,201 | ||||||||||
EMC Corp. | 2,277 | 54,306 | ||||||||||
Facebook, Inc., Class A(1) | 2,341 | 110,050 | ||||||||||
|
| |||||||||||
Total Technology | 376,890 | |||||||||||
|
| |||||||||||
Utilities (11.31%) | ||||||||||||
Alliant Energy Corp. | 1,150 | 59,225 | ||||||||||
Calpine Corp.(1) | 2,761 | 52,211 | ||||||||||
Duke Energy Corp. | 840 | 58,766 | ||||||||||
Edison International | 1,231 | 56,885 | ||||||||||
NextEra Energy, Inc. | 738 | 62,427 | ||||||||||
NRG Energy, Inc. | 2,206 | 58,371 | ||||||||||
|
| |||||||||||
Total Utilities | 347,885 | |||||||||||
|
| |||||||||||
TOTAL COMMON STOCKS | ||||||||||||
(Cost $2,901,877) | 3,067,152 | |||||||||||
|
| |||||||||||
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (0.18%) | ||||||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(2) | 5,656 | 5,656 | |||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $5,656) | 5,656 | |||||||||||
|
| |||||||||||
TOTAL INVESTMENTS (99.90%) | ||||||||||||
(Cost $2,907,533) | $ | 3,072,808 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (0.10%) | 3,063 | |||||||||||
|
| |||||||||||
NET ASSETS (100.00%) | $ | 3,075,871 | ||||||||||
|
|
(1) | Non-income producing security. |
(2) | Less than 0.0005%. |
Common Abbreviations:
Ltd. - Limited.
See Notes to Financial Statements.
www.alpsfunds.com | 13 | |
Table of Contents
STATEMENTS OF ASSETS & LIABILITIES | ||
November 30, 2013 |
ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF | ALPS | GS Index ETF | ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF | ALPS | GS Risk- Adjusted Return U.S Large Cap Index ETF | |||||||||||||
ASSETS: | ||||||||||||||||
Investments, at value | $ | 2,116,365 | $ | 2,632,716 | $ | 2,253,407 | $ | 3,072,808 | ||||||||
Cash | – | – | – | 976 | ||||||||||||
Dividends receivable | – | – | – | 6,132 | ||||||||||||
Total Assets | 2,116,365 | 2,632,716 | 2,253,407 | 3,079,916 | ||||||||||||
LIABILITIES: | ||||||||||||||||
Payable for investments purchased | – | – | – | 976 | ||||||||||||
Payable to adviser | 1,160 | 1,452 | 1,234 | 3,069 | ||||||||||||
Payable to custodian for overdraft | 145 | 324 | 182 | – | ||||||||||||
Total Liabilities | 1,305 | 1,776 | 1,416 | 4,045 | ||||||||||||
NET ASSETS | $ | 2,115,060 | $ | 2,630,940 | $ | 2,251,991 | $ | 3,075,871 | ||||||||
NET ASSETS CONSIST OF: | ||||||||||||||||
Paid-in capital | $ | 4,167,540 | $ | 2,989,740 | $ | 3,490,740 | $ | 3,096,003 | ||||||||
Accumulated net investment income | – | 15,300 | – | 11,579 | ||||||||||||
Accumulated net realized loss on investments | (2,106,353 | ) | (527,780 | ) | (1,306,720 | ) | (196,986 | ) | ||||||||
Net unrealized appreciation on investments | 53,873 | 153,680 | 67,971 | 165,275 | ||||||||||||
NET ASSETS | $ | 2,115,060 | $ | 2,630,940 | $ | 2,251,991 | $ | 3,075,871 | ||||||||
INVESTMENTS, AT COST | $ | 2,062,492 | $ | 2,479,036 | $ | 2,185,436 | $ | 2,907,533 | ||||||||
PRICING OF SHARES | ||||||||||||||||
Net Assets | $ | 2,115,060 | $ | 2,630,940 | $ | 2,251,991 | $ | 3,075,871 | ||||||||
Shares of beneficial interest outstanding (Unlimited number of shares, par value $0.01 per share) | 100,002 | 100,002 | 100,002 | 100,002 | ||||||||||||
Net Asset Value, offering and redemption price per share | $ | 21.15 | $ | 26.31 | $ | 22.52 | $ | 30.76 |
See Notes to Financial Statements.
14 | Annual Report | November 30, 2013 | |
Table of Contents
For the Period December 20, 2012 (Commencement of Operations) to November 30, 2013 |
ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF | ALPS | GS Index ETF | ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF | ALPS | GS Risk- Adjusted Return U.S Large Cap Index ETF | |||||||||||||
INVESTMENT INCOME: | ||||||||||||||||
Dividends | $ | 100,724 | $ | 193,252 | $ | 110,005 | $ | 147,800 | ||||||||
Total Investment Income | 100,724 | 193,252 | 110,005 | 147,800 | ||||||||||||
EXPENSES: | ||||||||||||||||
Investment adviser fees | 51,215 | 67,420 | 53,947 | 53,131 | ||||||||||||
Total Expenses | 51,215 | 67,420 | 53,947 | 53,131 | ||||||||||||
NET INVESTMENT INCOME | 49,509 | 125,832 | 56,058 | 94,669 | ||||||||||||
REALIZED AND UNREALIZED GAIN/(LOSS) |
| |||||||||||||||
Net realized gain/(loss) on investments | (1,901,744 | ) | 208,751 | (1,247,698 | ) | 1,836,342 | ||||||||||
Net change in unrealized appreciation on investments | 53,873 | 153,680 | 67,971 | 165,275 | ||||||||||||
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS | (1,847,871 | ) | 362,431 | (1,179,727 | ) | 2,001,617 | ||||||||||
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | (1,798,362 | ) | $ | 488,263 | $ | (1,123,669 | ) | $ | 2,096,286 | ||||||
See Notes to Financial Statements.
www.alpsfunds.com | 15 | |
Table of Contents
STATEMENTS OF CHANGES IN NET ASSETS | ||
For the Period December 20, 2012 (Commencement of Operations) to November 30, 2013 |
ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF | ALPS | GS Index ETF | ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF | ALPS | GS Risk- Adjusted Return U.S Large Cap Index ETF | |||||||||||||
OPERATIONS: | ||||||||||||||||
Net investment income | $ | 49,509 | $ | 125,832 | $ | 56,058 | $ | 94,669 | ||||||||
Net realized gain/(loss) on investments | (1,901,744 | ) | 208,751 | (1,247,698 | ) | 1,836,342 | ||||||||||
Net change in unrealized appreciation on investments | 53,873 | 153,680 | 67,971 | 165,275 | ||||||||||||
Net increase/(decrease) in net assets resulting from operations | (1,798,362 | ) | 488,263 | (1,123,669 | ) | 2,096,286 | ||||||||||
DISTRIBUTIONS TO SHAREHOLDERS: |
| |||||||||||||||
From net investment income | (49,509 | ) | (110,532 | ) | (56,058 | ) | (83,090 | ) | ||||||||
From tax return of capital | (6,701 | ) | – | (7,079 | ) | – | ||||||||||
Total distributions | (56,210 | ) | (110,532 | ) | (63,137 | ) | (83,090 | ) | ||||||||
CAPITAL SHARE TRANSACTIONS: |
| |||||||||||||||
Proceeds from sale of shares | 14,164,135 | 24,137,173 | 12,845,596 | 18,947,897 | ||||||||||||
Cost of shares redeemed | (10,194,503 | ) | (21,883,964 | ) | (9,406,799 | ) | (17,885,222 | ) | ||||||||
Net Increase from share transactions | 3,969,632 | 2,253,209 | 3,438,797 | 1,062,675 | ||||||||||||
Net Increase in net assets | 2,115,060 | 2,630,940 | 2,251,991 | 3,075,871 | ||||||||||||
NET ASSETS: | ||||||||||||||||
Beginning of period | – | – | – | – | ||||||||||||
End of period* | $ | 2,115,060 | $ | 2,630,940 | $ | 2,251,991 | $ | 3,075,871 | ||||||||
*Including accumulated net investment income/(loss) of: | $ | – | $ | 15,300 | $ | – | $ | 11,579 | ||||||||
OTHER INFORMATION: | ||||||||||||||||
CAPITAL SHARE TRANSACTIONS: |
| |||||||||||||||
Beginning shares | – | – | – | – | ||||||||||||
Shares sold | 550,002 | 950,002 | 500,002 | 700,002 | ||||||||||||
Shares redeemed | (450,000 | ) | (850,000 | ) | (400,000 | ) | (600,000 | ) | ||||||||
Shares outstanding, end of period | 100,002 | 100,002 | 100,002 | 100,002 | ||||||||||||
See Notes to Financial Statements.
16 | Annual Report | November 30, 2013 | |
Table of Contents
For the Period December 20, 2012 (Commencement of Operations) to November 30, 2013 |
ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF | ALPS | GS Momentum Builder® Multi-Asset Index ETF | ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF | ALPS | GS Risk- Adjusted Return U.S Large Cap Index ETF | |||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 25.00 | $ | 25.00 | $ | 25.00 | $ | 25.00 | ||||||||
INCOME/(LOSS) FROM OPERATIONS: | ||||||||||||||||
Net investment income(a) | 0.14 | 0.30 | 0.16 | 0.26 | ||||||||||||
Net realized and unrealized gain/(loss) | (3.85 | ) | 1.25 | (2.48 | ) | 5.71 | ||||||||||
Total from investment operations | (3.71 | ) | 1.55 | (2.32 | ) | 5.97 | ||||||||||
DISTRIBUTIONS: | ||||||||||||||||
From net investment income | (0.12 | ) | (0.24 | ) | (0.14 | ) | (0.21 | ) | ||||||||
From tax return of capital | (0.02 | ) | – | (0.02 | ) | – | ||||||||||
Total distributions | (0.14 | ) | (0.24 | ) | (0.16 | ) | (0.21 | ) | ||||||||
Net increase/(decrease) in net asset value | (3.85 | ) | 1.31 | (2.48 | ) | 5.76 | ||||||||||
Net asset value, end of period | $ | 21.15 | $ | 26.31 | $ | 22.52 | $ | 30.76 | ||||||||
TOTAL RETURN(b) | (14.82 | )% | 6.25 | % | (9.27 | )% | 23.95 | % | ||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||
Net assets, end of period (000s) | $ | 2,115 | $ | 2,631 | $ | 2,252 | $ | 3,076 | ||||||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||||||||||
Expenses | 0.68 | %(c) | 0.68 | %(c) | 0.68 | %(c) | 0.55 | %(c) | ||||||||
Net investment income | 0.65 | %(c) | 1.27 | %(c) | 0.70 | %(c) | 0.98 | %(c) | ||||||||
PORTFOLIO TURNOVER RATE(d) | 356 | % | 271 | % | 403 | % | 12 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. Total return calculated for a period less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. |
See Notes to Financial Statements.
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Table of Contents
NOTES TO FINANCIAL STATEMENTS | ||
November 30, 2013 |
1. ORGANIZATION
The ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). As of November 30, 2013, the Trust consists of nineteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF, ALPS | GS Momentum Builder® Multi-Asset Index ETF, ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF and ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF (each a “Fund” and collectively, the “Funds”). The Funds commenced operations on December 20, 2012.
The investment objective of the ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF is to seek investment results that correspond generally, before fees and expenses, to the performance of the GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index.
The investment objective of the ALPS | GS Momentum Builder® Multi-Asset Index ETF is to seek investment results that closely correspond generally, before fees and expenses, to the performance of the GS Momentum Builder® Multi-Asset Index.
The investment objective of the ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF is to seek investment results that correspond generally, before fees and expenses, to the performance of the GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index.
The investment objective of the ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF is to seek investment results that correspond generally, before fees and expenses, to the performance of the GS Risk-Adjusted Return U.S. Large Cap Index.
Each Fund’s Shares (“Shares”) are listed on the New York Stock Exchange (“NYSE”) Arca. Each Fund issues and redeems Shares, at net asset value (“NAV”) in blocks of 50,000 Shares, each of which is called a “Creation Unit.” Creation Units of the Funds are issued and redeemed principally in-kind for securities included in a specified index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates.
A. Portfolio Valuation
Each Fund’s NAV is determined daily, as of the close of the NYSE, usually 4:00 p.m. Eastern time, each day the NYSE is open for trading. The NAV is computed by dividing the value of the Fund’s portfolio securities, cash and other assets (including accrued interest), less all liabilities (including accrued expenses), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the National Association of Securities Dealer Automated Quotation (“NASDAQ”) exchange are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and asked prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the closing bid prices.
Each Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Fund may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the
18 | Annual Report | November 30, 2013 | |
Table of Contents
NOTES TO FINANCIAL STATEMENTS |
November 30, 2013 |
market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the closing sale prices on the applicable exchange and fair value prices may not reflect the actual value of a security. A variety of factors may be considered in determining the fair value of such securities.
B. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
C. Exchange-Traded Funds (“ETFs”)
The Funds, except the ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF, primarily invest their assets in the ETFs included in the applicable fund underlying index (the “Underlying ETFs”). When a Fund invests in Underlying ETFs, in addition to directly bearing the expenses associated with its own operations, it will bear a pro rata portion of the Underlying ETFs’ expenses (including operating costs and management fees). Consequently, an investment in a Fund entails more direct and indirect expenses than a direct investment in the Underlying ETF. The investment performance of the Funds is directly related to the investment performance of the Underlying ETFs in which they invest, and therefore, the Funds are also exposed to the risks arising from the Underlying ETFs’ investments.
D. Concentration
To the extent that the Funds’ or the Index’s portfolio is concentrated in the securities of companies in a particular market (including the market of a particular country or geographic region), industry, group of industries, sector or asset class, the Funds may be adversely affected by the performance of those securities, may be subject to increased price volatility and may be more susceptible to adverse economic, market, political or regulatory occurrences affecting that market, industry, group of industries, sector or asset class.
E. Foreign Investment Risk
An Underlying ETF’s investments in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers, including, among others, greater market volatility, the availability of less reliable financial information, higher transactional costs, taxation by foreign governments, decreased market liquidity and political instability. Foreign issuers often are subject to less stringent requirements regarding accounting, auditing, financial reporting and record keeping than are issuers of U.S. securities and, therefore, not all material information regarding these issuers will be available. Securities exchanges or foreign governments may adopt rules or regulations that may negatively impact the Underlying ETF’s ability to invest in foreign securities or may prevent the Underlying ETF from repatriating its investments. A Fund’s return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country.
F. Emerging Market Securities Risk
An Underlying ETF’s investments in the securities of issuers in emerging market countries involve risks often not associated with investments in the securities of issuers in developed countries. Emerging markets usually are subject to greater market volatility, lower trading volume, political and economic instability, uncertainty regarding the existence of trading markets and more governmental limitations on foreign investment than more developed markets. In addition, securities in emerging markets may be subject to greater price fluctuations than securities in more developed markets. A Fund’s return and net asset value may be significantly affected by political or economic conditions and regulatory requirements in a particular country.
G. Dividends and Distributions to Shareholders
Dividends from net investment income, if any, are distributed to shareholders quarterly. Net capital gains are distributed at least annually. Dividends may be declared and paid more frequently to improve Index tracking or to comply with the distribution requirements of the Internal Revenue Code of 1986, as amended.
H. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP . Reclassifications are made to each Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations.
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Table of Contents
NOTES TO FINANCIAL STATEMENTS | ||
November 30, 2013 |
For the period ended November 30, 2013, permanent book and tax differences resulting primarily from in-kind transactions were identified and reclassified among the components of the Fund’s net assets as follows:
Undistributed Net Investment Income | Accumulated Net Realized Loss | Paid-in Capital | ||||||||||
ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF | $ | – | $ | (204,609 | ) | $ | 204,609 | |||||
ALPS | GS Momentum Builder® Multi-Asset Index ETF | – | (736,531 | ) | 736,531 | ||||||||
ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF | – | (59,022 | ) | 59,022 | ||||||||
ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF | – | (2,033,328 | ) | 2,033,328 |
At November 30, 2013, the Funds had available for tax purposes unused capital loss carryforwards as follows:
Short Term | Long Term | |||||||
ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF | $ | 2,106,353 | $ | – | ||||
ALPS | GS Momentum Builder® Multi-Asset Index ETF | 527,779 | – | ||||||
ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF | 1,221,717 | – | ||||||
ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF | 191,357 | – |
Distributions from net investment income and capital gains are determined in accordance with income tax regulations, which may differ from U.S. GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterization of distributions made by each Fund.
The tax character of the distributions paid for the period ended November 30, 2013, was as follows:
Ordinary Income | Return of Capital | Total | ||||||||||
ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF | $ | 49,509 | $ | 6,701 | $ | 56,210 | ||||||
ALPS | GS Momentum Builder® Multi-Asset Index ETF | 110,532 | – | 110,532 | |||||||||
ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF | 56,058 | 7,079 | 63,137 | |||||||||
ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF | 83,090 | – | 83,090 |
20 | Annual Report | November 30, 2013 | |
Table of Contents
NOTES TO FINANCIAL STATEMENTS |
November 30, 2013 |
As of November 30, 2013, the components of distributable earnings on a tax basis were as follows:
Ordinary Income | Accumulated Capital Losses | Net Unrealized Appreciation/ (Depreciation) on Investments | Total | |||||||||||||
ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF | $ | – | $ | (2,106,353 | ) | $ | 53,873 | $ | (2,052,480 | ) | ||||||
ALPS | GS Momentum Builder® Multi-Asset Index ETF | 15,300 | (527,779 | ) | 153,679 | (358,800 | ) | ||||||||||
ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF | – | (1,221,717 | ) | (17,032 | ) | (1,238,749 | ) | |||||||||
ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF | 11,579 | (191,357 | ) | 159,646 | (20,132 | ) |
As of November 30, 2013, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Cost of investments for income tax purposes | Gross Appreciation (excess of value over tax cost) | Gross Depreciation (excess of tax cost over value) | Net Unrealized Appreciation/ (Depreciation) | |||||||||||||
ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF | $ | 2,062,492 | $ | 67,450 | $ | (13,577 | ) | $ | 53,873 | |||||||
ALPS | GS Momentum Builder® Multi-Asset Index ETF | 2,479,037 | 154,287 | (608 | ) | 153,679 | |||||||||||
ALPS | GS Momentum Builder® Asia ex-Japan Equities and U.S. Treasuries Index ETF | 2,270,439 | – | (17,032 | ) | (17,032 | ) | ||||||||||
ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF | 2,913,162 | 378,102 | (218,456 | ) | 159,646 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales.
I. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as each Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies.
Each Fund evaluates tax positions taken (or expected to be taken) in the course of preparing each Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. As of and during the period ended November 30, 2013, each Fund did not have a liability for any unrecognized tax benefits. Each Fund files U.S. federal, state, and local tax returns as required. Each Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is generally three years after the filing of the tax return. Being that the Funds commenced operations on December 20, 2012, no tax returns have been filed as of the date of this report.
J. Fair Value Measurements
Each Fund discloses the classification of fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
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NOTES TO FINANCIAL STATEMENTS | ||
November 30, 2013 |
Valuation techniques used to value the Funds’ investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy.
Investments in open-end mutual funds are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of each Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; | |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and | |
Level 3 – | Significant unobservable prices or inputs (including the Funds’ own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value each Fund’s investments at November 30, 2013:
ALPS | GS Momentum Builder® Growth Markets Equities and U.S. Treasuries Index ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||||||||||
Exchange Traded Funds | $ | 2,116,365 | $ | – | $ | – | $ | 2,116,365 | ||||||||||||||||
TOTAL | $ | 2,116,365 | $ | – | $ | – | $ | 2,116,365 | ||||||||||||||||
ALPS | GS Momentum Builder® Multi-Asset Index ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||||||||||
Exchange Traded Funds | $ | 2,632,716 | $ | – | $ | – | $ | 2,632,716 | ||||||||||||||||
TOTAL | $ | 2,632,716 | $ | – | $ | – | $ | 2,632,716 | ||||||||||||||||
ALPS | GS Asia EX-Japan Equities and U.S. Treasuries Index ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||||||||||
Exchange Traded Funds | $ | 2,253,407 | $ | – | $ | – | $ | 2,253,407 | ||||||||||||||||
TOTAL | $ | 2,253,407 | $ | – | $ | – | $ | 2,253,407 | ||||||||||||||||
ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||||||||||
Common Stocks* | $ | 3,067,152 | $ | – | $ | – | $ | 3,067,152 | ||||||||||||||||
Short Term Investments | 5,656 | – | – | 5,656 | ||||||||||||||||||||
TOTAL | $ | 3,072,808 | $ | – | $ | – | $ | 3,072,808 | ||||||||||||||||
* | For detailed Industry descriptions, see the accompanying Statement of Investments. |
22 | Annual Report | November 30, 2013 | |
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| NOTES TO FINANCIAL STATEMENTS | |
November 30, 2013 |
Each Fund recognizes transfers between levels as of the end of the period. For the period ended November 30, 2013, the Funds did not have any transfers between Level 1 and Level 2 securities. The Funds did not have any securities which used significant unobservable inputs (Level 3) in determining fair value.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Investment Adviser”) acts as the Funds’ investment adviser pursuant to an advisory agreement with the Trust on behalf of each Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, each Fund pays the Investment Adviser a unitary fee for the services and facilities it provides, accrued on average daily net assets and payable on a monthly basis at the annual rates listed below:
Fund | Advisory Fee | |||
ALPS | GS Momentum Builder®Growth Markets Equities and U.S. Treasuries Index ETF | 0.68% | |||
ALPS | GS Momentum Builder®Multi-Asset Index ETF | 0.68% | |||
ALPS | GS Momentum Builder®Asia ex-Japan Equities and U.S. Treasuries Index ETF | 0.68% | |||
ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF | 0.55% |
Out of the unitary management fees, the Investment Adviser pays substantially all expenses of the Funds, including the cost of transfer agency, custody, fund administration, legal, audit, trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Funds’ business. In addition, the Investment Adviser’s unitary management fees are designed to compensate the Investment Adviser for providing services for the Funds.
ALPS Fund Services, Inc. (“ALPS”), an affiliate of the Investment Adviser, is the administrator of the Funds.
Each Trustee who is not an officer or employee of the Investment Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) is paid a quarterly retainer of $5,000, $3,750 for each regularly scheduled Board meeting attended and $1,500 for each special meeting held outside of regularly scheduled meetings.
4. PURCHASES AND SALES OF SECURITIES
For the period ended November 30, 2013, the cost of purchases and proceeds from sales of investment securities, excluding short-term investments and in-kind transactions, were as follows:
Fund | Purchases | Sales | ||||||||
ALPS | GS Momentum Builder®Growth Markets Equities and U.S. Treasuries Index ETF | $ | 29,606,560 | $ | 26,442,033 | ||||||
ALPS | GS Momentum Builder®Multi-Asset Index ETF | 35,110,834 | 26,159,337 | ||||||||
ALPS | GS Momentum Builder®Asia ex-Japan Equities and U.S. Treasuries Index ETF | 33,615,487 | 31,508,179 | ||||||||
ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF | 9,393,402 | 1,214,659 |
For the period ended November 30, 2013, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||||
ALPS | GS Momentum Builder®Growth Markets Equities and U.S. Treasuries Index ETF | $ | 10,249,646 | $ | 9,449,936 | ||||||
ALPS | GS Momentum Builder®Multi-Asset Index ETF | 12,625,716 | 19,306,142 | ||||||||
ALPS | GS Momentum Builder®Asia ex-Japan Equities and U.S. Treasuries Index ETF | 10,212,836 | 8,887,010 | ||||||||
ALPS | GS Risk-Adjusted Return U.S. Large Cap Index ETF | 10,305,983 | 17,416,285 |
Gains on in-kind transactions are not considered taxable for federal income tax purposes.
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NOTES TO FINANCIAL STATEMENTS | ||
November 30, 2013 |
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Funds. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the net asset value per unit of each 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 AP or as a result of other market circumstances.
6. INDEMNIFICATIONS
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
7. NEW ACCOUNTING PRONOUNCEMENTS
In June 2013, the FASB issued ASU No. 2013-08, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The FASB standard identifies characteristics a company must assess to determine whether it is considered an investment company for financial reporting purposes. This ASU is effective for fiscal years beginning after December 15, 2013. The Funds are currently reviewing the requirements and believe the adoption of this ASU will not have a material impact on its financial statements.
24 | Annual Report | November 30, 2013 | |
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ADDITIONAL INFORMATION |
November 30, 2013 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
A description of the Funds’ proxy voting policies and procedures used in determining how to vote for proxies and information regarding how the Funds voted proxies related to portfolio securities during the most recent 12-month period ended June 30th is available without charge, (1) on the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov; (2) upon request, by calling (toll-free) 1-866-513-5856; and (3) on the Trust’s website located at http://www.alpsfunds.com.
PORTFOLIO HOLDINGS
The Trust will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q will be available (1) on the SEC’s website at http://www.sec.gov; (2) by calling (toll-free) 1-866-513-5856; (3) on the Trust’s website located at http://www.alpsfunds. com; and (4) for review and copying at the SEC’s Public Reference Room (“PRR”) in Washington D.C. Information regarding the operation of the PRR may be obtained by calling (toll-free) 1-800-732-0330.
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TRUSTEES & OFFICERS | ||
November 30, 2013 (Unaudited) |
INDEPENDENT TRUSTEES
Name, Address and Year of Birth of Trustee* | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by | Other Directorships Held by Trustees | |||||
Mary K. Anstine, 1940 | Trustee | Since March 2008 | Ms. Anstine was President/Chief Executive Officer of HealthONE Alliance, Denver, Colorado, and former Executive Vice President of First Interstate Bank of Denver. Ms. Anstine is also Trustee/Director of the following: AV Hunter Trust; Colorado Uplift Board. Ms. Anstine was formerly a Director of the Trust Bank of Colorado (later purchased and now known as Northern Trust Bank), HealthONE and Denver Area Council of the Boy Scouts of America and a member of the American Bankers Association Trust Executive Committee.
| 41 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder, Chief Operations Officer and Chief Financial Officer of Green Alpha Advisors, LLC. Prior to joining Green Alpha Advisors, Mr. Deems was CFO and Treasurer of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC, a private investment fund, and Sutton Place Management, LLC, an administrative services company, from 2004 to June 2007. Prior to this, Mr. Deems served as Controller of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC and Sutton Place Management, LLC.
| 41 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); and Reaves Utility Income Fund. | |||||
Rick A. Pederson, 1952 | Trustee | Since March 2008 | Mr. Pederson is President, Foundation Properties, Inc. (a real estate investment management company), 1994 – present; Advisory Committee, Bow River Capital Partners (private equity management), 2003 – present; Advisor, Pauls Corporation (real estate investment management and development), 2008 – present; Chairman, Ross Consulting Group (real estate consulting services) 1983 – 2013; Advisory Board, Neenan Company (construction services) 2002 – present; Board Member, Urban Land Conservancy (a not- for-profit organization), 2004 – present; Director, National Western Stock Show (not-for-profit organization).
| 22 | Mr. Pederson is Trustee of Westcore Trust (12 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services |
26 | Annual Report | November 30, 2013 | |
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TRUSTEES & OFFICERS |
November 30, 2013 (Unaudited) |
INTERESTED TRUSTEE
Name, Address and Year of Birth of Management | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of in Fund Complex | Other Directorships Held by Trustees | |||||
Thomas A. Carter, 1966 | Trustee | Since March 2008 | Mr. Carter joined ALPS Fund Services, Inc. (“ALPS”) in 1994 and is currently President and Director of ALPS Advisors, Inc. (“AAI”), ALPS Distributors, Inc. (“ADI”) and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”). Because of his position with AHI, ALPS, ADI, APSD and AAI, Mr. Carter is deemed an affiliate of the Fund as defined under the 1940 Act. Before joining ALPS, Mr. Carter was with Deloitte & Touché LLP, where he worked with a diverse group of clients, primarily within the financial services industry. Mr. Carter is a Certified Public Accountant and received his Bachelor of Science in Accounting from the University of Colorado at Boulder.
| 29 | Mr. Carter is a Trustee of ALPS Variable Investment Trust (7 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
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TRUSTEES & OFFICERS | ||
November 30, 2013 (Unaudited) |
OFFICERS
Name, Address and Year of Birth of Officer* | Position(s) Held with Trust | Length of Time Served** | Principal Occupation(s) During Past 5 Years | |||
Melanie Zimdars, 1976 | Chief | Since | Ms. Zimdars currently serves as a Deputy Chief Compliance Officer with ALPS. Prior to joining ALPS in September 2009, Ms. Zimdars served as Principal Financial Officer, Treasurer and Secretary for the Wasatch Funds from February 2007 to December 2008. From November 2006 to February 2007, she served as Assistant Treasurer for the Wasatch Funds and served as a Senior Compliance Officer for Wasatch Advisors, Inc. since 2005. Because of her position with ALPS, Ms. Zimdars is deemed an affiliate of the Trust as defined under the 1940 Act. Ms. Zimdars is also the CCO of ALPS Variable Investment Trust, Liberty All-Star Growth Fund, Inc., Liberty All-Star Equity Fund and BPV Family of Funds.
| |||
William Parmentier, 1952 | Vice | Since | Mr. Parmentier is Chief Investment Officer, AAI (since 2006); President of the Liberty All-Star Funds (since April 1999); Senior Vice President (2005 – 2006), Banc of America Investment Advisors, Inc. Because of his position with AAI, Mr. Parmentier is deemed an affiliate of the Trust as defined under the 1940 Act.
| |||
Patrick D. Buchanan, 1972 | Treasurer | Since | Mr. Buchanan is Vice President of AAI. Mr. Buchanan joined ALPS in 2007 and because of his position with AAI, he is deemed an affiliate of the Trust as defined under the 1940 Act. Mr. Buchanan is also Treasurer of ALPS Variable Investment Trust and the Principal Real Estate Income Fund.
| |||
Erin D. Nelson, 1977 | Secretary | Since | Ms. Nelson is Vice President and Assistant General Counsel of AAI, ALPS Fund Services, Inc., ALPS Distributors, Inc., and ALPS Portfolio Solutions Distributor, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson has served as Secretary of the Clough Global Allocation Fund since 2004, Clough Global Equity Fund since 2005, Clough Global Opportunities Fund since 2006, Liberty All-Star Equity Fund since 2013 and Liberty All-Star Growth Fund since 2013. Ms. Nelson received her Bachelor of Arts in Political Science, magna cum laude, from the University of New Hampshire and Juris Doctorate from the University of Denver.
| |||
Jennifer A. Craig, 1973 | Assistant | Since | Ms. Craig joined ALPS in 2007 and is currently Senior Paralegal. Prior to joining ALPS, Ms. Craig was Legal Manager at Janus Capital Management LLC and served as Assistant Secretary of Janus Investment Fund, Janus Adviser Series and Janus Aspen Series. Because of her position with ALPS, Ms. Craig is deemed an affiliate of the Trust as defined under the 1940 Act.
|
* | The business address of each Officer is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Officer began serving the Trust. Each Officer serves an indefinite term, until his successor is elected. |
28 | Annual Report | November 30, 2013 | |
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VelocityShares Emerging Markets DR ETF | ||||||
VelocityShares Russia Select DR ETF | ||||||
VelocityShares Emerging Asia DR ETF | ||||||
VelocityShares Tail Risk Hedged Large Cap ETF | ||||||
VelocityShares Volatility Hedged Large Cap ETF | ||||||
30 | ||||||
40 | ||||||
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT | 41 | |||||
43 |
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![]() | ||
VelocityShares Emerging Markets DR ETF | ||
November 30, 2013 (Unaudited) |
INVESTMENT OBJECTIVE
The VelocityShares Emerging Markets DR ETF (“Exchange Traded Fund”) seeks to provide investment results that correspond generally, before fees and expenses, to the performance of the BNY Mellon Emerging Markets DR Index (the “Underlying Index”). The ETF normally invests at least 90% of its total assets in depositary receipts (DR) that constitute its Underlying Index.
PERFORMANCE OVERVIEW
The VelocityShares Emerging Market DR ETF (EMDR) listed on the NASDAQ on April 8, 2013. For the period ended November 30, 2013 the Fund produced a total return of -1.92% on a market price basis and 4.05% on net asset value (NAV) basis. During the same period the Fund’s Underlying Index returned, net of fees, 4.66%. During the period the Fund fully replicated the components of the Underlying Index, and therefore the difference in the Fund’s NAV return and the Underlying Index’s net of fees return is primarily attributable to operating expenses, and transaction costs.
The best performing stocks for the period were Baidu, Inc. (Sponsored ADR) which increased 98.13%; China Life Insurance Co. Ltd. (Sponsored ADR) which increased 27.99%; and America Movil SAB de CV (Sponsored ADR) which increased 13.04%. The worst performing stocks were Tuerkiye Garanti Bankasi A.S. (Sponsored ADR) which decreased 36.95%; Banco Brandesco S.A. (Sponsored ADR) which decreased 20.35%; and Fomento Economico Mexicano, S.A.B. de C.V. (Sponsored ADR) which decreased 18.85%.
TOP 10 HOLDINGS^ (% of Investments) as of 11.30.13 | ||||
Samsung Electronics Co. Ltd., GDR | 11.92% | |||
Taiwan Semiconductor Manufacturing Co. Ltd., Sponsored ADR | 4.04% | |||
China Mobile Ltd., Sponsored ADR | 3.50% | |||
Gazprom OAO, Sponsored ADR | 3.16% | |||
America Movil SAB de CV, Series L, ADR | 3.09% | |||
Baidu, Inc., Sponsored ADR | 2.78% | |||
Itau Unibanco Holding SA, ADR | 2.18% | |||
AMBEV SA, ADR | 2.13% | |||
Petroleo Brasileiro SA, Series A, Sponsored ADR | 2.09% | |||
Sberbank of Russia, Sponsored ADR | 2.08% | |||
Total % of Top 10 Holdings | 36.97% |
^ Future holdings are subject to change.
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT as of 11.30.13
Comparison of Change in Value of a hypothetical $10,000 investment in the VelocityShares Emerging Markets DR ETF.
COUNTRY ALLOCATION^ (% of Investments) as of 11.30.13 | ||||
Brazil | 18.10 | % | ||
South Korea | 17.87 | % | ||
China | 17.52 | % | ||
Russia | 14.88 | % | ||
Taiwan | 8.44 | % | ||
Mexico | 6.93 | % | ||
India | 6.93 | % | ||
South Africa | 2.19 | % | ||
Chile | 2.03 | % | ||
Colombia | 0.89 | % | ||
Turkey | 0.80 | % | ||
United States | 0.72 | % | ||
Argentina | 0.69 | % | ||
Indonesia | 0.50 | % | ||
Phillipines | 0.33 | % | ||
Nigeria | 0.32 | % | ||
Egypt | 0.32 | % | ||
Peru | 0.28 | % | ||
Lebanon | 0.11 | % | ||
Kazakhstan | 0.11 | % | ||
Ukraine | 0.04 | % |
^ Future allocations are subject to change.
The chart represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
2 | Annual Report | November 30, 2013 | |
Table of Contents
PERFORMANCE OVERVIEW |
VelocityShares Emerging Markets DR ETF |
November 30, 2013 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURN as of 11.30.13 | ||
Since Inception* | ||
VelocityShares Emerging Markets DR ETF - NAV | 4.05% | |
VelocityShares Emerging Markets DR ETF - Market Price** | -1.92% | |
BNYM Emerging Market DR TR Index | 4.66% |
Total Expense Ratio (per the current prospectus) 0.65%
* | The Fund commenced operations on April 8, 2013. Total return for a period of less than one year is not annualized. |
** | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
BNY Mellon Emerging Markets DR Index: is a capitalization-weighted Index that is designed to reflect the performance of a portfolio of emerging market-based US listed ADRs and LSE-traded GDRs that satisfy the Index’s coverage requirements. An investor cannot directly invest in an index.
“VelocityShares” and the VelocityShares logo are trademarks of VelocityShares Index & Calculation Services, a division of VelocityShares, LLC.
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![]() | PERFORMANCE OVERVIEW | |
VelocityShares Russia Select DR ETF | ||
November 30, 2013 (Unaudited) |
INVESTMENT OBJECTIVE
The VelocityShares Russia Select DR ETF (“Exchange Traded Fund”) seeks to provide investment results that correspond generally, before fees and expenses, to the performance of the BNY Mellon Russia Select DR Index (the “Underlying Index”). The ETF normally invests at least 90% of its total assets in depository receipts (DR) that constitute its Underlying Index.
PERFORMANCE OVERVIEW
The VelocityShares Russia Emerging Market DR ETF (RUDR) listed on the NASDAQ on April 8, 2013. For the period ended November 30, 2013 the Fund produced a total return of -7.70% on a market price basis and 5.54% on net asset value (NAV) basis. During the same period the Fund’s Underlying Index returned, net of fees, 5.90%. During the period the Fund fully replicated the components of the Underlying Index, and therefore the difference in the Fund’s NAV return and the Underlying Index’s net of fees return is primarily attributable to operating expenses, and transaction costs.
The best performing stocks for the period were Mail.ru Group Ltd. (Sponsored GDR) which increased 60.27%; Sistema JSFC (Sponsored GDR) which increased 48.27%; and Magnit JSC (Sponsored GDR) which increased 37.43%. The worst performing stocks were Mechel OAO (Sponsored ADR) which decreased 51.39%; Pharmstandard OJSC (Sponsored GDR) which decreased 38.52%; and Surgutneftegas OJSC (Sponsored ADR) which decreased 13.03%.
Top 10 Holdings^ (% of Investments) as of 11.30.13 |
| |||
Gazprom OAO, Sponsored ADR | 21.06% | |||
Sberbank of Russia, Sponsored ADR | 13.87% | |||
Magnit OJSC, Sponsored GDR | 6.01% | |||
Mobile Telesystems OJSC, Sponsored ADR | 4.12% | |||
Tatneft OAO, Sponsored ADR | 3.87% | |||
Lukoil OAO, Sponsored ADR | 3.86% | |||
Uralkali OJSC, Sponsored GDR | 3.78% | |||
VTB Bank OJSC, GDR | 3.77% | |||
Rosneft OAO, GDR | 3.61% | |||
Surgutneftegas OAO, Sponsored ADR | 3.54% | |||
Total % of Top 10 Holdings | 67.49% | |||
^ Future holdings are subject to change. |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT as of 11.30.13
Comparison of Change in Value of a hypothetical $10,000 investment in the VelocityShares Russia Select DR ETF.
COUNTRY ALLOCATION^ (% of Investments) as of 11.30.13 | ||||
Russia | 97.21% | |||
United States | 1.49% | |||
Cyprus | 1.30% | |||
^ Future allocations are subject to change. |
The chart represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
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PERFORMANCE OVERVIEW |
VelocityShares Russia Select DR ETF |
November 30, 2013 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURN as of 11.30.13 | ||
Since Inception* | ||
VelocityShares Russia Select DR ETF - NAV | 5.54% | |
VelocityShares Russia Select DR ETF - Market Price** | -7.70% | |
BNYM Russia Select DR TR Index | 5.90% |
Total Expense Ratio (per the current prospectus) 0.65%
* | The Fund commenced operations on April 8, 2013. Total return for a period of less than one year is not annualized. |
** | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
BNY Mellon Russia Select DR Index: is a capitalization-weighted Index that is designed to reflect the performance of a portfolio of Russian-based US listed ADRs and LSE-traded GDRs that satisfy the Index’s coverage requirements. An investor cannot directly invest in an index.
“VelocityShares” and the VelocityShares logo are trademarks of VelocityShares Index & Calculation Services, a division of VelocityShares, LLC.
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![]() | PERFORMANCE OVERVIEW | |
VelocityShares Emerging Asia DR ETF | ||
November 30, 2013 (Unaudited) |
INVESTMENT OBJECTIVE
The VelocityShares Emerging Asia DR ETF (“Exchange Traded Fund”) seeks to provide investment results that correspond generally, before fees and expenses, to the performance of the BNY Mellon Emerging Asia DR Index (the “Underlying Index”). The ETF normally invests at least 90% of its total assets in depository receipts (DR) that constitute its Underlying Index.
PERFORMANCE OVERVIEW
The VelocityShares Emerging Asia DR ETF (ASDR) listed on the NASDAQ on April 8, 2013. For the period ended November 30, 2013 the Fund produced a total return of 12.98% on a market price basis and 14.01% on net asset value (NAV) basis. During the same period the Fund’s Underlying Index returned, net of fees, 13.72%. During the period the Fund fully replicated the components of the Underlying Index, and therefore the difference in the Fund’s NAV return and the Underlying Index’s net of fees return is primarily attributable to operating expenses, and transaction costs.
The best performing stocks for the period were Baidu, Inc. (Sponsored ADR) which increased 98.13%; China Life Insurance Co. Ltd. (Sponsored ADR) which increased 27.99%; and CNOOC Ltd. (Sponsored ADR) which increased 10.99%. The worst performing stocks were State Bank of India (Sponsored GDR) which decreased 22.87%; PT Telekomunikasi Indonesia Persero Tbk which decreased 15.71%; and Axis Bank Ltd. (Sponsored GDR) which decreased 12.53%.
TOP 10 HOLDINGS^ (% of Investments) as of 11.30.13 | ||||
Samsung Electronics Co. Ltd., GDR | 23.03% | |||
Taiwan Semiconductor Manufacturing Co. Ltd., Sponsored ADR | 7.80% | |||
China Mobile Ltd., Sponsored ADR | 6.78% | |||
Baidu, Inc., Sponsored ADR | 5.39% | |||
CNOOC Ltd., ADR | 3.93% | |||
Hon Hai Precision Industry Co. Ltd., GDR | 3.50% | |||
Infosys Ltd., Sponsored ADR | 3.11% | |||
PetroChina Co. Ltd., ADR | 3.00% | |||
POSCO, ADR | 2.88% | |||
China Life Insurance Co. Ltd., ADR | 2.86% | |||
Total % of Top 10 Holdings | 62.28% | |||
^ Future holdings are subject to change. |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT as of 11.30.13
Comparison of Change in Value of a hypothetical $10,000 investment in the VelocityShares Emerging Asia DR ETF.
COUNTRY ALLOCATION^ (% of Investments) as of 11.30.13 | ||||
South Korea | 34.58% | |||
China | 34.02% | |||
Taiwan | 16.33% | |||
India | 13.42% | |||
Indonesia | 0.97% | |||
Phillipines | 0.64% | |||
United States | 0.04% |
^ Future allocations are subject to change.
The chart represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6 | Annual Report | November 30, 2013 | |
Table of Contents
PERFORMANCE OVERVIEW |
VelocityShares Emerging Asia DR ETF |
November 30, 2013 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURN as of 11.30.13 | ||
Since Inception* | ||
VelocityShares Emerging Asia DR ETF - NAV | 14.01% | |
VelocityShares Emerging Asia DR ETF - Market Price** | 12.98% | |
BNYM Emerging Market Asia DR TR | 13.72% |
Total Expense Ratio (per the current prospectus) 0.65%
* | The Fund commenced operations on April 8, 2013. Total return for a period of less than one year is not annualized. |
** | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
BNY Mellon Emerging Asia DR Index: is a capitalization-weighted Index that is designed to reflect the performance of a portfolio of emerging Asia-based US listed ADRs and LSE-traded GDRs that satisfy the Index’s coverage requirements. An investor cannot directly invest in an index.
“VelocityShares” and the VelocityShares logo are trademarks of VelocityShares Index & Calculation Services, a division of VelocityShares, LLC.
www.velocitysharesetfs.com | 7 | |
Table of Contents
![]() | PERFORMANCE OVERVIEW | |
VelocityShares Tail Risk Hedged Large Cap ETF November 30, 2013 (Unaudited) | ||
INVESTMENT OBJECTIVE
The VelocityShares Tail Risk Hedged Large Cap ETF (“Exchange Traded Fund”) seeks to provide investment results that correspond generally, before fees and expenses, to the performance of the VelocityShares Tail Risk Hedged Large Cap Index (the “Underlying Index”). The ETF normally invests 85% of its total assets in S&P 500 ETFs. The Fund also intends to invest 15%, of its assets in swap agreements or other derivatives instead of investing directly in certain Underlying Volatility Index ETFs.
PERFORMANCE OVERVIEW
The VelocityShares Tail Risk Hedged Large Cap ETF (TRSK) listed on the NYSE Arca on June 21, 2013. For the five month period ended November 30, 2013 the Fund produced a total return of 8.66% in-line with the Fund’s Underlying Index, net of fees, which returned 8.88%. The Fund underperformed the S&P 500® which returned 14.78% for the same period.
The Fund’s assets invested in the Large Cap ETFs (SPDR S&P 500 ETF (SPY), Vanguard S&P 500 ETF (VOO) and iShares Core S&P 500 ETF (IVV)) contributed a return of 11.64%, and the assets invested in the Volatility Component detracted -2.98% for the period. The Volatility Component was net long volatility 70% of the period. This net long position coupled with falling volatility resulted in the Volatility Component’s negative performance for the period.
Volatility, as measured by the VIX®, fell from 20.5 at the beginning of the period to 13.7 at the end of the fiscal year. The VIX spiked modestly in October during the government shutdown and debt ceiling debate, but that spike was short-lived. In mid-September the Volatility Component had a neutral volatility position, and it jumped to an almost 60% long position in the second week in October, and then moved back to neutral position before the end of the month. This large short-term swing in the volatility exposure resulted in a negative performance during the month. The strategy performed as expected: the volatility exposure increased as volatility rose, and then the exposure was reduced as volatility fell.
TOP HOLDINGS^ (% of Investments) as of 11.30.13
|
| |||
SPDR® S&P 500® ETF | 33.34 | % | ||
Vanguard® S&P 500® ETF | 33.33 | % | ||
iShares® Core S&P 500® ETF | 33.33 | % | ||
Total % of Top Holdings
| 100.00 | % | ||
^ Future holdings are subject to change. |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT as of 11.30.13
Comparison of Change in Value of a hypothetical $10,000 investment in the VelocityShares Tail Risk Hedged Large Cap ETF
SECTOR ALLOCATION^ (% of Investments) as of 11.30.13
|
| |||
Equity Funds | 100.00 | % | ||
^ % of Total Investments |
The chart represents historical performance of a hypothetical investment of$10,000 in the Fund over the life of the Fund.Performance calculations areas of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholderwould pay on Fund distributions or the redemption of Fund shares.
8 | Annual Report | November 30, 2013 | |
Table of Contents
PERFORMANCE OVERVIEW |
VelocityShares Tail Risk Hedged Large Cap ETF November 30, 2013 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURN as of 11.30.13 | ||
Since Inception* | ||
VelocityShares Tail Risk Hedged Large Cap ETF - NAV | 8.66% | |
VelocityShares Tail Risk Hedged Large Cap ETF - Market Price** | 8.71% | |
VelocityShares Tail Risk Hedged Large Cap Index | 8.88% |
Total Expense Ratio (per the current prospectus) 0.71%
* | The Fund commenced operations on June 21, 2013. Total return for a period of less than one year is not annualized. |
** | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
VelocityShares Tail Risk Hedged Large Cap Index: reflects the performance of a portfolio providing a target exposure of 85% to a large cap equity portfolio and a target exposure of 15% to a volatility strategy designed to hedge tail risk in the S&P 500. An investor cannot directly invest in an index. “VelocityShares” and the VelocityShares logo are trademarks of VelocityShares Index & Calculation Services, a division of VelocityShares, LLC.
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Table of Contents
![]() | PERFORMANCE OVERVIEW | |
VelocityShares Volatility Hedged Large Cap ETF November 30, 2013 (Unaudited) | ||
INVESTMENT OBJECTIVE
The VelocityShares Volatility Hedged Large Cap ETF (“Exchange Traded Fund”) seeks to provide investment results that correspond generally, before fees and expenses, to the performance of the VelocityShares Volatility Hedged LargeCap Index (the “Underlying Index”). The ETF normally invests 85% of its total assets in S&P 500 ETFs. The Fund also intends to invest 15% of its assets in swap agreements or other derivatives instead of investing directly in certain Underlying Volatility Index ETFs.
PERFORMANCE OVERVIEW
The VelocityShares Volatility Hedged Large Cap ETF (SPXH) listed on the NYSE Arca on June 21, 2013. For the five month period ended November 30, 2013 the Fund produced a total return of 12.04% in-line with the Fund’s Underlying Index, net of fees, which returned 12.29%. The Fund underperformed the S&P 500® which returned 14.78% for the same period.
The Fund’s assets invested in the Large Cap ETFs (SPDR S&P 500 ETF (SPY), Vanguard S&P 500 ETF (VOO) and iShares Core S&P 500 ETF (IVV)) contributed a return of 12.04%, and the assets invested in the Volatility Component were flat for the period.
Volatility, as measured by the VIX®, fell from 20.5 at the beginning of the period to 13.7 at the end of the fiscal year. The VIX spiked modestly in October during the government shutdown and debt ceiling debate, but that was short-lived. During the spike the Volatility Component moved from a net short exposure to a net long exposure then back to a net short exposure, and this movement resulted in a negative performance during the month. The strategy performed as expected: it moved from a net short volatility to a net long volatility exposure as volatility started to rise.
TOP HOLDINGS^ (% of Investments) as of 11.30.13
|
| |||
SPDR® S&P 500® ETF | 33.34 | % | ||
Vanguard® S&P 500® ETF | 33.33 | % | ||
iShares® Core S&P 500® ETF | 33.33 | % | ||
Total % of Top Holdings
| 100.00 | % | ||
^ Future holdings are subject to change. |
GROWTH OF A HYPOTHETICAL $10,000 INVESTMENT as of 11.30.13
Comparison of Change in Value of a hypothetical $10,000 investment in the VelocityShares Volatility Hedged Large Cap ETF
SECTOR ALLOCATION^ (% of Investments) as of 11.30.13
|
| |||
Equity Funds | 100.00 | % | ||
^ % of Total Investments |
The chart represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
10 | Annual Report | November 30, 2013 | |
Table of Contents
PERFORMANCE OVERVIEW |
VelocityShares Volatility Hedged Large Cap ETF November 30, 2013 (Unaudited) |
AVERAGE ANNUAL TOTAL RETURN as of 11.30.13 | ||
Since Inception* | ||
VelocityShares Volatility Hedged Large Cap ETF - NAV | 12.04% | |
VelocityShares Volatility Hedged Large Cap ETF - Market Price** | 12.12% | |
VelocityShares Volatility Hedged Large Cap Index | 12.29% |
Total Expense Ratio (per the current prospectus) 0.71%
* | The Fund commenced operations on June 21, 2013. Total return for a period of less than one year is not annualized. |
** | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
VelocityShares Volatility Hedged Large Cap Index: reflects the performance of a portfolio providing a target exposure of 85% to a large cap equity portfolio and a target exposure of 15% to a volatility strategy designed to hedge volatility risk in the S&P 500. An investor cannot directly invest in an index. “VelocityShares” and the VelocityShares logo are trademarks of VelocityShares Index & Calculation Services, a division of VelocityShares, LLC.
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Table of Contents
![]() | ||
November 30, 2013 (Unaudited) | ||
Shareholder Expense Example: As a shareholder of the Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, and (2) ongoing costs, including management fees and other Fund expenses. These examples are 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 funds. The example is based on an investment of $1,000 invested at the beginning of the (six month) period and held through November 30, 2013.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred 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 first line of the table under the heading entitled “Expenses Paid During the Period” to estimate the expenses attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning Account Value 6/1/13 | Ending Account 11/30/13 | Expense Ratio(a) | Expense Paid During Period 6/1/13 - 11/30/13(b) | |||||
VelocityShares Emerging Markets DR ETF | ||||||||
Actual | $1,000.00 | $1,050.20 | 0.65% | $3.34 | ||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.81 | 0.65% | $3.29 | ||||
VelocityShares Russia Select DR ETF | ||||||||
Actual | $1,000.00 | $1,092.10 | 0.65% | $3.41 | ||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.81 | 0.65% | $3.29 | ||||
VelocityShares Emerging Asia DR ETF | ||||||||
Actual | $1,000.00 | $1,106.50 | 0.65% | $3.43 | ||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.81 | 0.65% | $3.29 | ||||
VelocityShares Tail Risk Hedged Large Cap ETF | ||||||||
Actual(c) | $1,000.00 | $1,086.60 | 0.65% | $3.03 | ||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.81 | 0.65% | $3.29 | ||||
VelocityShares Volatility Hedged Large Cap ETF | ||||||||
Actual(c) | $1,000.00 | $1,120.40 | 0.65% | $3.08 | ||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.81 | 0.65% | $3.29 |
(a) | Annualized, based on the Fund’s most recent fiscal half year expenses. |
(b) | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (183), divided by 365. |
(c) | Actual Expenses Paid During Period is based on expenses paid since commencement of operations of the Funds on June 21, 2013. |
12 | Annual Report | November 30, 2013 | |
Table of Contents
To the Board of Trustees and Shareholders of ALPS ETF Trust:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of VelocityShares Emerging Markets DR ETF, VelocityShares Russia Select DR ETF, VelocityShares Emerging Asia DR ETF, VelocityShares Tail Risk Hedged Large Cap ETF, and VelocityShares Volatility Hedged Large Cap ETF, five of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2013, and the related statements of operations, changes in net assets, and the financial highlights for the period April 8, 2013 (Commencement of Operations) to November 30, 2013 for the VelocityShares Emerging Markets DR ETF, VelocityShares Russia Select DR ETF, and VelocityShares Emerging Asia DR ETF, and the related statements of operations, changes in net assets, and the financial highlights for the period June 21, 2013 (Commencement of Operations) to November 30, 2013 for the VelocityShares Tail Risk Hedged Large Cap ETF and VelocityShares Volatility Hedged Large Cap ETF. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2013, by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of VelocityShares Emerging Markets DR ETF, VelocityShares Russia Select DR ETF, VelocityShares Emerging Asia DR ETF, VelocityShares Tail Risk Hedged Large Cap ETF, and VelocityShares Volatility Hedged Large Cap ETF of the ALPS ETF Trust as of November 30, 2013, the results of their operations, the changes in their net assets, and the financials highlights for the periods presented, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 27, 2014
www.velocitysharesetfs.com | 13 | |
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![]() | ||
VelocityShares Emerging Markets DR ETF November 30, 2013 |
Security Description | Shares | Value | ||||||
COMMON STOCKS (91.51%) |
| |||||||
Argentina (0.65%) | ||||||||
Alto Palermo SA, ADR | 2 | $ | 43 | |||||
Banco Macro SA, ADR(a) | 55 | 1,728 | ||||||
BBVA Banco Frances SA, ADR(a) | 67 | 613 | ||||||
Cresud SACIF y A, Sponsored ADR | 49 | 555 | ||||||
Empresa Distribuidora Y Comercializadora Norte, ADR(a) | 14 | 123 | ||||||
Grupo Financiero Galicia SA, ADR | 130 | 1,638 | ||||||
IRSA Inversiones y Representaciones SA, Sponsored ADR | 34 | 414 | ||||||
Pampa Energia SA, Sponsored ADR(a) | 82 | 546 | ||||||
Petrobras Argentina SA, ADR | 104 | 745 | ||||||
Telecom Argentina SA, Sponsored ADR(a) | 63 | 1,260 | ||||||
Transportadora de Gas del Sur SA, Sponsored ADR | 54 | 135 | ||||||
YPF SA, Sponsored ADR | 302 | 8,975 | ||||||
|
| |||||||
16,775 | ||||||||
|
| |||||||
Brazil (11.46%) | ||||||||
AMBEV SA, ADR | 7,220 | 54,583 | ||||||
Banco Bradesco SA, ADR | 865 | 12,757 | ||||||
Banco Bradesco SA, ADR | 3,344 | 44,375 | ||||||
Banco Santander Brasil SA, ADR | 822 | 5,310 | ||||||
BrasilAgro - Co. Brasileira de Propriedades Agricolas, Sponsored ADR | 51 | 217 | ||||||
Braskem SA, Sponsored ADR(a) | 116 | 2,069 | ||||||
BRF - Brasil Foods SA, ADR | 1,023 | 22,711 | ||||||
Centrais Eletricas Brasileiras SA, Sponsored ADR | 426 | 1,091 | ||||||
Cia de Saneamento Basico do Estado de Sao Paulo, ADR | 534 | 5,687 | ||||||
Cia Energetica de Minas Gerais, Class C, Sponsored ADR | 104 | 858 | ||||||
Cia Energetica de Minas Gerais, Sponsored ADR | 847 | 7,072 | ||||||
Cia Siderurgica Nacional SA, Sponsored ADR | 1,187 | 6,196 | ||||||
CPFL Energia SA, ADR | 173 | 2,867 | ||||||
Embraer SA, ADR | 258 | 8,001 | ||||||
Fibria Celulose SA, Sponsored ADR(a) | 349 | 4,212 | ||||||
Gafisa SA, ADR(a) | 340 | 1,013 | ||||||
Gerdau SA, Sponsored ADR | 1,400 | 10,836 | ||||||
Gol Linhas Aereas Inteligentes SA, ADR(a) | 166 | 725 | ||||||
Oi SA, ADR | 1,313 | 2,075 | ||||||
Oi SA, Class C, ADR | 425 | 723 | ||||||
Petroleo Brasileiro SA, ADR | 2,357 | 37,571 | ||||||
Telefonica Brasil SA, ADR | 455 | 8,854 | ||||||
Tim Participacoes SA, ADR | 249 | 6,170 | ||||||
Ultrapar Participacoes SA, Sponsored ADR | 647 | 16,020 | ||||||
Vale SA, Sponsored ADR | 2,063 | 31,605 | ||||||
|
| |||||||
293,598 | ||||||||
|
| |||||||
Chile (2.03%) | ||||||||
Banco de Chile, ADR | 42 | 3,645 | ||||||
Banco Santander Chile, ADR | 244 | 5,456 | ||||||
Cencosud SA, ADR | 556 | 6,110 |
Security Description | Shares | Value | ||||||
Chile (continued) | ||||||||
Cia Cervecerias Unidas SA, ADR | 86 | $ | 2,088 | |||||
Corpbanca SA, ADR | 163 | 3,161 | ||||||
Embotelladora Andina SA, Class A, ADR | 51 | 1,143 | ||||||
Embotelladora Andina SA, Class B, ADR | 50 | 1,495 | ||||||
Empresa Nacional de Electricidad SA, Sponsored ADR | 171 | 7,486 | ||||||
Enersis SA, Sponsored ADR | 606 | 9,478 | ||||||
Latam Airlines Group SA, Sponsored ADR | 452 | 7,282 | ||||||
Sociedad Quimica y Minera de Chile SA, Sponsored ADR | 142 | 3,551 | ||||||
Vina Concha y Toro SA, Sponsored ADR | 30 | 1,093 | ||||||
|
| |||||||
51,988 | ||||||||
|
| |||||||
China (17.52%) | ||||||||
21Vianet Group, Inc., ADR(a) | 98 | 1,749 | ||||||
51job, Inc., ADR(a) | 14 | 1,032 | ||||||
Acorn International, Inc., ADR(a) | 9 | 14 | ||||||
Actions Semiconductor Co. Ltd., | 106 | 272 | ||||||
Agria Corp., ADR(a) | 43 | 68 | ||||||
AirMedia Group, Inc., ADR(a) | 67 | 111 | ||||||
Aluminum Corp. of China Ltd., | 246 | 2,283 | ||||||
ATA, Inc., ADR(a) | 10 | 41 | ||||||
AutoNavi Holdings Ltd., ADR(a) | 43 | 653 | ||||||
Baidu, Inc., Sponsored ADR(a) | 428 | 71,292 | ||||||
Bitauto Holdings Ltd., ADR(a) | 28 | 882 | ||||||
Bona Film Group Ltd., Sponsored ADR(a) | 12 | 66 | ||||||
Camelot Information Systems, Inc., ADR(a) | 62 | 122 | ||||||
Changyou.com Ltd., ADR(a) | 17 | 479 | ||||||
Charm Communications, Inc., ADR | 10 | 45 | ||||||
China Digital TV Holding Co. Ltd., ADR(a) | 82 | 156 | ||||||
China Distance Education Holdings Ltd., ADR | 14 | 246 | ||||||
China Eastern Airlines Corp. Ltd., ADR(a) | 50 | 1,000 | ||||||
China Finance Online Co. Ltd., | 19 | 77 | ||||||
China Hydroelectric Corp., ADR(a) | 38 | 95 | ||||||
China Life Insurance Co. Ltd., ADR | 786 | 37,885 | ||||||
China Lodging Group Ltd., Sponsored ADR(a) | 28 | 736 | ||||||
China Ming Yang Wind Power Group Ltd., ADR(a) | 101 | 236 | ||||||
China Mobile Ltd., Sponsored ADR | 1,655 | 89,767 | ||||||
China Nepstar Chain Drugstore Ltd., ADR(a) | 40 | 83 | ||||||
China New Borun Corp., ADR(a) | 12 | 22 | ||||||
China Petroleum & Chemical Corp., ADR | 404 | 34,857 | ||||||
China Southern Airlines Co. Ltd., Sponsored ADR | 55 | 1,195 | ||||||
China Sunergy Co. Ltd., ADR(a) | 8 | 49 | ||||||
China Techfaith Wireless Communication Technology Ltd., ADR(a) | 57 | 85 | ||||||
China Telecom Corp. Ltd., ADR | 216 | 11,638 | ||||||
China Unicom Hong Kong Ltd., ADR | 710 | 11,225 | ||||||
China Xiniya Fashion Ltd., Sponsored ADR(a) | 34 | 49 | ||||||
China Zenix Auto International Ltd., ADR(a) | 23 | 57 |
14 | Annual Report | November 30, 2013 | |
Table of Contents
SCHEDULE OF INVESTMENTS |
VelocityShares Emerging Markets DR ETF November 30, 2013 |
Security Description | Shares | Value | ||||||
China (continued) | ||||||||
ChinaCache International Holdings Ltd., Sponsored ADR(a) | 22 | $ | 164 | |||||
ChinaEdu Corp., ADR(a) | 24 | 158 | ||||||
CNinsure, Inc., ADR(a) | 44 | 215 | ||||||
CNOOC Ltd., ADR | 256 | 52,398 | ||||||
Concord Medical Services Holdings Ltd., Sponsored ADR(a) | 37 | 195 | ||||||
Country Style Cooking Restaurant Chain Co. Ltd., Sponsored | 11 | 108 | ||||||
Ctrip.com International Ltd., ADR(a) | 200 | 9,556 | ||||||
Daqo New Energy Corp., ADR(a) | 6 | 230 | ||||||
E-Commerce China Dangdang, Inc., Sponsored ADR(a) | 87 | 810 | ||||||
E-House China Holdings Ltd., ADR | 111 | 1,185 | ||||||
eLong, Inc., Sponsored ADR(a) | 4 | 71 | ||||||
Giant Interactive Group, Inc., ADR | 156 | 1,752 | ||||||
Guangshen Railway Co. Ltd., Sponsored ADR | 44 | 1,084 | ||||||
Hanwha SolarOne Co. Ltd., Sponsored ADR(a) | 67 | 234 | ||||||
Home Inns & Hotels Management, Inc., ADR(a) | 34 | 1,364 | ||||||
Huaneng Power International, Inc., Sponsored ADR | 124 | 4,757 | ||||||
IFM Investments Ltd., ADR(a) | 9 | 18 | ||||||
iSoftStone Holdings Ltd., ADR(a) | 69 | 346 | ||||||
JA Solar Holdings Co. Ltd., ADR(a) | 44 | 416 | ||||||
Jiayuan.com International Ltd., ADR | 21 | 126 | ||||||
JinkoSolar Holding Co. Ltd., ADR(a) | 18 | 529 | ||||||
Kingtone Wirelessinfo Solution Holding Ltd., ADR(a) | 1 | 2 | ||||||
KongZhong Corp., ADR(a) | 40 | 313 | ||||||
Ku6 Media Co. Ltd., Sponsored ADR(a) | 21 | 60 | ||||||
LDK Solar Co. Ltd., ADR(a) | 103 | 154 | ||||||
Le Gaga Holdings Ltd., ADR(a) | 34 | 118 | ||||||
Lentuo International, Inc., Sponsored ADR(a) | 18 | 50 | ||||||
LightInTheBox Holding Co. Ltd., ADR(a) | 15 | 106 | ||||||
Linktone Ltd., ADR(a) | 27 | 68 | ||||||
Mecox Lane Ltd., ADR(a) | 7 | 31 | ||||||
Mindray Medical International Ltd., ADR | 134 | 5,335 | ||||||
NetEase, Inc., ADR | 114 | 8,186 | ||||||
New Oriental Education & Technology Group, Sponsored ADR | 206 | 6,116 | ||||||
Ninetowns Internet Technology Group Co. Ltd., ADR(a) | 35 | 62 | ||||||
Noah Education Holdings Ltd., ADR(a) | 22 | 51 | ||||||
Noah Holdings Ltd., Sponsored ADR | 27 | 542 | ||||||
NQ Mobile, Inc., ADR(a) | 58 | 757 | ||||||
O2Micro International Ltd., ADR(a) | 46 | 128 | ||||||
Ossen Innovation Co. Ltd., Sponsored ADR(a) | 13 | 18 | ||||||
Pactera Technology International Ltd., ADR(a) | 125 | 880 | ||||||
Perfect World Co. Ltd., Sponsored ADR | 62 | 1,176 | ||||||
PetroChina Co. Ltd., ADR | 336 | 39,997 | ||||||
Phoenix New Media Ltd., ADR(a) | 52 | 513 | ||||||
Qihoo 360 Technology Co. Ltd., ADR(a) | 120 | 9,782 | ||||||
RDA Microelectronics, Inc., Sponsored ADR | 28 | 493 |
Security Description | Shares | Value | ||||||
China (continued) | ||||||||
ReneSola Ltd., ADR(a) | 99 | $ | 447 | |||||
Renren, Inc., ADR(a) | 211 | 629 | ||||||
Semiconductor Manufacturing International Corp., ADR(a) | 732 | 2,965 | ||||||
Shanda Games Ltd., Sponsored ADR(a) | 119 | 483 | ||||||
Simcere Pharmaceutical Group, ADR(a) | 31 | 296 | ||||||
Sinopec Shanghai Petrochemical Co. Ltd., Sponsored ADR | 37 | 1,637 | ||||||
Sky-mobi Ltd., Sponsored ADR(a) | 15 | 53 | ||||||
SouFun Holdings Ltd., ADR | 26 | 1,689 | ||||||
Spreadtrum Communications, Inc., ADR | 60 | 1,837 | ||||||
TAL Education Group, ADR | 53 | 1,044 | ||||||
Taomee Holdings Ltd., Sponsored ADR(a) | 16 | 80 | ||||||
The9 Ltd., ADR(a) | 29 | 75 | ||||||
Trina Solar Ltd., Sponsored | 120 | 1,680 | ||||||
Vimicro International Corp., | 30 | 63 | ||||||
Vipshop Holdings Ltd., ADR(a) | 23 | 1,912 | ||||||
VisionChina Media, Inc., ADR(a) | 5 | 44 | ||||||
WSP Holdings Ltd., ADR(a) | 5 | 14 | ||||||
WuXi PharmaTech Cayman, Inc., ADR(a) | 110 | 3,644 | ||||||
Xinyuan Real Estate Co. Ltd., ADR | 51 | 282 | ||||||
Xueda Education Group, Sponsored ADR | 45 | 254 | ||||||
Yanzhou Coal Mining Co. Ltd., Sponsored ADR | 307 | 3,365 | ||||||
Yingli Green Energy Holding Co. Ltd., ADR(a) | 166 | 872 | ||||||
Youku Tudou, Inc., ADR(a) | 199 | 5,608 | ||||||
YY, Inc., ADR(a) | 12 | 605 | ||||||
Zuoan Fashion Ltd., Sponsored ADR(a) | 14 | 28 | ||||||
|
| |||||||
448,827 | ||||||||
|
| |||||||
Colombia (0.89%) | ||||||||
Bancolombia SA, Sponsored ADR | 133 | 6,747 | ||||||
Ecopetrol SA, Sponsored ADR | 391 | 15,965 | ||||||
|
| |||||||
22,712 | ||||||||
|
| |||||||
Egypt (0.32%) | ||||||||
Commercial International Bank Egypt | ||||||||
SAE, GDR(b) | 934 | 5,137 | ||||||
Global Telecom Holding, | 822 | 2,721 | ||||||
Orascom Telecom Media And Technology Holding SAE, GDR(b) | 788 | 370 | ||||||
|
| |||||||
8,228 | ||||||||
|
| |||||||
India (6.93%) | ||||||||
Axis Bank Ltd., GDR(b) | 359 | 6,814 | ||||||
Dr. Reddy’s Laboratories Ltd., ADR | 130 | 5,297 | ||||||
GAIL India Ltd., GDR(b) | 79 | 2,430 | ||||||
HDFC Bank Ltd., ADR | 618 | 20,505 | ||||||
ICICI Bank Ltd., Sponsored ADR | 456 | 16,352 | ||||||
Infosys Ltd., Sponsored ADR | 763 | 41,217 | ||||||
Larsen & Toubro Ltd., GDR(b) | 345 | 5,686 | ||||||
Mahindra & Mahindra Ltd., Sponsored GDR(b) | 472 | 7,245 | ||||||
Ranbaxy Laboratories Ltd., Sponsored GDR(a)(b) | 198 | 1,320 | ||||||
Rediff.Com India Ltd., ADR(a) | 23 | 51 | ||||||
Reliance Industries Ltd., Sponsored GDR(c) | 1,264 | 34,558 |
www.velocitysharesetfs.com | 15 | |
Table of Contents
![]() | SCHEDULE OF INVESTMENTS | |
VelocityShares Emerging Markets DR ETF November 30, 2013 |
Security Description | Shares | Value | ||||||
India (continued) | ||||||||
Sesa Sterlite Ltd., ADR | 489 | $ | 5,648 | |||||
Sify Technologies Ltd., Sponsored ADR(a) | 38 | 74 | ||||||
State Bank of India, GDR(b) | 105 | 6,090 | ||||||
Tata Motors Ltd., Sponsored ADR | 294 | 9,546 | ||||||
Tata Steel Ltd., GDR(b) | 366 | 2,293 | ||||||
Wipro Ltd., ADR | 930 | 10,853 | ||||||
WNS Holdings Ltd., ADR(a) | 80 | 1,602 | ||||||
|
| |||||||
177,581 | ||||||||
|
| |||||||
Indonesia (0.50%) | ||||||||
Telekomunikasi Indonesia Persero Tbk PT, Sponsored ADR | 351 | 12,826 | ||||||
|
| |||||||
Kazakhstan (0.11%) | ||||||||
Halyk Savings Bank of Kazakhstan JSC, GDR(b) | 140 | 1,400 | ||||||
Kazkommertsbank JSC, GDR(a)(b) | 220 | 365 | ||||||
Zhaikmunai LP, GDR(b) | 95 | 1,143 | ||||||
|
| |||||||
2,908 | ||||||||
|
| |||||||
Lebanon (0.11%) | ||||||||
BLOM Bank SAL, GDR(b) | 108 | 956 | ||||||
Solidere, GDR(a)(b) | 166 | 1,867 | ||||||
|
| |||||||
2,823 | ||||||||
|
| |||||||
Mexico (6.93%) | ||||||||
America Movil SAB de CV, Series A, ADR | 60 | 1,395 | ||||||
America Movil SAB de CV, Series L, ADR | 3,405 | 79,132 | ||||||
Cemex SAB de CV, Sponsored ADR(a) | 1,816 | 19,849 | ||||||
Coca-Cola Femsa SAB de CV, Sponsored ADR | 56 | 6,785 | ||||||
Desarrolladora Homex SAB de CV, ADR(a) | 57 | 68 | ||||||
Empresas ICA SAB de CV, Sponsored ADR(a) | 224 | 1,700 | ||||||
Fomento Economico Mexicano SAB de CV, Sponsored ADR | 298 | 28,295 | ||||||
Gruma SAB de CV, Sponsored ADR(a) | 86 | 2,393 | ||||||
Grupo Aeroportuario del Centro Norte SAB de CV, ADR | 39 | 1,071 | ||||||
Grupo Aeroportuario del Pacifico SAB de CV, ADR | 58 | 3,024 | ||||||
Grupo Aeroportuario del Sureste SAB de CV, ADR | 32 | 4,305 | ||||||
Grupo Financiero Santander Mexico SABde CV, Class B, ADR | 541 | 7,601 | ||||||
Grupo Simec SAB de CV, Sponsored ADR(a) | 50 | 555 | ||||||
Grupo Televisa SAB., Sponsored ADR | 611 | 18,642 | ||||||
Industrias Bachoco SAB de CV, Sponsored ADR | 12 | 477 | ||||||
Ternium SA, Sponsored ADR | 83 | 2,217 | ||||||
|
| |||||||
177,509 | ||||||||
|
| |||||||
Nigeria (0.32%) | ||||||||
Guaranty Trust Bank PLC, GDR(b) | 913 | 8,126 | ||||||
|
| |||||||
Peru (0.28%) | ||||||||
Cementos Pacasmayo SAA, ADR | 72 | 775 | ||||||
Cia de Minas Buenaventura SA, ADR | 289 | 3,410 |
Security Description | Shares | Value | ||||||
Peru (continued) | ||||||||
Grana y Montero SA, ADR(a) | 150 | $ | 2,955 | |||||
|
| |||||||
7,140 | ||||||||
|
| |||||||
Phillipines (0.33%) | ||||||||
Philippine Long Distance Telephone Co., Sponsored ADR | 136 | 8,504 | ||||||
|
| |||||||
Russia (14.88%) | ||||||||
AFI Development PLC, GDR(a)(b) | 295 | 240 | ||||||
Cherkizovo Group OJSC GDR(a)(b) | 51 | 553 | ||||||
Etalon Group Ltd., GDR(a)(b) | 186 | 977 | ||||||
Eurasia Drilling Co. Ltd., GDR(b) | 74 | 3,226 | ||||||
Federal Hydrogenerating Co. (RusHydro), JSC, ADR | 1,660 | 2,785 | ||||||
Gazprom Neft OAO, Sponsored ADR | 59 | 1,332 | ||||||
Gazprom OAO, Sponsored ADR | 9,373 | 80,889 | ||||||
Global Ports Investments PLC, | 94 | 1,307 | ||||||
Globaltrans Investment PLC, Sponsored GDR(b) | 159 | 2,409 | ||||||
Hydraulic Machines and Systems Group PLC, GDR(b) | 52 | 120 | ||||||
LSR Group, GDR(b) | 262 | 989 | ||||||
Lukoil OAO, Sponsored ADR | 823 | 51,026 | ||||||
Magnit OJSC, Sponsored GDR(b) | 456 | 30,050 | ||||||
Magnitogorsk Iron & Steel Works, Sponsored GDR(a)(b) | 191 | 587 | ||||||
Mail.ru Group Ltd., GDR | 149 | 6,161 | ||||||
Mechel, Sponsored ADR(a) | 215 | 451 | ||||||
MegaFon OAO, GDR(b) | 145 | 4,678 | ||||||
MMC Norilsk Nickel OJSC, ADR | 888 | 13,391 | ||||||
Mobile Telesystems OJSC, Sponsored ADR | 793 | 16,716 | ||||||
NOMOS-BANK, GDR(a)(b) | 65 | 983 | ||||||
Nord Gold NV, GDR(b) | 66 | 96 | ||||||
NovaTek OAO, Sponsored GDR(b) | 125 | 16,438 | ||||||
Novolipetsk Steel OJSC, GDR(b) | 133 | 2,169 | ||||||
Novorossiysk Commercial Sea Port PJSC, GDR(b) | 88 | 616 | ||||||
O’Key Group SA, GDR(b) | 58 | 730 | ||||||
Pharmstandard OJSC, GDR(a)(b) | 65 | 804 | ||||||
Phosagro OAO, GDR(b) | 127 | 1,248 | ||||||
PIK Group, GDR(a)(b) | 449 | 887 | ||||||
QIWI PLC, ADR | 25 | 1,170 | ||||||
Ros Agro PLC, GDR(a)(b) | 46 | 271 | ||||||
Rosneft OAO, GDR(b) | 1,659 | 11,912 | ||||||
Rostelecom OJSC, Sponsored ADR | 311 | 5,996 | ||||||
Sberbank of Russia, Sponsored ADR | 4,282 | 53,354 | ||||||
Severstal OAO, GDR(b) | 275 | 2,516 | ||||||
Sistema JSFC, Sponsored GDR(b) | 273 | 7,488 | ||||||
Surgutneftegas OAO, Sponsored ADR | 1,509 | 12,434 | ||||||
Tatneft OAO, Sponsored ADR | 385 | 14,322 | ||||||
TMK OAO, GDR(b) | 84 | 958 | ||||||
Uralkali OJSC, Sponsored GDR(b) | 545 | 13,712 | ||||||
VimpelCom Ltd., Sponsored ADR | 306 | 3,758 | ||||||
VTB Bank OJSC, GDR(b) | 4,065 | 11,374 | ||||||
|
| |||||||
381,123 | ||||||||
|
|
16 | Annual Report | November 30, 2013 | |
Table of Contents
SCHEDULE OF INVESTMENTS |
VelocityShares Emerging Markets DR ETF November 30, 2013 |
Security Description | Shares | Value | ||||||
South Africa (2.19%) | ||||||||
AngloGold Ashanti Ltd., Sponsored ADR | 598 | $ | 8,127 | |||||
DRDGOLD Ltd., Sponsored ADR | 61 | 251 | ||||||
Gold Fields Ltd., Sponsored ADR | 1,143 | 4,584 | ||||||
Harmony Gold Mining Co. Ltd., Sponsored ADR | 574 | 1,636 | ||||||
MiX Telematics Ltd., ADR(a) | 25 | 323 | ||||||
Sasol Ltd., Sponsored ADR | 802 | 39,731 | ||||||
Sibanye Gold Ltd., Sponsored ADR | 285 | 1,411 | ||||||
|
| |||||||
56,063 | ||||||||
|
| |||||||
South Korea (16.54%) | ||||||||
Gravity Co. Ltd., Sponsored ADR(a) | 18 | 17 | ||||||
Hyundai Motor Co., GDR(b) | 80 | 4,712 | ||||||
KB Financial Group, Inc., ADR | 620 | 23,113 | ||||||
Korea Electric Power Corp., Sponsored ADR(a) | 813 | 12,374 | ||||||
KT Corp., Sponsored ADR | 401 | 6,284 | ||||||
LG Display Co. Ltd., ADR(a) | 695 | 8,055 | ||||||
LG Electronics, Inc., GDR(b)(c) | 36 | 423 | ||||||
Lotte Shopping Co. Ltd., GDR(b)(c) | 433 | 7,954 | ||||||
POSCO, ADR | 492 | 38,125 | ||||||
Samsung Electronics Co. Ltd., | 383 | 271,164 | ||||||
Shinhan Financial Group Co. Ltd., ADR | 751 | 31,722 | ||||||
SK Telecom Co. Ltd., ADR | 557 | 13,301 | ||||||
Woori Finance Holdings Co. Ltd., ADR | 182 | 6,503 | ||||||
|
| |||||||
423,747 | ||||||||
|
| |||||||
Taiwan (8.43%) | ||||||||
Acer, Inc., Sponsored GDR(a)(b) | 826 | 2,221 | ||||||
Advanced Semiconductor Engineering, Inc., ADR | 1,858 | 9,364 | ||||||
AU Optronics Corp., Sponsored | 1,401 | 4,343 | ||||||
China Steel Corp., Sponsored | 958 | 16,047 | ||||||
Chunghwa Telecom Co. Ltd., ADR | 610 | 18,983 | ||||||
Himax Technologies, Inc., ADR | 148 | 1,480 | ||||||
Hon Hai Precision Industry Co. Ltd., GDR(b) | 8,878 | 46,432 | ||||||
Silicon Motion Technology Corp., ADR | 53 | 791 | ||||||
Siliconware Precision Industries Co., Sponsored ADR | 918 | 5,380 | ||||||
Taiwan Semiconductor Manufacturing Co. Ltd., Sponsored ADR | 5,830 | 103,366 | ||||||
United Microelectronics Corp., Sponsored ADR | 3,809 | 7,656 | ||||||
|
| |||||||
216,063 | ||||||||
|
| |||||||
Turkey (0.80%) | ||||||||
Turkcell Iletisim Hizmetleri AS, | 496 | 7,599 | ||||||
Turkiye Garanti Bankasi AS, ADR | 3,617 | 12,804 | ||||||
|
| |||||||
20,403 | ||||||||
|
| |||||||
Ukraine (0.04%) | ||||||||
Avangardco Investments Public Ltd., GDR(a)(b) | 23 | 276 | ||||||
MHP SA, GDR(b) | 37 | 629 | ||||||
|
| |||||||
905 | ||||||||
|
|
Security Description | Shares | Value | ||||||||||
United States (0.25%) |
| |||||||||||
Five Below, Inc.(a) |
| 135 | $ | 2,295 | ||||||||
KMG Chemicals, Inc. |
| 258 | 4,012 | |||||||||
|
| |||||||||||
6,307 | ||||||||||||
|
| |||||||||||
TOTAL COMMON STOCKS |
| |||||||||||
(Cost $2,265,023) |
| 2,344,156 | ||||||||||
|
| |||||||||||
PREFERRED STOCK (8.00%) |
| |||||||||||
Argentina (0.04%) |
| |||||||||||
Nortel Inversora SA, Series B, ADR(a) |
| 41 | 940 | |||||||||
|
| |||||||||||
Brazil (6.63%) | ||||||||||||
Centrais Eletricas Brasileiras SA, Series B, ADR |
| 357 | 1,603 | |||||||||
Cia Brasileira de Distribuicao Grupo Pao de Acucar, Sponsored ADR |
| 207 | 9,746 | |||||||||
Cia Paranaense de Energia, Sponsored ADR | 157 | 2,119 | ||||||||||
Itau Unibanco Holding SA, ADR |
| 3,975 | 55,928 | |||||||||
Petroleo Brasileiro SA, Series A, Sponsored ADR |
| 3,238 | 53,557 | |||||||||
Vale SA, Sponsored ADR |
| 3,339 | 46,846 | |||||||||
|
| |||||||||||
169,799 | ||||||||||||
|
| |||||||||||
Russia (0.00%)(d) | ||||||||||||
Mechel, Sponsored ADR |
| 178 | 87 | |||||||||
|
| |||||||||||
South Korea (1.33%) |
| |||||||||||
Samsung Electronics Co. Ltd., GDR(b) |
| 72 | 34,092 | |||||||||
|
| |||||||||||
TOTAL PREFERRED STOCK |
| |||||||||||
(Cost $218,008) | 204,918 | |||||||||||
|
| |||||||||||
RIGHTS (0.00%)(d) |
| |||||||||||
Chile (0.00%)(d) | ||||||||||||
Latam Airlines Group SA, Sponsored ADR, Strike Price: $15.22, Expiration Date: 01/12/2014 |
| 57 | 51 | |||||||||
|
| |||||||||||
TOTAL RIGHTS |
| |||||||||||
(Cost $0) | 51 | |||||||||||
|
| |||||||||||
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (0.47%) |
| |||||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(e) | 12,075 | 12,075 | |||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS |
| |||||||||||
(Cost $12,075) | 12,075 | |||||||||||
|
| |||||||||||
TOTAL INVESTMENTS (99.98%) |
| |||||||||||
(Cost $2,495,106) | $ | 2,561,200 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (0.02%) |
| 392 | ||||||||||
|
| |||||||||||
NET ASSETS (100.00%) |
| $ | 2,561,592 | |||||||||
|
|
(a) | Non-income producing security. |
www.velocitysharesetfs.com | 17 | |
Table of Contents
![]() | SCHEDULE OF INVESTMENTS | |
VelocityShares Emerging Markets DR ETF November 30, 2013 |
(b) | These securities initially sold to other parties pursuant to Regulation S under the 1933 Act and subsequently resold to the Fund. As of November 30, 2013, the aggregate market values of these securities were $561,412, representing 21.92% of the Fund’s net assets. |
(c) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of November 30, 2013, the market values of these securities restricted under Rule 144A were $42,935, representing 1.68% of the Fund’s net assets. |
(d) | Less than 0.005% of Net Assets. |
(e) | Less than 0.0005%. |
Common Abbreviations:
ADR - American Depositary Receipt.
AS - Anonim Sirket is the Turkish term for Incorporation.
GDR - Global Depositary Receipt.
JSC - Joint Stock Company.
JSFC - Joint Stock Financial Corporation.
LP - Limited Partnership.
Ltd. - Limited.
NV - Naamloze Vennootschap is the Dutch term for a public limited liability corporation.
OAO - Otkrytoe Aktsionernoe Obschestvo is the Russian term for Open Joint Stock Company.
OJSC - Open Joint Stock Company.
PJSC - Private Joint Stock Company.
PLC - Public Limited Company.
SA - Generally designates corporations in various countries, mostly those emloying the civil law.
SAA - Sociedad Anonima Abierta is the Peruvian term used for companies with 20 or more shareholders.
SAB - Sociedad Anonima Busatil is the Spanish term used for publicly held company.
SAB de CV - A variable capital company.
SACIF y A - Sociedad Anonima Comercial, Industrial, Financiera Y Agropecuaria.
SAE - Societe Anonyme Egyptienne is the French term for a Joint Stock Company in Egypt.
SAL - Societe Anonyme Libanaise is the French term for a Joint Stock Company in Lebanon.
Tbk PT - Terbuka Perseroan Terbatas is an Indonesian term for a limited liability company.
See Notes to Financial Statements.
18 | Annual Report | November 30, 2013 | |
Table of Contents
SCHEDULE OF INVESTMENTS |
VelocityShares Russia Select DR ETF November 30, 2013 |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.80%) | ||||||||
Chemicals: Agricultural (5.07%) | ||||||||
Phosagro OAO, GDR(a) | 3,386 | $ | 33,267 | |||||
Uralkali OJSC, Sponsored GDR(a) | 3,866 | 97,269 | ||||||
|
| |||||||
130,536 | ||||||||
|
| |||||||
Construction Materials (0.60%) | ||||||||
LSR Group, GDR(a) | 4,109 | 15,516 | ||||||
|
| |||||||
Contract Drilling (1.78%) | ||||||||
Eurasia Drilling Co. Ltd., GDR(a) | 1,052 | 45,867 | ||||||
|
| |||||||
Data Processing Services (1.30%) | ||||||||
QIWI PLC, ADR | 716 | 33,494 | ||||||
|
| |||||||
Electric Utilities (1.08%) | ||||||||
Federal Hydrogenerating Co. (RusHydro), JSC, ADR | 16,607 | 27,867 | ||||||
|
| |||||||
Food Retail (8.10%) | ||||||||
Five Below, Inc.(b) | 1,973 | 33,541 | ||||||
Magnit OJSC, Sponsored GDR(a) | 2,349 | 154,799 | ||||||
O’Key Group SA, GDR(a) | 1,605 | 20,191 | ||||||
|
| |||||||
208,531 | ||||||||
|
| |||||||
Homebuilding (0.83%) | ||||||||
Etalon Group Ltd., GDR(a)(b) | 4,066 | 21,347 | ||||||
|
| |||||||
Integrated Oil (35.93%) | ||||||||
Gazprom Neft OAO, Sponsored ADR | 1,015 | 22,909 | ||||||
Gazprom OAO, Sponsored ADR | 62,824 | 542,171 | ||||||
Lukoil OAO, Sponsored ADR | 1,604 | 99,448 | ||||||
NovaTek OAO, Sponsored GDR(a) | 581 | 76,401 | ||||||
Rosneft OAO, GDR(a) | 12,949 | 92,974 | ||||||
Surgutneftegas OAO, Sponsored ADR | 11,067 | 91,192 | ||||||
|
| |||||||
925,095 | ||||||||
|
| |||||||
Internet Software/Services (2.35%) | ||||||||
Mail.ru Group Ltd., GDR(a) | 1,461 | 60,412 | ||||||
|
| |||||||
Major Telecommunications (2.75%) | ||||||||
Sistema JSFC, Sponsored GDR(a) | 2,577 | 70,687 | ||||||
|
| |||||||
Oil & Gas Production (3.87%) | ||||||||
Tatneft OAO, Sponsored ADR | 2,678 | 99,622 | ||||||
|
| |||||||
Oilfield Services/Equipment (1.75%) | ||||||||
Global Ports Investments PLC, GDR(a) | 2,079 | 28,898 | ||||||
TMK OAO, GDR(a) | 1,416 | 16,143 | ||||||
|
| |||||||
45,041 | ||||||||
|
| |||||||
Other Metals/Minerals (2.82%) | ||||||||
MMC Norilsk Nickel OJSC, ADR | 4,818 | 72,655 | ||||||
|
| |||||||
Pharmaceuticals: Other (0.40%) | ||||||||
Pharmstandard OJSC, GDR(a)(b) | 842 | 10,416 | ||||||
|
|
Security Description | Shares | Value | ||||||||||
Railroads (1.12%) | ||||||||||||
Globaltrans Investment PLC, Sponsored GDR(a) |
| 1,903 | $ | 28,830 | ||||||||
|
| |||||||||||
Regional Banks (17.64%) |
| |||||||||||
Sberbank of Russia, Sponsored ADR |
| 28,668 | 357,203 | |||||||||
VTB Bank OJSC, GDR(a) |
| 34,666 | 96,996 | |||||||||
|
| |||||||||||
454,199 | ||||||||||||
|
| |||||||||||
Specialty Communications (1.93%) |
| |||||||||||
Rostelecom OJSC, Sponsored ADR |
| 2,579 | 49,723 | |||||||||
|
| |||||||||||
Steel (3.08%) | ||||||||||||
Magnitogorsk Iron & Steel Works, Sponsored GDR(a)(b) |
| 3,550 | 10,906 | |||||||||
Mechel, Sponsored ADR(b) |
| 4,312 | 9,055 | |||||||||
Novolipetsk Steel OJSC, GDR(a) |
| 1,859 | 30,320 | |||||||||
Severstal OAO, GDR(a) |
| 3,162 | 28,932 | |||||||||
|
| |||||||||||
79,213 | ||||||||||||
|
| |||||||||||
Wireless Telecommunications (7.40%) |
| |||||||||||
MegaFon OAO, GDR(a) |
| 1,468 | 47,357 | |||||||||
Mobile Telesystems OJSC, Sponsored ADR |
| 5,034 | 106,117 | |||||||||
VimpelCom Ltd., Sponsored ADR |
| 3,025 | 37,147 | |||||||||
|
| |||||||||||
190,621 | ||||||||||||
|
| |||||||||||
TOTAL COMMON STOCKS |
| |||||||||||
(Cost $2,485,256) |
| 2,569,672 | ||||||||||
|
| |||||||||||
| ||||||||||||
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (0.19%) |
| |||||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(c) | 4,947 | 4,947 | |||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS |
| |||||||||||
(Cost $4,947) | 4,947 | |||||||||||
|
| |||||||||||
TOTAL INVESTMENTS (99.99%) |
| |||||||||||
(Cost $2,490,203) |
| $ | 2,574,619 | |||||||||
NET OTHER ASSETS AND |
| 132 | ||||||||||
|
| |||||||||||
NET ASSETS (100.00%) |
| $ | 2,574,751 | |||||||||
|
| |||||||||||
|
|
(a) | These securities initially sold to other parties pursuant to Regulation S under the 1933 Act and subsequently resold to the Fund. As of November 30, 2013, the aggregate market values of these securities were $987,528, representing 38.35% of the Fund’s net assets. |
(b) | Non-income producing security. |
(c) | Less than 0.0005%. |
www.velocitysharesetfs.com | 19 | |
Table of Contents
![]() | SCHEDULE OF INVESTMENTS | |
VelocityShares Russia Select DR ETF November 30, 2013 | ||
Common Abbreviations:
ADR - American Depositary Receipt.
GDR - Global Depositary Receipt.
JSC - Joint Stock Company.
JSFC - Joint Stock Financial Corporation.
Ltd. - Limited.
OAO - Otkrytoe Aktsionernoe Obschestvo is the Russian term for Open Joint Stock Company.
OJSC - Open Joint Stock Company.
PLC - Public Limited Company.
SA - Generally designates corporations in various countries, mostly those emloying the civil law.
See Notes to Financial Statements.
20 | Annual Report | November 30, 2013 | |
Table of Contents
SCHEDULE OF INVESTMENTS |
VelocityShares Emerging Asia DR ETF |
November 30, 2013 |
Security Description | Shares | Value | ||||||
COMMON STOCKS (97.41%) |
| |||||||
China (34.03%) | ||||||||
21Vianet Group, Inc., ADR(a) | 936 | $ | 16,708 | |||||
51job, Inc., ADR(a) | 188 | 13,852 | ||||||
Acorn International, Inc., ADR(a) | 89 | 142 | ||||||
Actions Semiconductor Co. Ltd., ADR(a) | 1,371 | 3,523 | ||||||
Agria Corp., ADR(a) | 549 | 862 | ||||||
AirMedia Group, Inc., ADR(a) | 854 | 1,418 | ||||||
Aluminum Corp. of China Ltd., ADR(a) | 3,164 | 29,362 | ||||||
ATA, Inc., ADR(a) | 170 | 697 | ||||||
AutoNavi Holdings Ltd., ADR(a) | 533 | 8,091 | ||||||
Baidu, Inc., Sponsored ADR(a) | 5,463 | 909,972 | ||||||
Bitauto Holdings Ltd., ADR(a) | 357 | 11,245 | ||||||
Bona Film Group Ltd., Sponsored ADR(a) | 630 | 3,459 | ||||||
Camelot Information Systems, Inc., ADR(a) | 782 | 1,533 | ||||||
Changyou.com Ltd., ADR(a) | 219 | 6,167 | ||||||
Charm Communications, Inc., ADR | 141 | 634 | ||||||
China Digital TV Holding Co. Ltd., ADR(a) | 1,030 | 1,957 | ||||||
China Distance Education Holdings Ltd., ADR | 283 | 4,967 | ||||||
China Eastern Airlines Corp. Ltd., ADR(a) | 766 | 15,320 | ||||||
China Finance Online Co. Ltd., ADR(a) | 255 | 1,028 | ||||||
China Hydroelectric Corp., | 500 | 1,245 | ||||||
China Life Insurance Co. Ltd., | 10,021 | 483,012 | ||||||
China Lodging Group Ltd., Sponsored ADR(a) | 382 | 10,043 | ||||||
China Ming Yang Wind Power Group Ltd., ADR(a) | 1,749 | 4,093 | ||||||
China Mobile Ltd., Sponsored ADR | 21,111 | 1,145,061 | ||||||
China Nepstar Chain Drugstore Ltd., ADR(a) | 521 | 1,084 | ||||||
China New Borun Corp., ADR(a) | 150 | 272 | ||||||
China Petroleum & Chemical Corp., ADR | 5,152 | 444,515 | ||||||
China Southern Airlines Co. Ltd., Sponsored ADR | 696 | 15,117 | ||||||
China Sunergy Co. Ltd., ADR(a) | 181 | 1,108 | ||||||
China Techfaith Wireless Communication Technology Ltd., ADR(a) | 567 | 845 | ||||||
China Telecom Corp. Ltd., ADR | 2,799 | 150,810 | ||||||
China Unicom Hong Kong Ltd., ADR | 9,060 | 143,239 | ||||||
China Xiniya Fashion Ltd., Sponsored ADR(a) | 456 | 652 | ||||||
China Zenix Auto International Ltd., ADR(a) | 310 | 769 | ||||||
ChinaCache International Holdings Ltd., Sponsored | 294 | 2,190 | ||||||
ChinaEdu Corp., ADR(a) | 224 | 1,474 | ||||||
CNinsure, Inc., ADR(a) | 577 | 2,822 | ||||||
CNOOC Ltd., ADR | 3,244 | 663,982 | ||||||
Concord Medical Services Holdings Ltd., Sponsored | 455 | 2,398 | ||||||
Country Style Cooking Restaurant Chain Co. Ltd., Sponsored ADR(a) | 126 | 1,241 | ||||||
Ctrip.com International Ltd., ADR(a) | 2,618 | 125,088 | ||||||
Daqo New Energy Corp., ADR(a) | 72 | 2,755 | ||||||
E-Commerce China Dangdang, Inc., Sponsored ADR(a) | 1,120 | 10,427 | ||||||
E-House China Holdings Ltd., ADR | 1,333 | 14,236 |
Security Description | Shares | Value | ||||||
China (continued) | ||||||||
eLong, Inc., Sponsored ADR(a) | 46 | $ | 819 | |||||
Giant Interactive Group, Inc., ADR | 2,181 | 24,493 | ||||||
Guangshen Railway Co. Ltd., Sponsored ADR | 572 | 14,088 | ||||||
Hanwha SolarOne Co. Ltd., Sponsored ADR(a) | 837 | 2,921 | ||||||
Home Inns & Hotels Management, Inc., ADR(a) | 438 | 17,577 | ||||||
Huaneng Power International, Inc., Sponsored ADR | 1,601 | 61,414 | ||||||
IFM Investments Ltd., ADR(a) | 175 | 350 | ||||||
iSoftStone Holdings Ltd., ADR(a) | 963 | 4,834 | ||||||
JA Solar Holdings Co. Ltd., ADR(a) | 610 | 5,765 | ||||||
Jiayuan.com International Ltd., ADR | 262 | 1,572 | ||||||
JinkoSolar Holding Co. Ltd., | 282 | 8,288 | ||||||
Kingtone Wirelessinfo Solution Holding Ltd., ADR(a) | 12 | 29 | ||||||
KongZhong Corp., ADR(a) | 473 | 3,704 | ||||||
Ku6 Media Co. Ltd., Sponsored ADR(a) | 268 | 766 | ||||||
LDK Solar Co. Ltd., ADR(a) | 1,174 | 1,761 | ||||||
Le Gaga Holdings Ltd., ADR(a) | 498 | 1,733 | ||||||
Lentuo International, Inc., Sponsored ADR(a) | 232 | 640 | ||||||
LightInTheBox Holding Co. Ltd., ADR(a) | 165 | 1,172 | ||||||
Linktone Ltd., ADR(a) | 333 | 839 | ||||||
Mecox Lane Ltd., ADR(a) | 84 | 366 | ||||||
Mindray Medical International Ltd., ADR | 1,778 | 70,782 | ||||||
NetEase, Inc., ADR | 1,457 | 104,627 | ||||||
New Oriental Education & Technology Group, Sponsored ADR | 2,661 | 79,005 | ||||||
Ninetowns Internet Technology Group Co. Ltd., ADR(a) | 426 | 754 | ||||||
Noah Education Holdings Ltd., ADR(a) | 250 | 578 | ||||||
Noah Holdings Ltd., Sponsored ADR | 354 | 7,112 | ||||||
NQ Mobile, Inc., ADR(a) | 609 | 7,954 | ||||||
O2Micro International Ltd., ADR(a) | 602 | 1,674 | ||||||
Ossen Innovation Co. Ltd., Sponsored ADR(a) | 161 | 227 | ||||||
Pactera Technology International Ltd., ADR(a) | 1,512 | 10,644 | ||||||
Perfect World Co. Ltd., Sponsored ADR | 671 | 12,729 | ||||||
PetroChina Co. Ltd., ADR | 4,262 | 507,348 | ||||||
Phoenix New Media Ltd., ADR(a) | 666 | 6,567 | ||||||
Qihoo 360 Technology Co. Ltd., ADR(a) | 1,548 | 126,193 | ||||||
RDA Microelectronics, Inc., Sponsored ADR | 509 | 8,969 | ||||||
ReneSola Ltd., ADR(a) | 1,449 | 6,549 | ||||||
Renren, Inc., ADR(a) | 2,506 | 7,468 | ||||||
Semiconductor Manufacturing International Corp., ADR(a) | 9,067 | 36,721 | ||||||
Shanda Games Ltd., Sponsored ADR(a) | 1,386 | 5,627 | ||||||
Simcere Pharmaceutical Group, ADR(a) | 240 | 2,294 | ||||||
Sinopec Shanghai Petrochemical Co. Ltd., Sponsored ADR | 471 | 20,837 | ||||||
Sky-mobi Ltd., Sponsored ADR(a) | 181 | 643 | ||||||
SouFun Holdings Ltd., ADR | 331 | 21,498 | ||||||
Spreadtrum Communications, Inc., ADR | 828 | 25,345 | ||||||
TAL Education Group, ADR | 686 | 13,514 | ||||||
Taomee Holdings Ltd., Sponsored ADR(a) | 252 | 1,260 |
www.velocitysharesetfs.com | 21 | |
Table of Contents
![]() | SCHEDULE OF INVESTMENTS | |
VelocityShares Emerging Asia DR ETF November 30, 2013 | ||
Security Description | Shares | Value | ||||||
China (continued) |
| |||||||
The9 Ltd., ADR(a) | 365 | $ | 945 | |||||
Trina Solar Ltd., Sponsored ADR(a) | 1,504 | 21,056 | ||||||
Vimicro International Corp., ADR(a) | 372 | 777 | ||||||
Vipshop Holdings Ltd., ADR(a) | 348 | 28,922 | ||||||
VisionChina Media, Inc., ADR(a) | 66 | 575 | ||||||
WSP Holdings Ltd., ADR(a) | 82 | 233 | ||||||
WuXi PharmaTech Cayman, Inc., ADR(a) | 1,422 | 47,111 | ||||||
Xinyuan Real Estate Co. Ltd., ADR | 997 | 5,513 | ||||||
Xueda Education Group, Sponsored ADR | 566 | 3,198 | ||||||
Yanzhou Coal Mining Co. Ltd., Sponsored ADR | 3,933 | 43,106 | ||||||
Yingli Green Energy Holding Co. Ltd., ADR(a) | 2,117 | 11,114 | ||||||
Youku Tudou, Inc., ADR(a) | 2,591 | 73,014 | ||||||
YY, Inc., ADR(a) | 182 | 9,169 | ||||||
Zuoan Fashion Ltd., Sponsored ADR(a) | 147 | 297 | ||||||
|
| |||||||
5,744,495 | ||||||||
|
| |||||||
India (13.43%) |
| |||||||
Axis Bank Ltd., GDR(b) | 4,650 | 88,257 | ||||||
Dr. Reddy’s Laboratories Ltd., ADR | 1,678 | 68,378 | ||||||
GAIL India Ltd., GDR(b) | 1,025 | 31,529 | ||||||
HDFC Bank Ltd., ADR | 7,868 | 261,060 | ||||||
ICICI Bank Ltd., Sponsored ADR | 5,685 | 203,864 | ||||||
Infosys Ltd., Sponsored ADR | 9,733 | 525,777 | ||||||
Larsen & Toubro Ltd., GDR(b) | 4,506 | 74,259 | ||||||
Mahindra & Mahindra Ltd., Sponsored GDR(b) | 6,102 | 93,666 | ||||||
Ranbaxy Laboratories Ltd., Sponsored GDR(a)(b) | 2,545 | 16,962 | ||||||
Rediff.Com India Ltd., ADR(a) | 262 | 579 | ||||||
Reliance Industries Ltd., Sponsored GDR(c) | 15,973 | 436,702 | ||||||
Sesa Sterlite Ltd., ADR | 6,281 | 72,546 | ||||||
Sify Technologies Ltd., Sponsored ADR(a) | 500 | 975 | ||||||
State Bank of India, GDR(b) | 1,377 | 79,866 | ||||||
Tata Motors Ltd., Sponsored ADR | 3,798 | 123,321 | ||||||
Tata Steel Ltd., GDR(b) | 4,679 | 29,314 | ||||||
Wipro Ltd., ADR | 11,870 | 138,523 | ||||||
WNS Holdings Ltd., ADR(a) | 1,021 | 20,440 | ||||||
|
| |||||||
2,266,018 | ||||||||
|
| |||||||
Indonesia (0.97%) |
| |||||||
Telekomunikasi Indonesia Persero Tbk PT, Sponsored ADR | 4,485 | 163,882 | ||||||
|
| |||||||
Phillipines (0.64%) |
| |||||||
Philippine Long Distance Telephone Co., Sponsored ADR | 1,731 | 108,239 | ||||||
|
| |||||||
South Korea (32.01%) |
| |||||||
Gravity Co. Ltd., Sponsored ADR(a) | 232 | 218 | ||||||
Hyundai Motor Co., GDR(b) | 1,016 | 59,842 | ||||||
KB Financial Group, Inc., ADR | 7,804 | 290,933 | ||||||
Korea Electric Power Corp., Sponsored ADR(a) | 10,386 | 158,075 | ||||||
KT Corp., Sponsored ADR | 5,162 | 80,889 | ||||||
LG Display Co. Ltd., ADR(a) | 8,961 | 103,858 | ||||||
LG Electronics, Inc., GDR(b)(c) | 667 | 7,831 |
Security Description | Shares | Value | ||||||||||
South Korea (continued) |
| |||||||||||
Lotte Shopping Co. Ltd., |
| 5,601 | $ | 102,890 | ||||||||
POSCO, ADR |
| 6,267 | 485,630 | |||||||||
Samsung Electronics Co. Ltd., GDR(b) |
| 4,876 | 3,452,208 | |||||||||
Shinhan Financial Group Co. Ltd., ADR |
| 9,577 | 404,533 | |||||||||
SK Telecom Co. Ltd., ADR |
| 7,197 | 171,864 | |||||||||
Woori Finance Holdings Co. Ltd., ADR |
| 2,333 | 83,358 | |||||||||
|
| |||||||||||
5,402,129 | ||||||||||||
|
| |||||||||||
Taiwan (16.33%) |
| |||||||||||
Acer, Inc., Sponsored GDR(a)(b) |
| 10,585 | 28,463 | |||||||||
Advanced Semiconductor Engineering, Inc., ADR |
| 24,259 | 122,265 | |||||||||
AU Optronics Corp., Sponsored ADR(a) |
| 17,954 | 55,657 | |||||||||
China Steel Corp., Sponsored GDR(b) |
| 12,152 | 203,546 | |||||||||
Chunghwa Telecom Co. Ltd., ADR |
| 7,680 | 239,002 | |||||||||
Himax Technologies, Inc., ADR |
| 2,235 | 22,350 | |||||||||
Hon Hai Precision Industry Co. Ltd., GDR(b) |
| 113,043 | 591,215 | |||||||||
Silicon Motion Technology Corp., ADR |
| 685 | 10,227 | |||||||||
Siliconware Precision Industries Co., Sponsored ADR |
| 11,861 | 69,506 | |||||||||
Taiwan Semiconductor Manufacturing Co. Ltd., Sponsored ADR |
| 74,336 | 1,317,977 | |||||||||
United Microelectronics Corp., Sponsored ADR |
| 48,097 | 96,675 | |||||||||
|
| |||||||||||
2,756,883 | ||||||||||||
|
| |||||||||||
TOTAL COMMON STOCKS |
| |||||||||||
(Cost $15,931,301) | 16,441,646 | |||||||||||
|
| |||||||||||
PREFERRED STOCK (2.59%) |
| |||||||||||
South Korea (2.59%) |
| |||||||||||
Samsung Electronics Co. Ltd., GDR(b) |
| 924 | 437,514 | |||||||||
|
| |||||||||||
TOTAL PREFERRED STOCK |
| |||||||||||
(Cost $411,113) | 437,514 | |||||||||||
|
| |||||||||||
| ||||||||||||
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (0.05%) |
| |||||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(d) | 8,086 | 8,086 | |||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS |
| |||||||||||
(Cost $8,086) | 8,086 | |||||||||||
|
| |||||||||||
TOTAL INVESTMENTS (100.05%) |
| |||||||||||
(Cost $16,350,500) | $ | 16,887,246 | ||||||||||
NET LIABILITIES LESS OTHER |
| (8,464) | ||||||||||
|
| |||||||||||
NET ASSETS (100.00%) |
| $ | 16,878,782 | |||||||||
|
| |||||||||||
|
|
22 | Annual Report | November 30, 2013 | |
Table of Contents
SCHEDULE OF INVESTMENTS |
VelocityShares Emerging Asia DR ETF |
November 30, 2013 |
(a) | Non-income producing security. |
(b) | These securities initially sold to other parties pursuant to Regulation S under the 1933 Act and subsequently resold to the Fund. As of November 30, 2013, the aggregate market values of these securities were $5,297,362, representing 31.38% of the Fund’s net assets. |
(c) | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be resold in transactions exempt from registration, normally to qualified institutional buyers. As of November 30, 2013, the market values of these securities restricted under Rule 144A were $547,423, representing 3.24% of the Fund’s net assets. |
(d) | Less than 0.0005%. |
Common Abbreviations:
ADR - American Depositary Receipt.
GDR - Global Depositary Receipt.
Ltd. - Limited.
Tbk PT - Terbuka Perseroan Terbatas is an Indonesian term for a limited liability company.
See Notes to Financial Statements.
www.velocitysharesetfs.com | 23 | |
Table of Contents
![]() | SCHEDULE OF INVESTMENTS | |
VelocityShares Tail Risk Hedged Large Cap ETF November 30, 2013 |
Security Description | Shares | Value | ||||||
EXCHANGE TRADED FUNDS (85.11%) |
| |||||||
Equity Fund (85.11%) | ||||||||
iShares® Core S&P 500® ETF | 2,085 | $ | 379,387 | |||||
SPDR® S&P 500® ETF | 2,097 | 379,557 | ||||||
Vanguard® S&P 500® ETF | 2,290 | 379,453 | ||||||
|
| |||||||
1,138,397 | ||||||||
|
| |||||||
TOTAL EXCHANGE TRADED FUNDS |
| |||||||
(Cost $1,002,119) | 1,138,397 | |||||||
|
| |||||||
TOTAL INVESTMENTS (85.11%) |
| |||||||
(Cost $1,002,119) | $ | 1,138,397 | ||||||
NET OTHER ASSETS AND LIABILITIES (14.89%) |
| 199,180 | ||||||
|
| |||||||
NET ASSETS (100.00%) |
| $ | 1,337,577 | |||||
|
|
Common Abbreviations:
ETF - Exchange Traded Fund.
S&P - Standard and Poor’s.
SPDR - Standard and Poor’s Depositary Receipt.
TOTAL RETURN SWAP CONTRACTS(*)
Reference Obligation | Swap Counterparty | Rate Paid by the Fund | Termination Dates | Notional Amount | Unrealized Appreciation | |||||||||
| ||||||||||||||
S&P 500® VIX® Futures Tail Risk Index - Short Term | BNP Paribas | 1.970% | 08/04/2015 | $ | 5,546 | $ | 4 | |||||||
|
| |||||||||||||
$ | 4 | |||||||||||||
|
| |||||||||||||
Reference Obligation | Swap Counterparty | Rate Paid by the Fund | Termination Dates | Notional Amount | Unrealized Depreciation | |||||||||
| ||||||||||||||
S&P 500® VIX® Futures Tail Risk Index - Short Term | BNP Paribas | 1.970% | 02/03/2015 | $ | 192,807 | $ | (36,226) | |||||||
S&P 500® VIX® Futures Tail Risk Index - Short Term | BNP Paribas | 1.970% | 03/02/2015 | 16,505 | (1,541) | |||||||||
S&P 500® VIX® Futures Tail Risk Index - Short Term | BNP Paribas | 1.970% | 08/04/2015 | 23,923 | (521) | |||||||||
|
| |||||||||||||
$ | (38,288) | |||||||||||||
|
|
(*) | The Fund receives payments based on any positive return of the Reference Obligation net of the rate paid by the Fund. The Fund makes payments on any negative return of such Reference Obligation in addition to the rate paid by the Fund. |
See Notes to Financial Statements.
24 | Annual Report | November 30, 2013 | |
Table of Contents
SCHEDULE OF INVESTMENTS |
VelocityShares Volatility Hedged Large Cap ETF November 30, 2013 |
Security Description | Shares | Value | ||||||
EXCHANGE TRADED FUNDS (85.09%) |
| |||||||
Equity Fund (85.09%) | ||||||||
iShares® Core S&P 500® ETF | 13,024 | $ | 2,369,847 | |||||
SPDR® S&P 500® ETF | 13,096 | 2,370,376 | ||||||
Vanguard® S&P 500® ETF | 14,305 | 2,370,339 | ||||||
|
| |||||||
7,110,562 | ||||||||
|
| |||||||
TOTAL EXCHANGE TRADED FUNDS |
| |||||||
(Cost $6,463,448) | 7,110,562 | |||||||
|
| |||||||
TOTAL INVESTMENTS (85.09%) |
| |||||||
(Cost $6,463,448) | $ | 7,110,562 | ||||||
NET OTHER ASSETS AND LIABILITIES (14.91%) |
| 1,245,959 | ||||||
|
| |||||||
NET ASSETS (100.00%) |
| $ | 8,356,521 | |||||
|
|
Common Abbreviations:
ETF - Exchange Traded Fund.
S&P - Standard and Poor’s.
SPDR - Standard and Poor’s Depositary Receipt.
TOTAL RETURN SWAP CONTRACTS(*)
Reference Obligation | Swap Counterparty | Rate Paid by the Fund | Termination Dates | Notional Amount | Unrealized Appreciation | |||||||||
| ||||||||||||||
S&P 500® VIX® Futures Variable Long/Short Index - Short Term | BNP Paribas | 1.970% | 02/03/2015 | $ | 754,851 | $ | 4,033 | |||||||
S&P 500® VIX® Futures Variable Long/Short Index - Short Term | BNP Paribas | 1.970% | 03/02/2015 | 9,512 | 263 | |||||||||
S&P 500® VIX® Futures Variable Long/Short Index - Short Term | BNP Paribas | 1.970% | 04/01/2015 | 10,372 | 156 | |||||||||
S&P 500® VIX® Futures Variable Long/Short Index - Short Term | BNP Paribas | 1.970% | 08/04/2015 | 453,217 | 13,974 | |||||||||
|
| |||||||||||||
$ | 18,426 | |||||||||||||
|
| |||||||||||||
Reference Obligation | Swap Counterparty | Rate Paid by the Fund | Termination Dates | Notional Amount | Unrealized Depreciation | |||||||||
| ||||||||||||||
S&P 500® VIX® Futures Variable Long/Short Index - Short Term | BNP Paribas | 1.970% | 03/02/2015 | $ | 5,271 | $ | (78 | ) | ||||||
|
| |||||||||||||
$ | (78 | ) | ||||||||||||
|
|
(*) | The Fund receives payments based on any positive return of the Reference Obligation net of the rate paid by the Fund. The Fund makes payments on any negative return of such Reference Obligation in addition to the rate paid by the Fund. |
See Notes to Financial Statements.
www.velocitysharesetfs.com | 25 | |
Table of Contents
![]() | ||
November 30, 2013 |
VelocityShares Emerging Markets DR ETF | VelocityShares Russia Select DR ETF | VelocityShares Emerging Asia DR ETF | VelocityShares Tail Risk Hedged Large Cap ETF | VelocityShares Volatility Hedged Large Cap ETF | ||||||||||||||||
ASSETS: | ||||||||||||||||||||
Investments, at value | $ | 2,561,200 | $ | 2,574,619 | $ | 16,887,246 | $ | 1,138,397 | $ | 7,110,562 | ||||||||||
Cash | 166 | – | 48 | 233,153 | 1,239,793 | |||||||||||||||
Receivable for investments sold | – | – | – | 6,673 | – | |||||||||||||||
Receivable for foreign tax reclaims | 60 | – | 237 | – | – | |||||||||||||||
Dividends receivable | 1,527 | 1,537 | 56 | – | – | |||||||||||||||
Unrealized appreciation on total return swap contracts | – | – | – | 4 | 18,426 | |||||||||||||||
| ||||||||||||||||||||
Total Assets | 2,562,953 | 2,576,156 | 16,887,587 | 1,378,227 | 8,368,781 | |||||||||||||||
| ||||||||||||||||||||
LIABILITIES: | ||||||||||||||||||||
Payable to adviser | 1,361 | 1,405 | 8,805 | 706 | 4,402 | |||||||||||||||
Payable due to broker for total return swap contracts | – | – | – | 1,656 | 7,780 | |||||||||||||||
Unrealized depreciation on total return swap contracts | – | – | – | 38,288 | 78 | |||||||||||||||
| ||||||||||||||||||||
Total Liabilities | 1,361 | 1,405 | 8,805 | 40,650 | 12,260 | |||||||||||||||
| ||||||||||||||||||||
NET ASSETS | $ | 2,561,592 | $ | 2,574,751 | $ | 16,878,782 | $ | 1,337,577 | $ | 8,356,521 | ||||||||||
| ||||||||||||||||||||
NET ASSETS CONSIST OF: | ||||||||||||||||||||
Paid-in capital | $ | 2,496,049 | $ | 2,504,089 | $ | 16,361,558 | $ | 1,299,150 | $ | 7,691,466 | ||||||||||
Accumulated net investment income/(loss) | 3,282 | 4,066 | (5,799 | ) | – | – | ||||||||||||||
Accumulated net realized gain/ (loss) on investments | (3,833 | ) | (17,820 | ) | (13,723 | ) | (59,567 | ) | (407 | ) | ||||||||||
Net unrealized appreciation on investments | 66,094 | 84,416 | 536,746 | 97,994 | 665,462 | |||||||||||||||
| ||||||||||||||||||||
NET ASSETS | $ | 2,561,592 | $ | 2,574,751 | $ | 16,878,782 | $ | 1,337,577 | $ | 8,356,521 | ||||||||||
| ||||||||||||||||||||
INVESTMENTS, AT COST | $ | 2,495,106 | $ | 2,490,203 | $ | 16,350,500 | $ | 1,002,119 | $ | 6,463,448 | ||||||||||
PRICING OF SHARES: | ||||||||||||||||||||
Net Assets | $ | 2,561,592 | $ | 2,574,751 | $ | 16,878,782 | $ | 1,337,577 | $ | 8,356,521 | ||||||||||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 50,001 | 50,001 | 300,001 | 50,002 | 300,002 | |||||||||||||||
Net Asset Value, offering and redemption price per share | $ | 51.23 | $ | 51.49 | $ | 56.26 | $ | 26.75 | $ | 27.85 |
See Notes to Financial Statements.
26 | Annual Report | November 30, 2013 | |
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VelocityShares Emerging Markets DR ETF | VelocityShares Russia Select DR ETF | VelocityShares Emerging Asia DR ETF | VelocityShares Tail Risk Hedged Large Cap ETF | VelocityShares Volatility Hedged Large Cap ETF | ||||||||||||||||
For the Period April 8, 2013 operations) to November 30, 2013 | For the Period April 8, 2013 (commencement of operations) to November 30, 2013 | For the Period April 8, 2013 (commencement of operations) to November 30, 2013 | For the Period June 21, 2013 (commencement of operations) to November 30, 2013 | For the Period June 21, 2013 (commencement of operations) to November 30, 2013 | ||||||||||||||||
INVESTMENT INCOME: | ||||||||||||||||||||
Dividends(a) | $ | 50,843 | $ | 76,968 | $ | 59,178 | $ | 26,946 | $ | 43,964 | ||||||||||
| ||||||||||||||||||||
Total Investment Income | 50,843 | 76,968 | 59,178 | 26,946 | 43,964 | |||||||||||||||
| ||||||||||||||||||||
EXPENSES: | ||||||||||||||||||||
Investment adviser fees | 10,995 | 11,193 | 25,649 | 6,133 | 16,823 | |||||||||||||||
| ||||||||||||||||||||
Total Expenses | 10,995 | 11,193 | 25,649 | 6,133 | 16,823 | |||||||||||||||
| ||||||||||||||||||||
NET INVESTMENT INCOME | 39,848 | 65,775 | 33,529 | 20,813 | 27,141 | |||||||||||||||
| ||||||||||||||||||||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||||||||||||||||||
Net realized gain/(loss) on investments | (19,977 | ) | (130,830 | ) | (9,861 | ) | 199,200 | 772 | ||||||||||||
Net realized loss on total return swap contracts | – | – | – | (66,390 | ) | (7,781 | ) | |||||||||||||
Net change in unrealized appreciation on investments | 66,094 | 84,416 | 536,746 | 136,278 | 647,114 | |||||||||||||||
Net change in unrealized appreciation/(depreciation) on total return swap contracts | – | – | – | (38,284 | ) | 18,348 | ||||||||||||||
| ||||||||||||||||||||
NET REALIZED AND UNREALIZED GAIN/LOSS ON INVESTMENTS | 46,117 | (46,414 | ) | 526,885 | 230,804 | 658,453 | ||||||||||||||
| ||||||||||||||||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 85,965 | $ | 19,361 | $ | 560,414 | $ | 251,617 | $ | 685,594 | ||||||||||
|
(a) Net of foreign tax withholding ($6,967, $17,713, $10,764, $0, and $0, respectively).
See Notes to Financial Statements.
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VelocityShares Emerging Markets DR ETF | VelocityShares Russia Select DR ETF | VelocityShares Emerging Asia DR ETF | VelocityShares Tail Risk Hedged Large Cap ETF | VelocityShares Volatility Hedged Large Cap ETF | ||||||||||||||||
For the Period April 8, 2013 (commencement of operations) to November 30, 2013 | For the Period April 8, 2013 (commencement of operations) to November 30, 2013 | For the Period April 8, 2013 (commencement of operations) to November 30, 2013 | For the Period June 21, 2013 (commencement of operations) to November 30, 2013 | For the Period June 21, 2013 (commencement of operations) to November 30, 2013 | ||||||||||||||||
OPERATIONS: | ||||||||||||||||||||
Net investment income | $ | 39,848 | $ | 65,775 | $ | 33,529 | $ | 20,813 | $ | 27,141 | ||||||||||
Net realized gain/(loss) on investments and total return swap contracts | (19,977 | ) | (130,830 | ) | (9,861 | ) | 132,810 | (7,009 | ) | |||||||||||
Net change in unrealized appreciation on investments and total return swap contracts | 66,094 | 84,416 | 536,746 | 97,994 | 665,462 | |||||||||||||||
| ||||||||||||||||||||
Net increase in net assets resulting from operations | 85,965 | 19,361 | 560,414 | 251,617 | 685,594 | |||||||||||||||
| ||||||||||||||||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||||||||||||||
From net investment income | (36,566 | ) | (61,709 | ) | (43,190 | ) | (18,058 | ) | (20,539 | ) | ||||||||||
From tax return of capital | – | – | (1,659 | ) | (1,713 | ) | (9,582 | ) | ||||||||||||
| ||||||||||||||||||||
Total distributions | (36,566 | ) | (61,709 | ) | (44,849 | ) | (19,771 | ) | (30,121 | ) | ||||||||||
| ||||||||||||||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||||||||||||||
Proceeds from sale of shares | 5,000,050 | 5,000,050 | 18,840,950 | 5,000,050 | 7,701,048 | |||||||||||||||
Cost of shares redeemed | (2,487,857 | ) | (2,382,951 | ) | (2,477,733 | ) | (3,894,319 | ) | – | |||||||||||
| ||||||||||||||||||||
Net increase from share transactions | 2,512,193 | 2,617,099 | 16,363,217 | 1,105,731 | 7,701,048 | |||||||||||||||
| ||||||||||||||||||||
Net increase in net assets | 2,561,592 | 2,574,751 | 16,878,782 | 1,337,577 | 8,356,521 | |||||||||||||||
NET ASSETS: | ||||||||||||||||||||
Beginning of period | – | – | – | – | – | |||||||||||||||
| ||||||||||||||||||||
End of period* | $ | 2,561,592 | $ | 2,574,751 | $ | 16,878,782 | $ | 1,337,577 | $ | 8,356,521 | ||||||||||
| ||||||||||||||||||||
*Including accumulated net investment income/(loss) of: | $ | 3,282 | $ | 4,066 | $ | (5,799 | ) | $ | – | $ | – | |||||||||
OTHER INFORMATION: | ||||||||||||||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||||||
Beginning shares | – | – | – | – | – | |||||||||||||||
Shares sold | 100,001 | 100,001 | 350,001 | 200,002 | 300,002 | |||||||||||||||
Shares redeemed | (50,000 | ) | (50,000 | ) | (50,000 | ) | (150,000 | ) | – | |||||||||||
| ||||||||||||||||||||
Shares outstanding, end of period | 50,001 | 50,001 | 300,001 | 50,002 | 300,002 | |||||||||||||||
|
See Notes to Financial Statements.
28 | Annual Report | November 30, 2013 | |
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For the Shares Outstanding For the Period Presented |
VelocityShares Emerging Markets DR ETF | VelocityShares Russia Select DR ETF | VelocityShares Emerging Asia DR ETF | VelocityShares Tail Risk Hedged Large Cap ETF | VelocityShares Volatility Hedged Large Cap ETF | ||||||||||||||||
For the Period April 8, 2013 (commencement of operations) to November 30, 2013 | For the Period April 8, 2013 (commencement of operations) to November 30, 2013 | For the Period April 8, 2013 (commencement of operations) to November 30, 2013 | For the Period June 21, 2013 (commencement of operations) to November 30, 2013 | For the Period June 21, 2013 (commencement of operations) to November 30, 2013 | ||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 50.00 | $ | 50.00 | $ | 50.00 | $ | 25.00 | $ | 25.00 | ||||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||
Net investment income(a) | 0.75 | 1.24 | 0.29 | 0.24 | 0.12 | |||||||||||||||
Net realized and unrealized gain | 1.21 | 1.48 | 6.65 | 1.91 | 2.88 | |||||||||||||||
| ||||||||||||||||||||
Total from investment operations | 1.96 | 2.72 | 6.94 | 2.15 | 3.00 | |||||||||||||||
| ||||||||||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||
From net investment income | (0.73 | ) | (1.23 | ) | (0.66 | ) | (0.37 | ) | (0.10 | ) | ||||||||||
From tax return of capital | – | – | (0.02 | ) | (0.03 | ) | (0.05 | ) | ||||||||||||
| ||||||||||||||||||||
Total distributions | (0.73 | ) | (1.23 | ) | (0.68 | ) | (0.40 | ) | (0.15 | ) | ||||||||||
| ||||||||||||||||||||
NET INCREASE IN NET ASSET VALUE | 1.23 | 1.49 | 6.26 | 1.75 | 2.85 | |||||||||||||||
| ||||||||||||||||||||
NET ASSET VALUE, END OF YEAR | $ | 51.23 | $ | 51.49 | $ | 56.26 | $ | 26.75 | $ | 27.85 | ||||||||||
| ||||||||||||||||||||
TOTAL RETURN(b) | 4.05 | % | 5.54 | % | 14.01 | % | 8.66 | % | 12.04 | % | ||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||
Net assets, end of year (000s) | $ | 2,562 | $ | 2,575 | $ | 16,879 | $ | 1,338 | $ | 8,357 | ||||||||||
RATIO TO AVERAGE NET ASSETS: | ||||||||||||||||||||
Expenses(c) | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | ||||||||||
Net investment income(c) | 2.36 | % | 3.82 | % | 0.85 | % | 2.21 | % | 1.05 | % | ||||||||||
PORTFOLIO TURNOVER RATE(d) | 4 | % | 16 | % | 2 | % | 4 | % | 2 | % |
(a) | Calculated using average shares outstanding. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at actual reinvestment prices. Total return calculated for a period less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. |
See Notes to Financial Statements.
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![]() | ||
November 30, 2013 | ||
1. ORGANIZATION
The ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of November 30, 2013, the Trust consists of nineteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the VelocityShares Emerging Markets DR ETF, VelocityShares Russia Select DR ETF, VelocityShares Emerging Asia DR ETF, VelocityShares Tail Risk Hedged Large Cap ETF and VelocityShares Volatility Hedged Large Cap ETF (each a “Fund” and collectively, the “Funds”). The VelocityShares Emerging Markets DR ETF, VelocityShares Russia Select DR ETF and VelocityShares Emerging Asia DR ETF commenced operations on April 8, 2013. The Velocity Shares Tail Risk Hedged Large Cap ETF and VelocityShares Volatility Hedged Large Cap ETF commenced operations on June 21, 2013.
The investment objective of the VelocityShares Emerging Markets DR ETF is to seek investment results that correspond generally to the performance, before fees and expenses, of its underlying index, the BNY Mellon Emerging Markets DR Index.
The investment objective of the VelocityShares Russia Select DR ETF is to seek investment results that correspond generally to the performance, before fees and expenses, of its underlying index, the BNY Mellon Russia Select DR Index.
The investment objective of the VelocityShares Emerging Asia DR ETF is to seek investment results that correspond generally to the performance, before fees and expenses, of its underlying index, the BNY Mellon Emerging Asia DR Index.
The investment objective of the VelocityShares Tail Risk Hedged Large Cap ETF is to seek investment results that correspond generally to the performance, before fees and expenses, of its underlying index, the VelocityShares Tail Risk-Hedged Large Cap Index.
The investment objective of the VelocityShares Volatility Hedged Large Cap ETF is to seek investment results that correspond generally to the performance, before fees and expenses, of its underlying index, the VelocityShares Volatility Hedged Large Cap Index. Together with the BNY Mellon Emerging Markets DR Index, BNY Mellon Russia Select DR Index, BNY Mellon Emerging Asia DR Index and VelocityShares Tail Risk Hedged Large Cap Index, the “Underlying Indexes”.
VelocityShares Emerging Markets DR ETF, VelocityShares Russia Select DR ETF and VelocityShares Emerging Asia DR ETF Funds Shares (“Shares”) are listed on The National Association of Securities Dealers Automated Quotation Stock Market LLC (“NAS-DAQ”). The VelocityShares Tail Risk Hedged Large Cap ETF and VelocityShares Volatility Hedged Large Cap ETF Fund Shares are listed on the New York Stock Exchange (“NYSE”) Arca. Each Fund issues and redeems Shares at net asset value (“NAV”), in blocks of 50,000 Shares, each of which is called a “Creation Unit.” Creation Units are issued and redeemed principally in-kind for securities included in a specified index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates.
A. Portfolio Valuation
Each Fund’s NAV is determined daily, as of the close of regular trading on the NYSE and NASDAQ, normally 4:00 p.m. Eastern Time, on each day the exchanges are open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the NASDAQ exchange are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and asked prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the
30 | Annual Report | November 30, 2013 | |
Table of Contents
NOTES TO FINANCIAL STATEMENTS |
November 30, 2013 |
principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the closing bid prices. Over-the-counter swap contracts for which market quotations are readily available are valued based on quotes received from independent pricing services or one or more dealers that make markets in such securities.
Each Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Fund may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the closing sale prices on the applicable exchange and fair value prices may not reflect the actual value of a security. A variety of factors may be considered in determining the fair value of such securities.
B. Concentration of Risk
The Funds seek to track the Underlying Indexes, which may have concentrations in certain regions, economies, countries, markets, industries or sectors. Underperformance or increased risk in such concentrated areas may result in underperformance or increased risk in the Funds.
C. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
D. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid quarterly or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually.
E. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to each Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations.
Distributions from net investment income and capital gains are determined in accordance with income tax regulations, which may differ from U.S. GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterization of distributions made by each Fund.
For the period ended November 30, 2013, permanent book and tax differences resulting primarily from in-kind transactions, swap adjustments, and investments in passive foreign investment companies were identified and reclassified among the components of the Funds’ net assets as follows:
Undistributed Net Investment Income/(Loss) | Accumulated Net Realized Gain/(Loss) | Paid-in Capital | ||||||||||
VelocityShares Emerging Markets DR ETF | $ | – | $ | 16,144 | $ | (16,144 | ) | |||||
VelocityShares Russia Select DR ETF | $ | – | $ | 113,010 | $ | (113,010 | ) | |||||
VelocityShares Emerging Asia DR ETF | $ | 3,862 | $ | (3,862 | ) | $ | – | |||||
VelocityShares Tail Risk Hedged Large Cap ETF | $ | (2,755 | ) | $ | (192,377 | ) | $ | 195,132 | ||||
VelocityShares Volatility Hedged Large Cap ETF | $ | (6,602 | ) | $ | 6,602 | $ | – |
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![]() | NOTES TO FINANCIAL STATEMENTS | |
November 30, 2013 | ||
At November 30, 2013, the Fund had available for tax purposes unused capital loss carryforwards as follows:
Short-Term | Long-Term | |||||||
VelocityShares Emerging Markets DR ETF | $ | 3,626 | $ | – | ||||
VelocityShares Russia Select DR ETF | $ | 13,766 | $ | – | ||||
VelocityShares Emerging Asia DR ETF | $ | 10,288 | $ | – | ||||
VelocityShares Tail Risk Hedged Large Cap ETF | $ | 59,567 | $ | – | ||||
VelocityShares Volatility Hedged Large Cap ETF | $ | – | $ | – |
Net investment income and net realized (loss), as disclosed on The Statement of Operations, and net assets were not affected by their reclassifications.
The tax character of the distributions paid for the period ended November 30, 2013, was as follows:
Ordinary Income | Return of Capital | Total | ||||||||||
VelocityShares Emerging Markets DR ETF | $ | 36,566 | $ | – | $ | 36,566 | ||||||
VelocityShares Russia Select DR ETF | $ | 61,709 | $ | – | $ | 61,709 | ||||||
VelocityShares Emerging Asia DR ETF | $ | 43,190 | $ | 1,659 | $ | 44,849 | ||||||
VelocityShares Tail Risk Hedged Large Cap ETF | $ | 18,058 | $ | 1,713 | $ | 19,771 | ||||||
VelocityShares Volatility Hedged Large Cap ETF | $ | 20,539 | $ | 9,582 | $ | 30,121 |
As of November 30, 2013, the components of distributable earnings on a tax basis for the Fund were as follows:
Undistributed Net Investment Income | Accumulated Capital Losses | Net Unrealized Appreciation on Investments | Total | |||||||||||||
VelocityShares Emerging Markets DR ETF | $ | 5,442 | $ | (3,626 | ) | $ | 63,727 | $ | 65,543 | |||||||
VelocityShares Russia Select DR ETF | $ | 4,066 | $ | (13,766 | ) | $ | 80,362 | $ | 70,662 | |||||||
VelocityShares Emerging Asia DR ETF | $ | – | $ | (10,288 | ) | $ | 527,512 | $ | 517,224 | |||||||
VelocityShares Tail Risk Hedged Large Cap ETF | $ | – | $ | (59,567 | ) | $ | 97,994 | $ | 38,427 | |||||||
VelocityShares Volatility Hedged Large Cap ETF | $ | – | $ | – | $ | 665,055 | $ | 665,055 |
As of November 30, 2013, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/ (depreciation) on investments were as follows:
Cost of investments for income tax purposes | Gross Appreciation (excess of value over tax cost) | Gross Depreciation (excess of tax cost over value) | Net Appreciation/ (Depreciation) on derivatives | Net Unrealized Appreciation/ (Depreciation) | ||||||||||||||||
VelocityShares Emerging Markets DR ETF | $ | 2,497,473 | $ | 217,549 | $ | (153,822 | ) | $ | – | $ | 63,727 | |||||||||
VelocityShares Russia Select DR ETF | $ | 2,494,257 | $ | 181,995 | $ | (101,633 | ) | $ | – | $ | 80,362 | |||||||||
VelocityShares Emerging Asia DR ETF | $ | 16,359,734 | $ | 749,527 | $ | (222,015 | ) | $ | – | $ | 527,512 | |||||||||
VelocityShares Tail Risk Hedged Large Cap ETF | $ | 1,002,119 | $ | 336,771 | $ | (200,493 | ) | $ | (38,284 | ) | $ | 97,994 | ||||||||
VelocityShares Volatility Hedged Large Cap ETF | $ | 6,463,855 | $ | 1,879,852 | $ | (1,233,145 | ) | $ | 18,348 | $ | 665,055 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales.
32 | Annual Report | November 30, 2013 | |
Table of Contents
NOTES TO FINANCIAL STATEMENTS |
November 30, 2013 |
F. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as each Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies.
Each Fund evaluates tax positions taken (or expected to be taken) in the course of preparing each Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the period ended November 30, 2013, each Fund did not have a liability for any unrecognized tax benefits. Each Fund files U.S. federal, state, and local tax returns as required. Each Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is generally three years after the filing of the tax return. Being that the Funds’ commenced operations in 2013, no tax returns have been filed as of the date of this report.
G. Fair Value Measurements
Each Fund discloses the classification of fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Funds’ investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy.
Investments in open-end mutual funds are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of each Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; | |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and | |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
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![]() | NOTES TO FINANCIAL STATEMENTS | |
November 30, 2013 | ||
The following is a summary of the inputs used to value each Fund’s investments at November 30, 2013:
VelocityShares Emerging Markets DR ETF
Investments in Securities at Value* | Level 1 – Unadjusted Quoted Prices | Level 2 – Other Significant Observable Inputs | Level 3 – Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 2,344,156 | $ | – | $ | – | $ | 2,344,156 | ||||||||
Preferred Stocks | 204,918 | – | – | 204,918 | ||||||||||||
Rights | – | 51 | – | 51 | ||||||||||||
Short Term Investments | 12,075 | – | – | 12,075 | ||||||||||||
TOTAL | $ | 2,561,149 | $ | 51 | $ | – | $ | 2,561,200 | ||||||||
VelocityShares Russia Select DR ETF | ||||||||||||||||
Investments in Securities at Value* | Level 1 – Unadjusted Quoted Prices | Level 2 – Other Significant Observable Inputs | Level 3 – Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 2,569,672 | $ | – | $ | – | $ | 2,569,672 | ||||||||
Short Term Investments | 4,947 | – | – | 4,947 | ||||||||||||
TOTAL | $ | 2,574,619 | $ | – | $ | – | $ | 2,574,619 | ||||||||
VelocityShares Emerging Asia DR ETF | ||||||||||||||||
Investments in Securities at Value* | Level 1 – Unadjusted Quoted Prices | Level 2 – Other Significant Observable Inputs | Level 3 – Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 16,441,646 | $ | – | $ | – | $ | 16,441,646 | ||||||||
Preferred Stocks | 437,514 | – | – | 437,514 | ||||||||||||
Short Term Investments | 8,086 | – | – | 8,086 | ||||||||||||
TOTAL | $ | 16,887,246 | $ | – | $ | – | $ | 16,887,246 | ||||||||
VelocityShares Tail Risk Hedged Large Cap ETF | ||||||||||||||||
Investments in Securities at Value* | Level 1 – Unadjusted Quoted Prices | Level 2 – Other Significant Observable Inputs | Level 3 – Significant Unobservable Inputs | Total | ||||||||||||
Exchange Traded Funds | $ | 1,138,397 | $ | – | $ | – | $ | 1,138,397 | ||||||||
TOTAL | $ | 1,138,397 | $ | – | $ | – | $ | 1,138,397 | ||||||||
Other Financial Instruments** | ||||||||||||||||
Assets | ||||||||||||||||
Total Return Swap Contracts | $ | 4 | $ | – | $ | – | $ | 4 | ||||||||
Liabilities | ||||||||||||||||
Total Return Swap Contracts | $ | (38,288 | ) | $ | – | $ | – | $ | (38,288 | ) | ||||||
Total | $ | (38,284 | ) | $ | – | $ | – | $ | (38,284 | ) | ||||||
VelocityShares Volatility Hedged Large Cap ETF | ||||||||||||||||
Investments in Securities at Value* | Level 1 – Unadjusted Quoted Prices | Level 2 – Other Significant Observable Inputs | Level 3 – Significant Unobservable Inputs | Total | ||||||||||||
Exchange Traded Funds | $ | 7,110,562 | $ | – | $ | – | $ | 7,110,562 | ||||||||
TOTAL | $ | 7,110,562 | $ | – | $ | – | $ | 7,110,562 | ||||||||
Other Financial Instruments** | ||||||||||||||||
Assets | ||||||||||||||||
Total Return Swap Contracts | $ | 18,426 | $ | – | $ | – | $ | 18,426 | ||||||||
Liabilities | ||||||||||||||||
Total Return Swap Contracts | $ | (78 | ) | $ | – | $ | – | $ | (78 | ) | ||||||
Total | $ | 18,349 | $ | – | $ | – | $ | 18,349 | ||||||||
* | For detailed country and industry descriptions, see the accompanying Schedule of Investments. |
** | Other financial instruments are instruments not reflected in the Schedule of Investments. |
34 | Annual Report | November 30, 2013 | |
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NOTES TO FINANCIAL STATEMENTS |
November 30, 2013 |
Each Fund recognizes transfers between levels as of the end of the period. For the period ended November 30, 2013, each Fund did not have any transfers between Level 1 and Level 2 securities. The Funds did not have any securities which used significant unobservable inputs (Level 3) in determining fair value.
3. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
As a part of their investment strategy, the VelocityShares Tail Risk Hedged Large Cap ETF and the VelocityShares Volatility Hedged Large Cap ETF are permitted to purchase investment securities, and enter into various types of derivatives contracts. In doing so, the Funds employ strategies in differing combinations that permit them to increase, decrease, or change the level or types of exposure to market factors. Central to those strategies are features inherent in derivatives that make them more attractive for this purpose than equity or debt securities; they require little or no initial cash investment, they can focus exposure on only certain selected risk factors, and they may not require the ultimate receipt or delivery of the underlying security (or securities) to the contract. This may allow the Funds to pursue their objectives more quickly and efficiently than if they were to make direct purchases or sales of securities capable of affecting a similar response to market factors.
A Fund’s use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments. Derivatives are subject to a number of risks including liquidity risk, market risk, credit risk, default risk, counterparty risk and management risk. They also involve the risk of mispricing or improper valuation and the risk that changes in the value of the derivative may not correlate exactly with the change in the value of the underlying asset, rate or index.
Market Risk Factors: In pursuit of their investment objectives, certain Funds may seek to use derivatives to increase or decrease their exposure to the following market risk factors:
Credit Risk: Credit risk is the risk an issuer will be unable to make principal and interest payments when due, or will default on its obligations.
Equity Risk: Equity risk relates to the change in value of equity securities as they relate to increases or decreases in the general market.
Swaps: Swap agreements are contracts between parties in which one party agrees to make periodic payments to the other party (the “Counterparty”) based on the change in market value or level of a specified rate, index or asset. In return, the Coun-terparty agrees to make periodic payments to the first party based on the return of a different specified rate, index or asset. Swap agreements will usually be done on a net basis, the Funds receiving or paying only the net amount of the two payments. The net amount of the excess, if any, of the Funds’ obligations over its entitlements with respect to each swap is accrued on a daily basis and an amount of cash or highly liquid securities having an aggregate value at least equal to the accrued excess is maintained in an account at the Trust’s custodian bank. The use of interest rate and index swaps is a highly specialized activity that involves investment techniques and risks different from those associated with ordinary portfolio security transactions. These transactions generally do not involve the delivery of securities or other underlying assets or principal. The use of swap agreements involves certain risks. For example, if the Counterparty under a swap agreement defaults on its obligation to make payments due from it, as a result of its bankruptcy or otherwise, the Funds may lose such payments altogether, or collect only a portion thereof, which collection could involve costs or delays.
Swap Risk: The VelocityShares Tail Risk Hedged Large Cap ETF and the VelocityShares Volatility Hedged Large Cap ETF use swap agreements to obtain exposure to the volatility component of each Fund’s underlying index. Swap agreements provide that when the period payment dates for both parties are the same, the payments are made on a net basis (i.e., the two payment streams are netted out, with only the net amount paid by one party to the other). The Fund’s obligations or rights under a swap contract entered into on a net basis will generally be equal only to the net amount to be paid or received under the agreement, based on the relative values of the positions held by each counterparty. The swap agreements are traded over the counter. The counterparty to swap agreements is generally a single bank or other financial institution, rather than a clearing organization backed by a group of financial institutions.
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![]() | NOTES TO FINANCIAL STATEMENTS | |
November 30, 2013 | ||
As a result, the VelocityShares Tail Risk Hedged Large Cap ETF and the VelocityShares Volatility Hedged Large Cap ETF are subject to credit risk with respect to amounts they expect to receive from counterparties to swaps entered into as part of their principal investment strategies. If a counterparty becomes bankrupt or otherwise fails to perform its obligations due to financial difficulties, the Funds could suffer significant losses on these contracts and the value of an investor’s investment in the Funds may decline. The Funds typically enter into swap transactions only with large, well capitalized and well established financial institutions. Swaps are less marketable because they are not traded on an exchange, do not have uniform terms and conditions, and are entered into based upon the creditworthiness of the parties and the availability of credit support, such as collateral, and in general, are not transferable without the consent of the counterparty. Swap agreements may entail breakage costs if terminated prior to the final maturity date.
During the period ended November 30, 2013, the VelocityShares Tail Risk Hedged Large Cap ETF and the VelocityShares Volatility Hedged Large Cap ETF invested in swap agreements consistent with their investment strategies to gain exposure to certain indices. Swap agreements held at November 30, 2013 are disclosed in the Schedule of Investments. No other Funds held swap agreements at November 30, 2013.
The effect of derivative instruments on the Statements of Assets and Liabilities for the period ended November 30, 2013(a):
Derivatives Not Accounted for as Hedging Instruments | Asset Derivatives Statements of Assets and Liabilities Location | Fair Value | Liability Derivatives Statements of Assets and Liabilities Location | Fair Value | ||||||||
VelocityShares Tail Risk Hedged Large Cap ETF | ||||||||||||
Equity Contracts (Total Return Swap Contracts) | Unrealized appreciation on total return swap contracts | $ | 4 | Unrealized depreciation on total return swap contracts | $ | 38,288 | ||||||
$ | 4 | $ | 38,288 | |||||||||
VelocityShares Volatility Hedged Large Cap ETF | ||||||||||||
Equity Contracts (Total Return Swap Contracts) | Unrealized appreciation on total return swap contracts | $ | 18,426 | Unrealized depreciation on total return swap contracts | $ | 78 | ||||||
$ | 18,426 | $ | 78 | |||||||||
(a) | For open derivative instruments as of November 30, 2013, see the Schedule of Investments. |
The gains/(losses) in the table below are included in the “Net realized gain/(loss)” or “Net change in unrealized gain/(loss)” on the Statements of Operations.
The effect of derivatives Instruments on the Statements of Operations for the period ended November 30, 2013:
Derivatives Not Accounted for as Hedging Instruments | Location of Gain/(Loss) on Derivatives Recognized in Income | Realized Gain/(Loss) on Derivatives Recognized in Income | Change in Unrealized Appreciation/(Depreciation) on Derivatives Recognized in Income | |||||||
VelocityShares Tail Risk Hedged Large Cap ETF | ||||||||||
Equity Contracts (Total Return Swap Contracts) | Net realized loss on total return swap contracts/Net change in unrealized appreciation/ (depreciation) on total return swap contracts | $ | (66,390 | ) | $ | (38,284 | ) | |||
$ | (66,390 | ) | $ | (38,284 | ) | |||||
VelocityShares Volatility Hedged Large Cap ETF | ||||||||||
Equity Contracts (Total Return Swap Contracts) | Net realized loss on total return swap contracts/Net change in unrealized appreciation/ (depreciation) on total return swap contracts | $ | (7,781 | ) | $ | 18,348 | ||||
$ | (7,781 | ) | $ | 18,348 | ||||||
36 | Annual Report | November 30, 2013 | |
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NOTES TO FINANCIAL STATEMENTS |
November 30, 2013 |
Volume of derivative instruments for the Funds for the period ended November 30, 2013 was as follows:
Derivative Type | Unit of Measurement | Monthly Average | ||
VelocityShares Tail Risk Hedged Large Cap ETF | ||||
Total Return Swap Contracts | Notional Quantity | 2,522 | ||
VelocityShares Volatility Hedged Large Cap ETF | ||||
Total Return Swap Contracts | Notional Quantity | 2,712 |
Financial Accounting Standards Board (“FASB”) Accounting Standards Update 2011-11, Disclosures about Offsetting Assets and Liabilities, requires an entity that has financial instruments that are either (1) offset or (2) subject to an enforceable master netting arrangement or similar agreement to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position.
The following table presents financial instruments that are subject to enforceable netting arrangements or other similar agreements as of November 30, 2013:
VelocityShares Tail Risk Hedged Large Cap ETF Offsetting of Derivatives Assets | ||||||||||||
November 30, 2013 | Gross Amounts Not Offset in the Statement of Financial Position | |||||||||||
Description | Gross Amounts of Recognized Assets | Gross Amounts Offset in the Statement of Financial Position | Net Amounts Presented in the Statement of Financial Position | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||
Total Return Swap Contracts | $ 4 | $ – | $ 4 | $ – | $ – | $ 4 | ||||||
VelocityShares Tail Risk Hedged Large Cap ETF Offsetting of Derivatives Liabilities | ||||||||||||
November 30, 2013 | Gross Amounts Not Offset in the Statement of Financial Position | |||||||||||
Description | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statement of Financial Position | Net Amounts Presented in the Statement of Financial Position | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||
Total Return Swap Contracts | $ 38,288 | $ – | $ 38,288 | $ – | $ – | $ 38,288 | ||||||
VelocityShares Volatility Hedged Large Cap ETF Offsetting of Derivatives Assets | ||||||||||||
November 30, 2013 | Gross Amounts Not Offset in the Statement of Financial Position | |||||||||||
Description | Gross Amounts of Recognized Asset | Gross Amounts Offset in the Statement of Financial Position | Net Amounts Presented in the Statement of | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||
Total Return Swap Contracts | $ 18,426 | $ – | $ 18,426 | $ – | $ – | $ 18,426 | ||||||
VelocityShares Tail Risk Hedged Large Cap ETF Offsetting of Derivatives Liabilities | ||||||||||||
November 30, 2013 | Gross Amounts Not Offset in the Statement of Financial Position | |||||||||||
Description | Gross Amounts of Recognized Liabilities | Gross Amounts in the Statement of Financial Position | Net Amounts Presented in the Statement of | Financial Instruments | Cash Collateral Pledged | Net Amount | ||||||
Total Return Swap Contracts | $ 78 | $ – | $ 78 | $ – | $ – | $ 78 |
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![]() | NOTES TO FINANCIAL STATEMENTS | |
November 30, 2013 | ||
4. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Investment Adviser”) acts as each Fund’s investment adviser pursuant to an advisory agreement with the Trust on behalf of each Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, each Fund pays the Investment Adviser a unitary fee for the services and facilities it provides, accrued daily on average net assets and payable on a monthly basis, at the annual rates listed below. From time to time, the Adviser may waive all or a portion of its fee.
Fund | Advisory Fee | |
VelocityShares Emerging Markets DR ETF | 0.65% | |
VelocityShares Russia Select DR ETF | 0.65% | |
VelocityShares Emerging Asia DR ETF | 0.65% | |
VelocityShares Tail Risk Hedged Large Cap ETF | 0.65% | |
VelocityShares Volatility Hedged Large Cap ETF | 0.65% |
Out of the unitary management fees, the Investment Adviser pays substantially all expenses of the Funds, including the licensing fee of the Index provider, and the cost of transfer agency, custody, fund administration, legal, audit, trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Funds’ business. In addition, the Investment Adviser’s unitary management fees are designed to compensate the Investment Adviser for providing services for the Funds.
ALPS Fund Services, Inc. (“ALPS”), an affiliate of the Investment Adviser, is the administrator of the Funds.
Each Trustee who is not an officer or employee of the Investment Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) is paid a quarterly retainer of $5,000, $3,750 for each regularly scheduled Board meeting attended and $1,500 for each special meeting held outside of regularly scheduled meetings.
5. PURCHASES AND SALES OF SECURITIES
For the period ended November 30, 2013, the cost of purchases and proceeds from sales of investment securities, excluding short-term investments and in-kind transactions, were as follows:
Purchases | Sales | |||||||
VelocityShares Emerging Markets DR ETF | $ | 100,292 | $ | 89,364 | ||||
VelocityShares Russia Select DR ETF | $ | 423,470 | $ | 385,504 | ||||
VelocityShares Emerging Asia DR ETF | $ | 137,435 | $ | 2,559,577 | ||||
VelocityShares Tail Risk Hedged Large Cap ETF | $ | 85,383 | $ | 59,748 | ||||
VelocityShares Volatility Hedged Large Cap ETF | $ | 92,240 | $ | 100,398 | ||||
For the period ended November 30, 2013, the cost of in-kind purchases and proceeds from in-kind sales, were as follows: | ||||||||
Purchases | Sales | |||||||
VelocityShares Emerging Markets DR ETF | $ | 4,980,058 | $ | 2,487,742 | ||||
VelocityShares Russia Select DR ETF | $ | 4,961,152 | $ | 2,383,032 | ||||
VelocityShares Emerging Asia DR ETF | $ | 18,774,431 | $ | – | ||||
VelocityShares Tail Risk Hedged Large Cap ETF | $ | 4,143,442 | $ | 3,366,160 | ||||
VelocityShares Volatility Hedged Large Cap ETF | $ | 6,470,834 | $ | – |
Gains on in-kind transactions are not considered taxable for federal income tax purposes.
6. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Fund. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the net asset value per unit of each 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 AP or as a result of other market circumstances.
38 | Annual Report | November 30, 2013 | |
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NOTES TO FINANCIAL STATEMENTS |
November 30, 2013 |
7. INDEMNIFICATIONS
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
8. NEW ACCOUNTING PRONOUNCEMENTS
In June 2013, the FASB issued ASU No. 2013-08, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The FASB standard identifies characteristics a company must assess to determine whether it is considered an investment company for financial reporting purposes. This ASU is effective for fiscal years beginning after December 15, 2013. The Funds are currently reviewing the requirements and believe the adoption of this ASU will not have a material impact on the financial statements.
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![]() | ||
November 30, 2013 (Unaudited) | ||
PROXY VOTING POLICIES AND PROCEDURES
A description of the Funds’ proxy voting policies and procedures used in determining how to vote for proxies and information regarding how the Funds voted proxies related to portfolio securities during the most recent 12-month period ended June 30th is available without charge, (1) on the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov; (2) upon request, by calling (toll-free) 1-866-513-5856; and (3) on the Trust’s website located at http://www.alpsfunds.com.
PORTFOLIO HOLDINGS
The Trust will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q will be available (1) on the SEC’s website at http://www.sec.gov; (2) by calling (toll-free) 1-866-513-5856; (3) on the Trust’s website located at http://www.alpsfunds.com; and (4) for review and copying at the SEC’s Public Reference Room (“PRR”) in Washington D.C. Information regarding the operation of the PRR may be obtained by calling (toll-free) 1-800-732-0330.
TAX INFORMATION
Pursuant to Section 853(c) of the Internal Revenue Code, the following Funds designate the following:
Foreign Taxes Paid | Foreign Source Income | |||||||
VelocityShares Emerging Markets DR ETF | $ | 5,325 | $ | 53,614 | ||||
VelocityShares Russia Select DR ETF | $ | 9,220 | $ | 93,538 | ||||
VelocityShares Emerging Asia DR ETF | $ | 9,908 | $ | 70,534 |
40 | Annual Report | November 30, 2013 | |
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BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT |
November 30, 2013 (Unaudited) |
VELOCITYSHARES VOLATILITY HEDGED LARGE CAP ETF
At an in-person meeting held on September 10, 2012, the Board of Trustees of the Trust (the “Board”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve the Advisory Agreement between the Trust and ALPS Advisors, Inc. (the “Adviser”) with respect to the VelocityShares Volatility Hedged Large Cap ETF (“SPXH”). The Independent Trustees also met separately to consider the Advisory Agreement.
In evaluating whether to approve the Advisory Agreement for SPXH, the Board considered numerous factors, as described below.
With respect to the nature, extent and quality of the services to be provided by the Adviser under the Advisory Agreement, representatives from the Adviser presented the Adviser’s materials regarding consideration of approval of the Advisory Agreement. The Independent Trustees noted that included in the Board materials were responses by the Adviser to a questionnaire drafted by legal counsel to the Trust to assist the Board in evaluating whether to approve the Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the services proposed to be provided under the Advisory Agreement, the proposed investment parameters of the index for SPXH, financial information regarding the Adviser, its parent company, information describing the Adviser’s current organizations and the background and experience of the persons who would be responsible for the day-to-day management of SPXH, the nature and quality of services provided to other exchange-traded (“ETFs”), open-end and closed-end funds by the Adviser. Based upon their review, the Board concluded that the Adviser was qualified to oversee the services to be provided by other service providers and that the services to be provided by the Adviser to SPXH are expected to be satisfactory.
The Independent Trustees noted the services to be provided by the Adviser for the proposed annual advisory fee of 0.65% of SPXH’s average daily net assets. The Independent Trustees noted that the advisory fees proposed for SPXH were unitary fees pursuant to which the Adviser will assume all expenses of SPXH (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than payments under the Advisory Agreement, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses. Based on its review, the Independent Trustees concluded that the expected profitability of SPXH to the Adviser was not unreasonable.
The Independent Trustees reviewed the comparative fee information, including data from Lipper Analytical Services (“Lipper”). The Independent Trustees noted that Lipper’s report contained information regarding comparisons of the proposed cost and expense structures of SPXH with other funds’ cost and expense structures. The Independent Trustees also reviewed the comparative fee information in a separate peer group analysis prepared by ALPS Fund Services, Inc. (“ALPS”). In determining the weight to be accorded the Lipper and ALPS comparative fee data respectively, the Board took into account that the Lipper group consisted solely of large cap core ETFs, which the Adviser does not believe is a representative peer group given the unique volatility hedging strategy SPXH will employ. The Board noted that the only 1940 Act ETF which utilizes a comparable volatility hedging strategy is the First Trust CBOE VIX Tail Hedge Index Fund, which charges a management fee of 0.60%. Based on the foregoing and the other information available to them, the Independent Trustees concluded that the advisory fee for SPXH was reasonable under the circumstances and in light of the quality of services provided.
The Independent Trustees also considered other benefits that may be realized by the Adviser from its relationship with SPXH and concluded that the advisory fee was reasonable taking into account any such benefits. The Independent Trustees considered the extent to which economies of scale would be realized as SPXH grows and whether the fee level reflects a reasonable sharing of such economies of scale for the benefit of the Fund’s investors. Because SPXH is newly organized, the Board reviewed the unitary advisory fee proposed for SPXH and anticipated expenses of the Fund and determined to review economies of scale in the future when SPXH had attracted assets.
Based on consideration of all factors deemed relevant, the Independent Trustees determined that approval of the Advisory Agreement was in the best interests of SPXH. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
In voting to approve the Advisory Agreement, the Trustees, including the Independent Trustees, concluded that the terms of the Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Trustees considered relevant in the exercise of their reasonable business judgment.
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![]() | BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENT | |
November 30, 2013 (Unaudited) | ||
VELOCITYSHARES TAIL RISK HEDGED LARGE CAP ETF
At an in-person meeting held on September 10, 2012, the Board of Trustees of the Trust (the “Board”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve the Advisory Agreement between the Trust and ALPS Advisors, Inc. (the “Adviser”) with respect to the VelocityShares Tail Risk Hedged Large Cap ETF (“TRSK”). The Independent Trustees also met separately to consider the Advisory Agreement.
In evaluating whether to approve the Advisory Agreement for TRSK, the Board considered numerous factors, as described below.
With respect to the nature, extent and quality of the services to be provided by the Adviser under the Advisory Agreement, representatives from the Adviser presented the Adviser’s materials regarding consideration of approval of the Advisory Agreement. The Independent Trustees noted that included in the Board materials were responses by the Adviser to a questionnaire drafted by legal counsel to the Trust to assist the Board in evaluating whether to approve the Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the services proposed to be provided under the Advisory Agreement, the proposed investment parameters of the index for TRSK, financial information regarding the Adviser, its parent company, information describing the Adviser’s current organizations and the background and experience of the persons who would be responsible for the day-to-day management of TRSK, the nature and quality of services provided to other exchange-traded (“ETFs”), open-end and closed-end funds by the Adviser. Based upon their review, the Board concluded that the Adviser was qualified to oversee the services to be provided by other service providers and that the services to be provided by the Adviser to TRSK are expected to be satisfactory.
The Independent Trustees noted the services to be provided by the Adviser for the proposed annual advisory fee of 0.65% of TRSK’s average daily net assets. The Independent Trustees noted that the advisory fees proposed for TRSK were unitary fees pursuant to which the Adviser will assume all expenses of TRSK (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than payments under the Advisory Agreement, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses. . Based on its review, the Independent Trustees concluded that the expected profitability of TRSK to the Adviser was not unreasonable.
The Independent Trustees reviewed the comparative fee information, including data from Lipper Analytical Services (“Lipper”). The Independent Trustees noted that Lipper’s report contained information regarding comparisons of the proposed cost and expense structures of TRSK with other funds’ cost and expense structures. The Independent Trustees also reviewed the comparative fee information in a separate peer group analysis prepared by ALPS Fund Services, Inc. (“ALPS”). In determining the weight to be accorded the Lipper and ALPS comparative fee data respectively, the Independent Trustees took into account that the Lipper group consisted solely of large cap core ETFs, which the Adviser does not believe is a representative peer group given the unique volatility hedging strategy TRSK will employ. Based on the foregoing and the other information available to them, the Independent Trustees concluded that the advisory fee for TRSK was reasonable under the circumstances and in light of the quality of services provided.
The Independent Trustees also considered other benefits that may be realized by the Adviser from its relationship with TRSK and concluded that the advisory fee was reasonable taking into account any such benefits. The Independent Trustees considered the extent to which economies of scale would be realized as TRSK grows and whether fee level reflects a reasonable sharing of such economies of scale for the benefit of the Fund’s investors. Because TRSK is newly organized, the Independent Trustees reviewed the unitary advisory fee proposed for TRSK and anticipated expenses of the Fund and determined to review economies of scale in the future when TRSK had attracted assets.
Based on consideration of all factors deemed relevant, the Independent Trustees determined that approval of the Advisory Agreement was in the best interests of TRSK and its shareholders. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
In voting to approve the Advisory Agreement, the Trustees, including the Independent Trustees, concluded that the terms of the Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Trustees considered relevant in the exercise of their reasonable business judgment.
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November 30, 2013 (Unaudited) |
INDEPENDENT TRUSTEES
Name, Ad- dress and Year of Birth of Trustee* | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustees*** | Other Directorships Held by Trustees | |||||
Mary K. Anstine, 1940 | Trustee | Since March 2008 | Ms. Anstine was President/Chief Executive Officer of HealthONE Alliance, Denver, Colorado, and former Executive Vice President of First Interstate Bank of Denver. Ms. Anstine is also Trustee/Director of the following: AV Hunter Trust; Colorado Uplift Board. Ms. Anstine was formerly a Director of the Trust Bank of Colorado (later purchased and now known as Northern Trust Bank), HealthONE and Denver Area Council of the Boy Scouts of America and a member of the American Bankers Association Trust Executive Committee. | 41 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder, Chief Operations Officer and Chief Financial Officer of Green Alpha Advisors, LLC. Prior to joining Green Alpha Advisors, Mr. Deems was CFO and Treasurer of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC, a private investment fund, and Sutton Place Management, LLC, an administrative services company, from 2004 to June 2007. Prior to this, Mr. Deems served as Controller of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC and Sutton Place Management, LLC. | 41 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); and Reaves Utility Income Fund. | |||||
Rick A. Pederson, 1952 | Trustee | Since March 2008 | Mr. Pederson is President, Foundation Properties, Inc. (a real estate investment management company), 1994 - present; Advisory Committee, Bow River Capital Partners (private equity management), 2003 - present; Advisor, Pauls Corporation (real estate investment management and development), 2008 - present; Chairman, Ross Consulting Group (real estate consulting services) 1983-2013; Advisory Board, Neenan Company (construction services) 2002-present; Board Member, Urban Land Conservancy (a not-for-profit organization), 2004 - present; Director, National Western Stock Show (not-for- profit organization). | 22 | Mr. Pederson is Trustee of Westcore Trust (12 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
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![]() | TRUSTEES & OFFICERS | |
November 30, 2013 (Unaudited) | ||
INTERESTED TRUSTEE
Name, Address and Year of Birth of | Position(s) Held with Trust | Term of Office and Length of Time Served** | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen by Trustees*** | Other Directorships Held by Trustees | |||||
Thomas A. Carter, 1966 | Trustee and President | Since March 2008 | Mr. Carter joined ALPS Fund Services, Inc. (“ALPS”) in 1994 and is currently President and Director of ALPS Advisors, Inc. (“AAI”), ALPS Distributors, Inc. (“ADI”) and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”). Because of his position with AHI, ALPS, ADI, APSD and AAI, Mr. Carter is deemed an affiliate of the Fund as defined under the 1940 Act. Before joining ALPS, Mr. Carter was with Deloitte & Touché LLP, where he worked with a diverse group of clients, primarily within the financial services industry. Mr. Carter is a Certified Public Accountant and received his Bachelor of Science in Accounting from the University of Colorado at Boulder. | 29 | Mr. Carter is a Trustee of ALPS Variable Investment Trust (7 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
44 | Annual Report | November 30, 2013 | |
Table of Contents
TRUSTEES & OFFICERS |
November 30, 2013 (Unaudited) |
OFFICERS
Name, Address and Year of Birth of Officer* | Position(s) Held with Trust | Length of Time Served** | Principal Occupation(s) During Past 5 Years | |||
Melanie Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars currently serves as a Deputy Chief Compliance Officer with ALPS. Prior to joining ALPS in September 2009, Ms. Zimdars served as Principal Financial Officer, Treasurer and Secretary for the Wasatch Funds from February 2007 to December 2008. From November 2006 to February 2007, she served as Assistant Treasurer for the Wasatch Funds and served as a Senior Compliance Officer for Wasatch Advisors, Inc. since 2005. Because of her position with ALPS, Ms. Zimdars is deemed an affiliate of the Trust as defined under the 1940 Act. Ms. Zimdars is also the CCO of ALPS Variable Investment Trust, Liberty All-Star Growth Fund, Inc., Liberty All-Star Equity Fund and BPV Family of Funds.
| |||
William Parmentier, 1952 | Vice President | Since March 2008 |
Mr. Parmentier is Chief Investment Officer, AAI (since 2006); President of the Liberty All-Star Funds (since April 1999); Senior Vice President (2005 – 2006), Banc of America Investment Advisors, Inc. Because of his position with AAI, Mr. Parmentier is deemed an affiliate of the Trust as defined under the 1940 Act. Because of his position with AAI, Mr. Parmentier is deemed an affiliate of the Trust as defined under the 1940 Act.
| |||
Patrick D. Buchanan, 1972 | Treasurer | Since June 2012 |
Mr. Buchanan is Vice President of AAI. Mr. Buchanan joined ALPS in 2007 and because of his position with AAI, he is deemed an affiliate of the Trust as defined under the 1940 Act. Mr. Buchanan is also Treasurer of ALPS Variable Investment Trust and the Principal Real Estate Income Fund.
| |||
Erin D. Nelson, 1977 | Secretary | Since October 2013 |
Ms. Nelson is Vice President and Assistant General Counsel of ALPS, ALPS Fund Services, Inc., ALPS Distributors, Inc., and ALPS Portfolio Solutions Distributor, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson has served as Secretary of the Clough Global Allocation Fund since 2004, Clough Global Equity Fund since 2005, Clough Global Opportunities Fund since 2006, Liberty All-Star Equity Fund since 2013 and Liberty All-Star Growth Fund since 2013. Ms. Nelson received her Bachelor of Arts in Political Science, magna cum laude, from the University of New Hampshire and Juris Doctorate from the University of Denver.
| |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 |
Ms. Craig joined ALPS in 2007 and is currently Senior Paralegal. Prior to joining ALPS, Ms. Craig was Legal Manager at Janus Capital Management LLC and served as Assistant Secretary of Janus Investment Fund, Janus Adviser Series and Janus Aspen Series. Because of her position with ALPS, Ms. Craig is deemed an affiliate of the Trust as defined under the 1940 Act. |
* | The business address of each Officer is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Officer began serving the Trust. Each Officer serves an indefinite term, until his successor is elected. |
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Board Considerations Regarding Approval of Investment Advisory Agreement | 24 | |||
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Table of Contents
Barron’s 400SM ETF
| ||
November 30, 2013 (Unaudited) |
Investment Objective
The Barron’s 400SM ETF (BFOR) seeks investment results that correspond generally, before fees and expenses, to the performance of the Barron’s 400 IndexSM (B400 or the “Underlying Index”).
The Barron’s 400SM ETF allows you to access some of America’s high performing companies in a single share. Its underlying index seeks to collect the highest rated companies in the U.S. stock according to MarketGrader’s fundamental analysis, which measures them based on growth, valuation, profitability and cash flow. This process is based on rigorous measures of financial health. Four key attributes distinguish the Barron’s 400 IndexSM from other broad market benchmarks, providing you with an intelligent portfolio built from the bottom up.
Performance Overview
The Barron’s 400SM ETF was listed on NYSE Arca on June 3, 2013. Since then, through November 30, 2013, the fund NAV gained 17.20% net of fees, closely tracking its benchmark, the Barron’s 400 IndexSM, which gained 17.58% on a total return basis.
The Barron’s 400 IndexSM (B400) itself outperformed the Dow Jones U.S. Total Stock Market Index (DWCF), the broadest measure of the U.S. equity market, by 568 basis points (5.68 percentage points) over the same period of time, through November 30, 2013. It also outpaced the S&P 500 Index’s 11.24% total return, an outperformance of 633 basis points (6.33 percentage points).
The strong performance turned in by the index over this six-month period was broad-based and not attributed to any particular group of stocks or to a particular sector. Of the 573 companies held by the index from June 3 to November 30 (the number exceeds 400 since the index was rebalanced on September 20 when 173 companies were replaced), 432 had overall price gains while members of B400. This amounts to 75.4% of all stocks held during this period. 146 of these, or 25.5% of all stocks held, had a gain of at least 20% while in the Barron’s 400.
A closer look at the sector breakdown across all gainers reveals the breadth of the rally in B400 stocks during this six-month period, in a way that was closely aligned with overall sector representation in the index during this time. Consumer Discretionary stocks had the largest representation among gainers with 90 stocks, or 20.8% of all stocks with positive performance. It was closely followed by Financials and Industrials, with 85 and 79 stocks, or 19.7% and 18.3%, respectively, among all stocks with price gains for the period. These three sectors were also the three largest ones in B400 over the last six months.
Among the 141 stocks whose performance was detrimental to that of B400 during the period, only 15, or 10.6% of all decliners, experienced a loss greater than 20%; only 38, or 27% had a double-digit drop for the period. The sector breakdown for all decliners, as was the case for all gainers, was also closely aligned with the overall sector breakdown for the index between June and November. The table below displays the list of Barron’s 400 top ten gainers and losers during the period they were held by the index between June 3 and November 29, 2013.
Top Gainers | Name | Sector | Performance (%)* | |||
IGTE | iGate Corporation | Technology | 131.22 | |||
NUS | Nu Skin Enterprises | Consumer Staples | 120.49 | |||
CAMP | CalAmp Corp. | Technology | 86.68 | |||
TASR | TASER International | Industrials | 80.95 | |||
AKRX | Akorn, Inc. | Health Care | 79.44 | |||
HOMB | Home BancShares, Inc. | Financials | 71.94 | |||
MDSO | Medidata Solutions, Inc. | Industrials | 70.19 | |||
BOFI | BofI Holding, Inc. | Financials | 68.99 | |||
QCOR | Questcor Pharmaceuticals | Health Care | 64.71 | |||
MKTX | MarketAxess Holdings Inc. | Financials | 61.62 | |||
Top Decliners | Name | Sector | Performance (%)* | |||
EBIX | Ebix, Inc. | Financials | -49.70 | |||
TWI | Titan International, Inc. | Industrials | -35.84 | |||
CVI | CVR Energy, Inc. | Energy | -35.83 | |||
ONE | Higher One Holdings, Inc. | Industrials | -34.36 | |||
FRAN | Francesca’s Holdings Corp. | Consumer Discretionary | -31.95 | |||
TSO | Tesoro Corporation | Energy | -26.61 | |||
REGI | Renewable Energy Group | Materials | -25.49 | |||
IDCC | InterDigital, Inc. | Technology | -25.27 | |||
AEO | American Eagle Outfitters | Consumer Discretionary | -24.91 | |||
ISRG | Intuitive Surgical, Inc. | Health Care | -24.65 |
* | Price-only returns. Sources: MarketGrader.com, FactSet. |
1 | November 30, 2013
Table of Contents
Barron’s 400SM ETF
| ||
Performance Overview | November 30, 2013 (Unaudited) |
GROWTH OF $10,000 (as of November 30, 2013)
Comparison of change in value of a $10,000 investment in the Fund and the Index
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
FUND PERFORMANCE (as of November 30, 2013)
Since Inception^ | ||
Barron’s 400SM ETF – NAV | 17.20% | |
Barron’s 400SM ETF – Market Price* | 17.20% | |
Barron’s 400 IndexSM(1) | 17.58% |
Total Expense Ratio (per the current prospectus) 0.65%
Performance data quoted represent past performance. Past performance is no guarantee of future results. The investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance quoted. Call 1-866-759-5679 for current month end performance.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund commenced Investment Operations on June 4, 2013. Total return for a period of less than one year is not annualized. |
* | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
(1) | The Barron’s 400 IndexSM, calculated by NYSE Euronext or its affiliates, measures the performance of a diversified group of U.S. companies selected in part based on fundamentals-related rules-based criteria. The index includes companies that have scored highest according to fundamentals-related rankings calculated by MarketGrader. Additional rules-based screening provides for sector and market cap diversification. The Index has been licensed to MarketGrader Capital LLC for use with the Barron’s 400 IndexSM. You cannot invest directly in an index. |
Dow Jones U.S. Total Stock Market Index: A market-capitalization-weighted index maintained by Dow Jones Indexes providing broad-based coverage of the U.S. stock market. The Dow Jones U.S. Market Index, considered a total market index, represents the top 95% of the U.S. stock market based on market capitalization.
S&P 500® Index: The Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices. You cannot invest directly into an index. Funds that emphasize investments in small/mid cap companies will generally experience greater price volatility.
Barron’s 400SM ETF shares are not individually redeemable. Investors buy and sell shares of the Barron’s 400SM ETF on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
2 | November 30, 2013
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Barron’s 400SM ETF
| ||
Performance Overview | November 30, 2013 (Unaudited) |
TOP TEN HOLDINGS (as a % of Net Assets) †
| SECTOR ALLOCATION (% of Total Investments) † | |||||||||
CalAmp Corp. | 0.34% | ![]() | ||||||||
Santarus, Inc. | 0.33% | |||||||||
Anika Therapeutics, Inc. | 0.33% | |||||||||
Outerwall, Inc. | 0.33% | |||||||||
Ambarella, Inc. | 0.32% | |||||||||
Delek US Holdings, Inc. | 0.32% | |||||||||
Akorn, Inc. | 0.32% | |||||||||
US Silica Holdings, Inc. | 0.32% | |||||||||
HCI Group, Inc. | 0.32% | |||||||||
Winnebago Industries, Inc. | 0.32% | |||||||||
Top Ten Holdings | 3.25% |
† | Holdings and sector allocations are subject to change. |
3 | November 30, 2013
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Barron’s 400SM ETF
| ||
November 30, 2013 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, and (2) ongoing costs, including management fees and other Fund expenses. These examples are 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 funds. It is based on an investment of $1,000 invested at the beginning of the (six month) period and held through November 30, 2013.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this table, together with the amount you invested, to estimate the expenses that you incurred 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 first line under the heading entitled “Expenses Paid During the Period” to estimate the expenses attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees, or brokerage charges. Therefore, the second line 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 costs were included, your costs would have been higher.
Beginning Account 6/1/13 | Ending Account 11/30/13 | Expense Ratio(a) | Expense Paid During Period 6/1/13 - 11/30/13(b) | |||||||||||||||||
Actual (c) | $ | 1,000.00 | $ | 1,172.00 | 0.65% | $ | 3.48 | |||||||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,021.81 | 0.65% | $ | 3.29 |
(a) | Annualized, based on the Fund’s most recent fiscal half year expenses. |
(b) | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (183), divided by 365. |
(c) | The Fund commenced operations on June 4, 2013, and as such the actual expenses paid during the period were based on 180 days. |
4 | November 30, 2013
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Barron’s 400SM ETF
| ||
To the Board of Trustees and Shareholders of ALPS ETF Trust:
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Barron’s 400SM ETF, one of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2013, and the related statements of operations, changes in net assets, and the financial highlight for the period June 4, 2013 (Commencement) to November 30, 2013. These financial statements and financial highlights are the responsibility of the Trust’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Trust is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of November 30, 2013, by correspondence with the custodian and brokers; where replies were not received from brokers, we performed other auditing procedures. We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of Barron’s 400SM ETF of the ALPS ETF Trust as of November 30, 2013, the results of its operations, the changes in its net assets, and the financial highlights for the period June 4, 2013 (Commencement) to November 30, 2013, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 27, 2014
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Barron’s 400SM ETF
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November 30, 2013 |
Security Description | Shares | Value | ||||||
| ||||||||
COMMON STOCKS (96.48%) | ||||||||
Basic Materials (3.87%) | ||||||||
American Pacific Corp.(a) | 8,444 | $ | 349,159 | |||||
American Vanguard Corp. | 15,982 | 459,163 | ||||||
Axiall Corp. | 10,720 | 485,616 | ||||||
CF Industries Holdings, Inc. | 2,019 | 438,890 | ||||||
Eastman Chemical Co. | 5,394 | 415,500 | ||||||
FMC Corp. | 5,952 | 433,663 | ||||||
Gold Resource Corp. | 56,765 | 292,907 | ||||||
Innospec, Inc. | 9,192 | 447,742 | ||||||
International Paper Co. | 8,818 | 411,360 | ||||||
NewMarket Corp. | 1,422 | 460,657 | ||||||
PPG Industries, Inc. | 2,512 | 462,359 | ||||||
Praxair, Inc. | 3,424 | 432,314 | ||||||
Quaker Chemical Corp. | 6,042 | 489,643 | ||||||
Sigma-Aldrich Corp. | 4,870 | 419,989 | ||||||
US Silica Holdings, Inc. | 16,820 | 580,459 | ||||||
Westlake Chemical Corp. | 3,956 | 445,366 | ||||||
|
| |||||||
Total Basic Materials | 7,024,787 | |||||||
|
| |||||||
Communications (7.03%) | ||||||||
CalAmp Corp.(a) | 24,673 | 615,344 | ||||||
Cisco Systems, Inc. | 17,062 | 362,568 | ||||||
Comcast Corp., Class A | 9,566 | 477,056 | ||||||
Entravision Communications Corp., Class A | 80,231 | 530,327 | ||||||
F5 Networks, Inc.(a) | 4,592 | 377,738 | ||||||
FactSet Research Systems, Inc. | 3,878 | 438,214 | ||||||
Google, Inc., Class A(a) | 496 | 525,557 | ||||||
IDT Corp., Class B | 24,584 | 546,010 | ||||||
InterDigital, Inc. | 11,428 | 387,295 | ||||||
IPG Photonics Corp. | 7,082 | 513,587 | ||||||
Liberty Media Corp., Class A(a) | 2,834 | 434,906 | ||||||
NeuStar, Inc., Class A(a) | 8,184 | 398,970 | ||||||
Nexstar Broadcasting Group, Inc., Class A | 11,278 | 560,178 | ||||||
NIC, Inc. | 19,375 | 472,363 | ||||||
OpenTable, Inc.(a) | 5,736 | 479,358 | ||||||
Overstock.com, Inc.(a) | 14,644 | 410,032 | ||||||
Perficient, Inc.(a) | 24,368 | 528,297 | ||||||
Plantronics, Inc. | 8,996 | 402,391 | ||||||
priceline.com, Inc.(a) | 388 | 462,624 | ||||||
Scripps Networks Interactive, Inc., Class A | 5,488 | 409,350 | ||||||
Shutterstock, Inc.(a) | 7,164 | 529,992 | ||||||
Stamps.com, Inc.(a) | 9,399 | 433,012 | ||||||
Time Warner Cable, Inc. | 3,740 | 516,943 | ||||||
TripAdvisor, Inc.(a) | 5,696 | 503,071 | ||||||
Ubiquiti Networks, Inc. | 12,774 | 503,296 | ||||||
Walt Disney Co. | 6,290 | 443,697 | ||||||
Yahoo! Inc.(a) | 13,896 | 513,874 | ||||||
|
| |||||||
Total Communications | 12,776,050 | |||||||
|
| |||||||
Consumer, Cyclical (20.03%) | ||||||||
Advance Auto Parts, Inc. | 5,210 | 526,262 | ||||||
AFC Enterprises, Inc.(a) | 9,566 | 416,982 | ||||||
Alaska Air Group, Inc. | 6,734 | 523,501 | ||||||
Allegiant Travel Co.(a) | 4,172 | 461,840 | ||||||
ANN, Inc.(a) | 11,526 | 411,132 | ||||||
Arctic Cat, Inc. | 7,308 | 411,221 | ||||||
Bally Technologies, Inc.(a) | 5,607 | 418,114 |
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Barron’s 400SM ETF
| ||
Schedule of Investments | November 30, 2013 |
Security Description | Shares | Value | ||||||
| ||||||||
Consumer, Cyclical (continued) | ||||||||
Bed Bath & Beyond, Inc.(a) | 5,452 | $ | 425,420 | |||||
BorgWarner, Inc. | 4,180 | 447,971 | ||||||
Brunswick Corp. | 10,372 | 474,001 | ||||||
Buckle, Inc. | 7,810 | 414,399 | ||||||
Buffalo Wild Wings, Inc.(a) | 3,798 | 570,611 | ||||||
Chipotle Mexican Grill, Inc.(a) | 958 | 501,858 | ||||||
Churchill Downs, Inc. | 4,862 | 436,851 | ||||||
Coach, Inc. | 7,722 | 447,104 | ||||||
Cooper Tire & Rubber Co. | 13,544 | 333,182 | ||||||
Dollar General Corp.(a) | 7,314 | 416,459 | ||||||
Dollar Tree, Inc.(a) | 7,312 | 406,913 | ||||||
Dorman Products, Inc. | 8,386 | 417,455 | ||||||
Express, Inc.(a) | 18,662 | 459,272 | ||||||
Family Dollar Stores, Inc. | 5,735 | 400,131 | ||||||
Fastenal Co. | 8,314 | 386,850 | ||||||
First Cash Financial Services, Inc.(a) | 7,182 | 456,632 | ||||||
Foot Locker, Inc. | 12,593 | 489,742 | ||||||
Fossil Group, Inc.(a) | 3,630 | 461,990 | ||||||
Fox Factory Holding Corp.(a) | 22,872 | 420,387 | ||||||
Francesca’s Holdings Corp.(a) | 21,118 | 414,335 | ||||||
Gap, Inc. | 10,010 | 410,110 | ||||||
Genuine Parts Co. | 5,176 | 428,780 | ||||||
G-III Apparel Group, Ltd.(a) | 7,854 | 473,204 | ||||||
GNC Holdings, Inc., Class A | 7,996 | 481,199 | ||||||
Goodyear Tire & Rubber Co. | 19,132 | 425,878 | ||||||
Hanesbrands, Inc. | 6,631 | 464,833 | ||||||
Hibbett Sports, Inc.(a) | 7,660 | 494,606 | ||||||
Home Depot, Inc. | 5,424 | 437,554 | ||||||
HSN, Inc. | 7,760 | 445,424 | ||||||
Las Vegas Sands Corp. | 6,570 | 470,938 | ||||||
LeapFrog Enterprises, Inc.(a) | 44,520 | 383,317 | ||||||
Lear Corp. | 5,914 | 490,330 | ||||||
Lumber Liquidators Holdings, Inc.(a) | 3,776 | 380,205 | ||||||
Macy’s, Inc. | 9,293 | 494,945 | ||||||
McDonald’s Corp. | 4,310 | 419,665 | ||||||
MDC Holdings, Inc. | 13,090 | 395,580 | ||||||
Multimedia Games Holding Co., Inc.(a) | 12,125 | 351,625 | ||||||
NIKE, Inc., Class B | 6,140 | 485,920 | ||||||
Nordstrom, Inc. | 7,352 | 457,368 | ||||||
Nu Skin Enterprises, Inc., Class A | 4,474 | 571,955 | ||||||
O’Reilly Automotive, Inc.(a) | 3,314 | 414,117 | ||||||
Panera Bread Co., Class A(a) | 2,448 | 433,027 | ||||||
Papa John’s International, Inc. | 5,984 | 507,892 | ||||||
PetMed Express, Inc. | 26,296 | 414,951 | ||||||
PetSmart, Inc. | 5,770 | 427,615 | ||||||
Pier 1 Imports, Inc. | 17,972 | 400,596 | ||||||
Polaris Industries, Inc. | 3,344 | 446,324 | ||||||
Ralph Lauren Corp. | 2,482 | 434,921 | ||||||
Ross Stores, Inc. | 5,824 | 445,303 | ||||||
Ryland Group, Inc. | 9,940 | 392,829 | ||||||
Spirit Airlines, Inc.(a) | 12,362 | 567,046 | ||||||
Standard Pacific Corp.(a) | 50,986 | 417,065 | ||||||
Starbucks Corp. | 5,518 | 449,496 | ||||||
Steven Madden, Ltd.(a) | 11,739 | 457,351 | ||||||
TiVo, Inc.(a) | 34,366 | 440,916 | ||||||
TJX Cos, Inc. | 7,436 | 467,576 | ||||||
Toro Co. | 7,696 | 474,920 |
7 | November 30, 2013
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Barron’s 400SM ETF
| ||
Schedule of Investments | November 30, 2013 |
Security Description | Shares | Value | ||||||
| ||||||||
Consumer, Cyclical (continued) | ||||||||
Tractor Supply Co. | 6,512 | $ | 476,744 | |||||
TRW Automotive Holdings Corp.(a) | 5,826 | 452,098 | ||||||
Ulta Salon Cosmetics & Fragrance, Inc.(a) | 3,503 | 444,671 | ||||||
Under Armour, Inc., Class A(a) | 5,480 | 442,236 | ||||||
Urban Outfitters, Inc.(a) | 11,120 | 433,902 | ||||||
US Airways Group, Inc.(a) | 22,698 | 532,949 | ||||||
Vera Bradley, Inc.(a) | 21,104 | 530,132 | ||||||
Vitamin Shoppe, Inc.(a) | 10,218 | 554,530 | ||||||
Wabash National Corp.(a) | 35,980 | 436,797 | ||||||
WABCO Holdings, Inc.(a) | 4,992 | 442,291 | ||||||
Wal-Mart Stores, Inc. | 5,550 | 449,606 | ||||||
Wesco Aircraft Holdings, Inc.(a) | 20,254 | 422,904 | ||||||
Williams-Sonoma, Inc. | 7,312 | 432,285 | ||||||
Winnebago Industries, Inc.(a) | 18,600 | 575,856 | ||||||
World Fuel Services Corp. | 11,294 | 433,690 | ||||||
WW Grainger, Inc. | 1,554 | 400,808 | ||||||
Zumiez, Inc.(a) | 15,062 | 418,272 | ||||||
|
| |||||||
Total Consumer, Cyclical | 36,385,767 | |||||||
|
| |||||||
Consumer, Non-Cyclical (18.25%) | ||||||||
Akorn, Inc.(a) | 22,564 | 581,023 | ||||||
Alexion Pharmaceuticals, Inc.(a) | 3,594 | 447,453 | ||||||
Allergan, Inc. | 4,786 | 464,481 | ||||||
Alliance Data Systems Corp.(a) | 1,982 | 480,159 | ||||||
American Public Education, Inc.(a) | 10,902 | 492,661 | ||||||
Amgen, Inc. | 3,594 | 410,004 | ||||||
Anika Therapeutics, Inc.(a) | 17,578 | 603,805 | ||||||
Auxilium Pharmaceuticals, Inc.(a) | 23,081 | 471,083 | ||||||
Barrett Business Services, Inc. | 5,884 | 497,316 | ||||||
Biogen Idec, Inc.(a) | 1,734 | 504,542 | ||||||
Boston Beer Co., Inc., Class A(a) | 1,712 | 419,098 | ||||||
Cardtronics, Inc.(a) | 11,554 | 492,085 | ||||||
Celgene Corp.(a) | 2,816 | 455,544 | ||||||
Cooper Cos, Inc. | 3,150 | 414,981 | ||||||
DaVita HealthCare Partners, Inc.(a) | 7,264 | 432,571 | ||||||
Deluxe Corp. | 10,456 | 519,558 | ||||||
Edwards Lifesciences Corp.(a) | 5,962 | 390,690 | ||||||
Eli Lilly & Co. | 7,854 | 394,428 | ||||||
Estee Lauder Cos, Inc., Class A | 5,896 | 441,964 | ||||||
FleetCor Technologies, Inc.(a) | 3,870 | 471,289 | ||||||
Flowers Foods, Inc. | 19,448 | 422,605 | ||||||
Fresh Market, Inc.(a) | 8,497 | 345,913 | ||||||
Gartner, Inc.(a) | 7,350 | 475,178 | ||||||
General Mills, Inc. | 8,444 | 425,831 | ||||||
Gilead Sciences, Inc.(a) | 6,630 | 495,990 | ||||||
Grand Canyon Education, Inc.(a) | 10,672 | 486,003 | ||||||
Green Mountain Coffee Roasters, Inc.(a) | 4,824 | 325,041 | ||||||
H&R Block, Inc. | 15,176 | 423,259 | ||||||
HealthSouth Corp. | 12,400 | 443,796 | ||||||
Heartland Payment Systems, Inc. | 10,780 | 484,130 | ||||||
Herbalife, Ltd. | 5,772 | 402,193 | ||||||
Hershey Co. | 4,498 | 435,811 | ||||||
Hormel Foods Corp. | 9,566 | 430,661 | ||||||
IDEXX Laboratories, Inc.(a) | 4,342 | 452,262 | ||||||
Ingredion, Inc. | 6,362 | 439,996 | ||||||
Intuitive Surgical, Inc.(a) | 1,118 | 421,374 | ||||||
Kroger Co. | 10,472 | 437,206 |
8 | November 30, 2013
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| ||
Schedule of Investments | November 30, 2013 |
Security Description | Shares | Value | ||||||
| ||||||||
Consumer, Non-Cyclical (continued) | ||||||||
Ligand Pharmaceuticals, Inc., Class B(a) | 9,034 | $ | 503,013 | |||||
Magellan Health Services, Inc.(a) | 7,199 | 440,579 | ||||||
Mastercard, Inc., Class A | 586 | 445,835 | ||||||
MAXIMUS, Inc. | 9,987 | 454,409 | ||||||
McGraw Hill Financial, Inc. | 6,574 | 489,763 | ||||||
McKesson Corp. | 3,208 | 532,175 | ||||||
Mead Johnson Nutrition Co. | 5,369 | 453,734 | ||||||
Medifast, Inc.(a) | 15,695 | 425,178 | ||||||
Meridian Bioscience, Inc. | 17,684 | 434,673 | ||||||
Moody’s Corp. | 5,978 | 446,138 | ||||||
Morningstar, Inc. | 5,394 | 449,914 | ||||||
Mylan, Inc.(a) | 10,940 | 482,782 | ||||||
Myriad Genetics, Inc.(a) | 16,286 | 484,509 | ||||||
On Assignment, Inc.(a) | 12,774 | 434,699 | ||||||
PDL BioPharma, Inc. | 52,160 | 509,603 | ||||||
PepsiCo, Inc. | 5,086 | 429,563 | ||||||
Performant Financial Corp.(a) | 38,854 | 407,578 | ||||||
Pilgrim’s Pride Corp.(a) | 25,116 | 411,400 | ||||||
Questcor Pharmaceuticals, Inc. | 6,452 | 374,281 | ||||||
Regeneron Pharmaceuticals, Inc.(a) | 1,360 | 399,650 | ||||||
Repligen Corp.(a) | 41,472 | 558,628 | ||||||
ResMed, Inc. | 7,842 | 382,768 | ||||||
Robert Half International, Inc. | 10,916 | 421,685 | ||||||
Sanderson Farms, Inc. | 6,416 | 438,469 | ||||||
Santarus, Inc.(a) | 18,802 | 605,049 | ||||||
SEI Investments Co. | 13,838 | 464,680 | ||||||
Team Health Holdings, Inc.(a) | 11,062 | 516,926 | ||||||
Tupperware Brands Corp. | 4,862 | 444,095 | ||||||
Tyson Foods, Inc., Class A | 13,896 | 440,365 | ||||||
United Rentals, Inc.(a) | 7,322 | 503,241 | ||||||
United Therapeutics Corp.(a) | 5,362 | 494,966 | ||||||
UnitedHealth Group, Inc. | 5,856 | 436,155 | ||||||
USANA Health Sciences, Inc.(a) | 4,859 | 355,241 | ||||||
Varian Medical Systems, Inc.(a) | 5,616 | 438,329 | ||||||
Verisk Analytics, Inc., Class A(a) | 6,358 | 413,969 | ||||||
WEX, Inc.(a) | 4,920 | 488,359 | ||||||
|
| |||||||
Total Consumer, Non-Cyclical | 33,144,385 | |||||||
|
| |||||||
Diversified Financial Services (0.28%) | ||||||||
Credit Acceptance Corp.(a) | 3,882 | 501,360 | ||||||
|
| |||||||
Total Diversified Financial Services | 501,360 | |||||||
|
| |||||||
Energy (7.95%) | ||||||||
Anadarko Petroleum Corp. | 4,488 | 398,624 | ||||||
Atwood Oceanics, Inc.(a) | 7,388 | 388,313 | ||||||
C&J Energy Services, Inc.(a) | 19,847 | 470,374 | ||||||
Cabot Oil & Gas Corp. | 11,062 | 381,086 | ||||||
Carrizo Oil & Gas, Inc.(a) | 11,494 | 464,817 | ||||||
Continental Resources, Inc.(a) | 4,114 | 442,296 | ||||||
CVR Energy, Inc. | 10,611 | 418,922 | ||||||
Delek US Holdings, Inc. | 19,364 | 585,956 | ||||||
Dril-Quip, Inc.(a) | 3,740 | 406,014 | ||||||
EOG Resources, Inc. | 2,460 | 405,900 | ||||||
EPL Oil & Gas, Inc.(a) | 12,026 | 344,545 | ||||||
Flotek Industries, Inc.(a) | 19,290 | 403,933 | ||||||
FutureFuel Corp. | 22,878 | 382,520 | ||||||
Geospace Technologies Corp.(a) | 5,376 | 469,164 |
9 | November 30, 2013
Table of Contents
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| ||
Schedule of Investments | November 30, 2013 |
Security Description | Shares | Value | ||||||
| ||||||||
Energy (continued) | ||||||||
Helmerich & Payne, Inc. | 6,112 | $ | 470,624 | |||||
HollyFrontier Corp. | 10,188 | 488,820 | ||||||
Kodiak Oil & Gas Corp.(a) | 37,300 | 422,982 | ||||||
Marathon Petroleum Corp. | 6,340 | 524,572 | ||||||
Noble Energy, Inc. | 6,245 | 438,649 | ||||||
Oasis Petroleum, Inc.(a) | 9,508 | 438,604 | ||||||
Oceaneering International, Inc. | 5,080 | 392,125 | ||||||
Phillips 66 | 7,450 | 518,595 | ||||||
Primoris Services Corp. | 17,046 | 490,243 | ||||||
Range Resources Corp. | 5,294 | 411,079 | ||||||
Renewable Energy Group, Inc.(a) | 27,360 | 311,083 | ||||||
Rosetta Resources, Inc.(a) | 7,906 | 399,806 | ||||||
RPC, Inc. | 28,552 | 504,513 | ||||||
Schlumberger, Ltd. | 4,704 | 415,928 | ||||||
Seadrill, Ltd. | 8,818 | 376,617 | ||||||
Stone Energy Corp.(a) | 13,148 | 434,936 | ||||||
Synergy Resources Corp.(a) | 44,285 | 418,050 | ||||||
Western Refining, Inc. | 14,644 | 572,141 | ||||||
Whiting Petroleum Corp.(a) | 7,538 | 455,295 | ||||||
|
| |||||||
Total Energy | 14,447,126 | |||||||
|
| |||||||
Financial (16.24%) | ||||||||
Affiliated Managers Group, Inc.(a) | 2,244 | 449,361 | ||||||
Aflac, Inc. | 6,732 | 446,803 | ||||||
Ambac Financial Group, Inc.(a) | 21,160 | 500,434 | ||||||
American Equity Investment Life Holding Co. | 20,046 | 475,291 | ||||||
American Express Co. | 5,488 | 470,870 | ||||||
Amtrust Financial Services, Inc. | 10,890 | 455,311 | ||||||
Apollo Commercial Real Estate Finance, Inc. | 26,831 | 446,200 | ||||||
Bank of Hawaii Corp. | 8,030 | 474,975 | ||||||
Bank of the Ozarks, Inc. | 9,034 | 507,259 | ||||||
BankUnited, Inc. | 13,680 | 441,590 | ||||||
Berkshire Hathaway, Inc., Class B(a) | 3,582 | 417,410 | ||||||
Berkshire Hills Bancorp, Inc. | 17,046 | 466,038 | ||||||
BofI Holding, Inc.(a) | 6,302 | 516,512 | ||||||
BOK Financial Corp. | 6,608 | 418,286 | ||||||
Capital One Financial Corp. | 6,142 | 439,951 | ||||||
Cardinal Financial Corp. | 23,703 | 420,254 | ||||||
CBOE Holdings, Inc. | 9,362 | 489,445 | ||||||
Commerce Bancshares, Inc. | 10,252 | 462,582 | ||||||
Community Bank System, Inc. | 12,558 | 488,004 | ||||||
Discover Financial Services | 8,056 | 429,385 | ||||||
East West Bancorp, Inc. | 14,076 | 482,525 | ||||||
Ellie Mae, Inc.(a) | 13,522 | 381,320 | ||||||
Employers Holdings, Inc. | 14,436 | 471,191 | ||||||
Everest Re Group, Ltd. | 2,992 | 469,235 | ||||||
Fidelity National Financial, Inc., Class A | 16,170 | 470,062 | ||||||
Fifth Third Bancorp | 22,726 | 461,792 | ||||||
First Financial Bankshares, Inc. | 7,225 | 479,596 | ||||||
First Republic Bank | 9,034 | 461,637 | ||||||
FirstMerit Corp. | 19,880 | 456,445 | ||||||
Franklin Resources, Inc. | 8,047 | 445,723 | ||||||
Greenhill & Co., Inc. | 7,912 | 432,866 | ||||||
HCI Group, Inc. | 11,652 | 580,153 | ||||||
HFF, Inc., Class A | 17,586 | 450,553 | ||||||
Home BancShares, Inc. | 13,859 | 501,141 | ||||||
Huntington Bancshares, Inc. | 49,364 | 453,162 |
10 | November 30, 2013
Table of Contents
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| ||
Schedule of Investments | November 30, 2013 |
Security Description | Shares | Value | ||||||
| ||||||||
Financial (continued) | ||||||||
JPMorgan Chase & Co. | 7,940 | $ | 454,327 | |||||
M&T Bank Corp. | 3,740 | 431,446 | ||||||
Main Street Capital Corp. | 14,212 | 468,286 | ||||||
MarketAxess Holdings, Inc. | 7,430 | 522,849 | ||||||
Marsh & McLennan Cos, Inc. | 9,724 | 461,404 | ||||||
Nelnet, Inc., Class A | 11,436 | 514,620 | ||||||
Outerwall, Inc.(a) | 8,656 | 592,071 | ||||||
PNC Financial Services Group, Inc. | 5,668 | 436,153 | ||||||
Portfolio Recovery Associates, Inc.(a) | 7,219 | 421,590 | ||||||
Prospect Capital Corp. | 36,400 | 415,324 | ||||||
Prosperity Bancshares, Inc. | 6,948 | 445,575 | ||||||
SLM Corp. | 16,730 | 445,855 | ||||||
Stewart Information Services Corp. | 13,918 | 443,427 | ||||||
SunTrust Banks, Inc. | 12,400 | 449,252 | ||||||
T Rowe Price Group, Inc. | 5,800 | 466,668 | ||||||
Third Point Reinsurance, Ltd.(a) | 30,563 | 509,180 | ||||||
Triangle Capital Corp. | 14,428 | 429,377 | ||||||
US Bancorp | 11,220 | 440,048 | ||||||
Virtus Investment Partners, Inc.(a) | 2,618 | 544,020 | ||||||
Visa, Inc. | 2,244 | 456,564 | ||||||
Waddell & Reed Financial, Inc., Class A | 8,070 | 514,301 | ||||||
WageWorks, Inc.(a) | 7,704 | 441,439 | ||||||
Webster Financial Corp. | 16,475 | 485,683 | ||||||
Wells Fargo & Co. | 9,828 | 432,629 | ||||||
Western Alliance Bancorp(a) | 23,778 | 552,125 | ||||||
Wilshire Bancorp, Inc. | 49,701 | 525,340 | ||||||
WisdomTree Investments, Inc.(a) | 36,021 | 551,842 | ||||||
World Acceptance Corp.(a) | 4,756 | 439,074 | ||||||
|
| |||||||
Total Financial | 29,503,831 | |||||||
|
| |||||||
Industrial (13.58%) | ||||||||
3M Co. | 3,472 | 463,547 | ||||||
AAON, Inc. | 16,514 | 508,136 | ||||||
AGCO Corp. | 7,106 | 414,138 | ||||||
AMERCO(a) | 2,244 | 520,002 | ||||||
American Railcar Industries, Inc. | 11,268 | 489,031 | ||||||
Babcock & Wilcox Co. | 12,400 | 402,628 | ||||||
Boeing Co. | 3,558 | 477,662 | ||||||
CAI International, Inc.(a) | 18,074 | 415,702 | ||||||
Caterpillar, Inc. | 4,840 | 409,464 | ||||||
CSX Corp. | 15,904 | 433,702 | ||||||
Cummins, Inc. | 3,108 | 411,375 | ||||||
Deere & Co. | 4,998 | 421,032 | ||||||
Dover Corp. | 4,654 | 422,304 | ||||||
EnerSys, Inc. | 7,322 | 522,425 | ||||||
Fabrinet(a) | 29,072 | 575,625 | ||||||
Federal Signal Corp.(a) | 33,136 | 517,916 | ||||||
FLIR Systems, Inc. | 13,306 | 394,789 | ||||||
Flowserve Corp. | 6,738 | 480,957 | ||||||
Generac Holdings, Inc. | 10,098 | 537,819 | ||||||
Graco, Inc. | 5,734 | 442,837 | ||||||
HEICO Corp. | 7,921 | 452,131 | ||||||
Hexcel Corp.(a) | 10,718 | 470,842 | ||||||
Honeywell International, Inc. | 4,862 | 430,336 | ||||||
Hubbell, Inc., Class B | 3,956 | 426,892 | ||||||
Hyster-Yale Materials Handling, Inc. | 4,488 | 374,120 | ||||||
InvenSense, Inc.(a) | 23,530 | 406,834 |
11 | November 30, 2013
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| ||
Schedule of Investments | November 30, 2013 |
Security Description | Shares | Value | ||||||
| ||||||||
Industrial (continued) | ||||||||
JB Hunt Transport Services, Inc. | 5,706 | $ | 429,034 | |||||
Joy Global, Inc. | 7,980 | 451,348 | ||||||
Lincoln Electric Holdings, Inc. | 6,170 | 441,032 | ||||||
Lindsay Corp. | 5,158 | 394,020 | ||||||
Louisiana-Pacific Corp.(a) | 23,778 | 389,959 | ||||||
Methode Electronics, Inc. | 15,772 | 456,284 | ||||||
Mettler-Toledo International, Inc.(a) | 1,736 | 428,046 | ||||||
Middleby Corp.(a) | 1,949 | 430,417 | ||||||
Movado Group, Inc. | 9,855 | 448,600 | ||||||
Northrop Grumman Corp. | 4,330 | 487,904 | ||||||
Old Dominion Freight Line, Inc.(a) | 9,351 | 481,857 | ||||||
Packaging Corp. of America | 6,948 | 425,634 | ||||||
PGT, Inc.(a) | 38,582 | 385,820 | ||||||
Proto Labs, Inc.(a) | 5,636 | 418,755 | ||||||
Raytheon Co. | 5,236 | 464,328 | ||||||
Rock Tenn Co., Class A | 3,740 | 353,131 | ||||||
Rockwell Automation, Inc. | 3,910 | 444,098 | ||||||
Rogers Corp.(a) | 7,032 | 441,680 | ||||||
Smith & Wesson Holding Corp.(a) | 36,895 | 436,099 | ||||||
Snap-on, Inc. | 4,248 | 450,925 | ||||||
Sturm Ruger & Co., Inc. | 6,822 | 524,816 | ||||||
Swift Transportation Co.(a) | 21,499 | 497,702 | ||||||
Taser International, Inc.(a) | 30,113 | 517,641 | ||||||
Textainer Group Holdings, Ltd. | 10,798 | 419,286 | ||||||
Trinity Industries, Inc. | 9,192 | 477,157 | ||||||
Triumph Group, Inc. | 5,866 | 433,732 | ||||||
Union Pacific Corp. | 2,620 | 424,545 | ||||||
Valmont Industries, Inc. | 2,922 | 422,843 | ||||||
Wabtec Corp. | 6,850 | 472,650 | ||||||
|
| |||||||
Total Industrial | 24,671,589 | |||||||
|
| |||||||
Technology (8.76%) | ||||||||
Akamai Technologies, Inc.(a) | 8,070 | 360,890 | ||||||
Ambarella, Inc.(a) | 23,670 | 587,015 | ||||||
ANSYS, Inc.(a) | 4,862 | 416,528 | ||||||
Apple, Inc. | 868 | 482,669 | ||||||
Aspen Technology, Inc.(a) | 12,026 | 475,388 | ||||||
Broadridge Financial Solutions, Inc. | 13,522 | 515,864 | ||||||
Cadence Design Systems, Inc.(a) | 30,135 | 399,289 | ||||||
Cirrus Logic, Inc.(a) | 18,505 | 373,431 | ||||||
Cognizant Technology Solutions Corp., Class A(a) | 5,120 | 480,717 | ||||||
CommVault Systems, Inc.(a) | 4,836 | 361,975 | ||||||
Computer Programs & Systems, Inc. | 7,260 | 446,635 | ||||||
EMC Corp. | 15,626 | 372,680 | ||||||
EPAM Systems, Inc.(a) | 12,264 | 435,004 | ||||||
iGATE Corp.(a) | 15,337 | 513,483 | ||||||
International Business Machines Corp. | 2,168 | 389,546 | ||||||
Intuit, Inc. | 6,454 | 479,080 | ||||||
j2 Global, Inc. | 8,458 | 405,730 | ||||||
Jack Henry & Associates, Inc. | 8,184 | 464,606 | ||||||
Manhattan Associates, Inc.(a) | 4,586 | 551,512 | ||||||
Maxim Integrated Products, Inc. | 14,270 | 406,410 | ||||||
Medidata Solutions, Inc.(a) | 4,360 | 518,448 | ||||||
Microsoft Corp. | 12,646 | 482,192 | ||||||
Netscout Systems, Inc.(a) | 16,298 | 495,948 | ||||||
Omnicell, Inc.(a) | 17,644 | 427,867 | ||||||
Oracle Corp. | 12,570 | 443,595 |
12 | November 30, 2013
Table of Contents
Barron’s 400SM ETF
| ||
Schedule of Investments | November 30, 2013 |
Security Description | Shares | Value | ||||||
| ||||||||
Technology (continued) | ||||||||
PDF Solutions, Inc.(a) | 19,665 | $ | 456,228 | |||||
Pegasystems, Inc. | 11,062 | 556,971 | ||||||
QUALCOMM, Inc. | 6,046 | 444,865 | ||||||
SanDisk Corp. | 6,954 | 473,915 | ||||||
Skyworks Solutions, Inc.(a) | 16,397 | 435,996 | ||||||
SolarWinds, Inc.(a) | 10,688 | 357,407 | ||||||
Synaptics, Inc.(a) | 9,940 | 502,069 | ||||||
Syntel, Inc. | 5,396 | 476,845 | ||||||
Tyler Technologies, Inc.(a) | 5,236 | 537,266 | ||||||
VMware, Inc., Class A(a) | 4,704 | 379,284 | ||||||
|
| |||||||
Total Technology | 15,907,348 | |||||||
|
| |||||||
Utilities (0.49%) | ||||||||
American States Water Co. | 15,982 | 466,355 | ||||||
Questar Corp. | 19,027 | 428,488 | ||||||
|
| |||||||
Total Utilities | 894,843 | |||||||
|
| |||||||
TOTAL COMMON STOCKS (Cost $162,253,355) | 175,257,086 | |||||||
|
| |||||||
LIMITED PARTNERSHIPS (3.21%) | ||||||||
Basic Materials (0.40%) | ||||||||
CVR Partners LP | 22,714 | 398,177 | ||||||
Terra Nitrogen Co., LP | 2,086 | 325,979 | ||||||
|
| |||||||
Total Basic Materials | 724,156 | |||||||
|
| |||||||
Energy (2.11%) | ||||||||
Alliance Holdings GP LP | 6,959 | 382,675 | ||||||
Alliance Resource Partners LP | 5,452 | 399,468 | ||||||
Crestwood Equity Partners LP | 31,700 | 487,545 | ||||||
CVR Refining LP | 16,459 | 395,016 | ||||||
DCP Midstream Partners LP | 8,818 | 424,851 | ||||||
Exterran Partners LP | 15,018 | 417,951 | ||||||
Magellan Midstream Partners LP | 7,854 | 488,048 | ||||||
Natural Resource Partners LP | 21,908 | 440,132 | ||||||
Pioneer Southwest Energy Partners LP | 9,724 | 400,629 | ||||||
|
| |||||||
Total Energy | 3,836,315 | |||||||
|
| |||||||
Financial (0.48%) | ||||||||
Apollo Global Management LLC, Class A | 14,220 | 429,302 | ||||||
Ellington Financial LLC | 18,916 | 436,959 | ||||||
|
| |||||||
Total Financial | 866,261 | |||||||
�� |
|
| ||||||
Industrial (0.22%) | ||||||||
Golar LNG Partners LP | 12,716 | 406,658 | ||||||
|
| |||||||
Total Industrial | 406,658 | |||||||
|
| |||||||
TOTAL LIMITED PARTNERSHIPS (Cost $5,993,735) | 5,833,390 | |||||||
|
|
13 | November 30, 2013
Table of Contents
Barron’s 400SM ETF
| ||
Schedule of Investments | November 30, 2013 |
7 Day Yield | Shares | Value | ||||||||||
| ||||||||||||
SHORT TERM INVESTMENTS (0.25%) | ||||||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(b) | 456,207 | $ | 456,207 | ||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $456,207) | 456,207 | |||||||||||
|
| |||||||||||
TOTAL INVESTMENTS (99.94%) (Cost $168,703,297) | $ | 181,546,683 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (0.06%) | 105,210 | |||||||||||
|
| |||||||||||
NET ASSETS (100.00%) | $ | 181,651,893 | ||||||||||
|
| |||||||||||
|
|
(a) | Non-income producing security. |
(b) | Less than 0.0005%. |
Common Abbreviations:
LLC - Limited Liability Company.
LP - Limited Partnership.
Ltd. - Limited.
See Notes to Financial Statements.
14 | November 30, 2013
Table of Contents
Barron’s 400SM ETF
| ||
November 30, 2013 |
ASSETS: | ||||
Investments, at value | $ | 181,546,683 | ||
Cash | 43,592 | |||
Receivable for shares sold | 5,363 | |||
Dividends receivable | 188,080 | |||
Total Assets | 181,783,718 | |||
LIABILITIES: | ||||
Payable for investments purchased | 41,096 | |||
Payable to adviser | 90,729 | |||
Total Liabilities | 131,825 | |||
NET ASSETS | $ | 181,651,893 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 169,032,224 | ||
Accumulated net investment income | 239,977 | |||
Accumulated net realized loss on investments | (463,694) | |||
Net unrealized appreciation on investments | 12,843,386 | |||
NET ASSETS | $ | 181,651,893 | ||
INVESTMENTS, AT COST | $ | 168,703,297 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 181,651,893 | ||
Shares of beneficial interest outstanding (Unlimited number of shares, par value $0.01 per share) | 6,200,002 | |||
Net Asset Value, offering and redemption price per share | $ | 29.30 |
See Notes to Financial Statements.
15 | November 30, 2013
Table of Contents
Barron’s 400SM ETF
| ||
For the Period Ended June 4, 2013 (Commencement) to November 30, 2013 |
INVESTMENT INCOME: | ||||
Dividends | $ | 610,829 | ||
Total investment income | 610,829 | |||
EXPENSES: | ||||
Investment adviser fees | 277,409 | |||
Total expenses | 277,409 | |||
NET INVESTMENT INCOME | 333,420 | |||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized gain on investments | 2,436,210 | |||
Net change in unrealized appreciation on investments | 12,843,386 | |||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 15,279,596 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 15,613,016 | ||
See Notes to Financial Statements.
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For the Period June 4, 2013 (Commencement) to November 30, 2013 | ||||
OPERATIONS: | ||||
Net investment income | $ | 333,420 | ||
Net realized gain on investments | 2,436,210 | |||
Net change in unrealized appreciation on investments | 12,843,386 | |||
Net increase in net assets resulting from operations | 15,613,016 | |||
CAPITAL SHARE TRANSACTIONS: | ||||
Proceeds from sale of shares | 197,335,901 | |||
Cost of shares redeemed | (31,297,024) | |||
Net increase from share transactions | 166,038,877 | |||
Net increase in net assets | 181,651,893 | |||
NET ASSETS: | ||||
Beginning of period | – | |||
End of period * | $ | 181,651,893 | ||
*Including accumulated net investment income of: | $ | 239,977 | ||
OTHER INFORMATION: | ||||
CAPITAL SHARE TRANSACTIONS: | ||||
Beginning shares | – | |||
Shares sold | 7,350,002 | |||
Shares redeemed | (1,150,000) | |||
Shares outstanding, end of period | 6,200,002 | |||
See Notes to Financial Statements.
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For a Share Outstanding Throughout the Period Presented |
For the Period June 4, 2013 (Commencement) to November 30, 2013 | ||
NET ASSET VALUE, BEGINNING OF PERIOD | $25.00 | |
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||
Net investment income(a) | 0.10 | |
Net realized and unrealized gain | 4.20 | |
Total from investment operations | 4.30 | |
NET INCREASE IN NET ASSET VALUE | 4.30 | |
NET ASSET VALUE, END OF PERIOD | $29.30 | |
TOTAL RETURN(b) | 17.20% | |
RATIOS/SUPPLEMENTAL DATA: | ||
Net assets, end of period (000s) | $181,652 | |
RATIOS TO AVERAGE NET ASSETS: | ||
Expenses | 0.65%(c) | |
Net investment income | 0.78%(c) | |
PORTFOLIO TURNOVER RATE(d) | 11% |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at actual reinvestment prices. Total return calculated for a period less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover is not annualized and does not include securities recieved or delivered from processing creations or redemptions. |
See Notes to Financial Statements.
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November 30, 2013 |
1. ORGANIZATION
The ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of November 30, 2013, the Trust consisted of nineteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains solely to the Barron’s 400SM ETF (the “Fund”). The investment objective of the Fund is to seek investment results that correspond generally, before fees and expenses, to the performance of the Barron’s 400 IndexSM. The Fund commenced operations on June 4, 2013.
The Fund’s Shares (“Shares”) are listed on the New York Stock Exchange (“NYSE”) Arca. The Fund issues and redeems Shares at Net Asset Value (“NAV”) in blocks of 50,000 Shares, each of which is called a “Creation Unit.” Creation Units are issued and redeemed principally in-kind for securities included in a specified index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates.
A. Portfolio Valuation
The Fund’s NAV is determined daily, as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the National Association of Securities Dealers Automated Quotation (“NASDAQ”) exchange are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and asked prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ.
The Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Fund may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the closing sale prices on the applicable exchange and fair value prices may not reflect the actual value of a security. A variety of factors may be considered in determining the fair value of such securities.
B. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income is recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
C. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid annually or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually.
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Notes to Financial Statements | November 30, 2013 |
D. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carry forwards) under income tax regulations.
For the period ended November 30, 2013, permanent book and tax differences resulting primarily from differing treatment of investments in partnerships and in-kind transactions were identified and reclassified among the components of the Fund’s net assets as follows:
Fund | Paid-in Capital | Accumulated Net Investment Loss | Accumulated Net Realized Loss on Investments | |||||||||
Barron’s 400SM ETF | $ | 2,993,347 | $ | (93,443) | $ | (2,899,904) |
Net investment income and net realized (loss), as disclosed on the Statement of Operations, and net assets were not affected by this reclassification.
As of November 30, 2013, the components of distributable earnings on a tax basis were as follows:
Barron’s 400SM ETF | ||||
Undistributed net investment income | $ | 239,977 | ||
Accumulated net realized loss on investments | (504,350) | |||
Other accumulated gains | – | |||
Net unrealized appreciation on investments | 12,884,042 | |||
Total | $ | 12,619,669 | ||
At November 30, 2013, the Fund had available for tax purposes unused capital loss carry forwards as follows:
Short-Term | Long-Term | |||||
$504,350 | $– |
Distributions from net investment income and capital gains are determined in accordance with income tax regulations, which may differ from U.S. GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Fund, timing differences and differing characterization of distributions made by the Fund. During the period ended November 30, 2013 there were no distributions made by the Fund.
As of November 30, 2013, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Barron’s 400SM ETF | ||||
Gross appreciation | $ | 14,772,418 | ||
Gross depreciation | (1,888,376) | |||
Net unrealized appreciation (depreciation) | 12,884,042 | |||
Cost of investments for income tax purposes | $ | 168,662,641 | ||
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales and investments in partnerships.
E. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. The Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
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Notes to Financial Statements | November 30, 2013 |
As of and during the period ended November 30, 2013, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations which is generally three years after the filing of the tax return. Being that the Fund commenced operations on June 4, 2013, no tax returns have been filed as of the date of this report.
F. Fair Value Measurements
The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability; including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Fund’s investments by major category are as follows:
Equity securities and Limited Partnerships, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy.
Investments in open-end mutual funds are valued at their closing net asset value (NAV) each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments. These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value the Fund’s investments as of November 30, 2013:
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks* | $ | 175,257,086 | $ | – | $ | – | $ | 175,257,086 | ||||||||
Limited Partnerships | 5,833,390 | – | – | 5,833,390 | ||||||||||||
Short Term Investments | 456,207 | – | – | 456,207 | ||||||||||||
TOTAL | $ | 181,546,683 | $ | – | $ | – | $ | 181,546,683 | ||||||||
* | For a detailed sector breakdown, see the accompanying Schedule of Investments. |
The Fund recognizes transfers between levels as of the end of the period. For the period ended November 30, 2013, the Fund did not have any transfers between Level 1 and Level 2 securities. The Fund did not have any securities which used significant unobservable inputs (Level 3) in determining fair value.
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Notes to Financial Statements | November 30, 2013 |
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Investment Adviser”) acts as the Fund’s investment adviser pursuant to an Advisory Agreement with the Trust on behalf of the Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Fund pays the Investment Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.65% of the Fund’s average daily net assets. From time to time, the Investment Adviser may waive all or a portion of its fee.
Out of the unitary management fee, the Investment Adviser pays substantially all expenses of the Fund, including the licensing fee of the Index provider, and the cost of transfer agency, custody, fund administration, legal, audit and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Fund’s business. In addition, the Investment Adviser’s unitary management fee is designed to compensate the Investment Adviser for providing services for the Fund.
ALPS Fund Services, Inc. (“ALPS”), an affiliate of the Investment Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Investment Adviser, any subadviser or any of their affiliates (“Independent Trustees”) is paid a quarterly retainer of $5,000, $3,750 for each regularly scheduled Board meeting attended and $1,500 for each special meeting held outside of regularly scheduled meetings.
4. PURCHASES AND SALES OF SECURITIES
For the period ended November 30, 2013, the cost of purchases and proceeds from sales of investment securities, excluding in-kind transactions and short-term investments, were as follows:
Fund | Purchases of Securities | Proceeds From Sales of Securities | ||||||
Barron’s 400SM ETF | $ | 43,220,315 | $ | 11,894,788 | ||||
For the period ended November 30, 2013, the cost of in-kind purchases and proceeds from in-kind sales were as follows: |
| |||||||
Fund | Purchases of Securities | Proceeds from Sales of Securities | ||||||
Barron’s 400SM ETF | $ | 165,535,613 | $ | 31,046,929 | ||||
Gains on in-kind transactions are not considered taxable for federal income tax purposes. |
|
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 shares. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Fund. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the net asset value per unit 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 AP or as a result of other market circumstances.
6. INDEMNIFICATIONS
Under the Trust’s organizational documents, its officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
7. NEW ACCOUNTING PRONOUNCEMENTS
In June 2013, the FASB issued ASU No. 2013-08, Financial Services-Investment Companies (Topic 946): Amendments to the Scope, Measurement, and Disclosure Requirements. The FASB standard identifies characteristics a company must assess to determine whether it is considered an investment company for financial reporting purposes. This ASU is effective for fiscal years beginning after December 15, 2013. The Fund is currently reviewing the requirements and believes the adoption of this ASU will not have a material impact on its financial statements.
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November 30, 2013 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
A description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies and information regarding how the Fund voted proxies related to portfolio securities during the most recent 12-month period ended June 30th is available without charge, (1) on the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov; (2) upon request, by calling (toll-free) 1-866-513-5856; and (3) on the Trust’s website located at http://www.alpsfunds.com.
PORTFOLIO HOLDINGS
The Trust will file its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. The Trust’s Form N-Q will be available (1) on the SEC’s website at http://www.sec.gov; (2) by calling (toll-free) 1-866-513-5856; (3) on the Trust’s website located at http://www.alpsfunds.com; and (4) for review and copying at the SEC’s Public Reference Room (“PRR”) in Washington D.C. Information regarding the operation of the PRR may be obtained by calling (toll-free) 1-800-732-0330.
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Board Considerations Regarding Approval of Investment Advisory Agreement | November 30, 2013 (Unaudited) |
At an in-person meeting held on March 11, 2013, the Board of Trustees of the Trust (the “Board”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve the Advisory Agreement between the Trust and ALPS Advisors, Inc. (the “Adviser”) with respect to the Barron’s 400 ETF. The Independent Trustees also met separately to consider the Advisory Agreement.
In evaluating whether to approve the Advisory Agreement for the Barron’s 400 ETF, the Board considered numerous factors, as described below.
With respect to the nature, extent and quality of the services to be provided by the Adviser under the Advisory Agreement, representatives from the Adviser presented the Adviser’s material regarding consideration of renewal of the Advisory Agreement. The Independent Trustees noted that included in the Board materials were responses by the Adviser to a questionnaire drafted by legal counsel to the Trust to assist the Board in evaluating whether to approve the Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the services proposed to be provided under the Advisory Agreement, the proposed investment parameters of the index for the Barron’s 400 ETF, financial information regarding the Adviser, its parent company, information describing the Adviser’s current organizations and the background and experience of the persons who would be responsible for the day-to-day management of the Barron’s 400 ETF, the nature and quality of services provided to other exchange-traded (“ETFs”), open-end and closed-end funds by the Adviser. Based upon their review, the Independent Trustees concluded that the Adviser was qualified to oversee the services to be provided by other service providers and that the services to be provided by the Adviser to the Barron’s 400 ETF are expected to be satisfactory.
The Independent Trustees noted the services to be provided by the Adviser for the proposed annual advisory fee of 0.65% of Barron’s 400 ETF’s average daily net assets. The Independent Trustees noted that the advisory fees proposed for Barron’s 400 ETF were unitary fees pursuant to which the Adviser will assume all expense of Barron’s 400 ETF (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than payments under the Advisory Agreement, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses. Based on its review, the Independent Trustees concluded that the expected profitability of the Barron’s 400 ETF to the Adviser was not unreasonable.
The Independent Trustees reviewed the comparative fee information, including data from Lipper Analytical Services (“Lipper”). The Independent Trustees noted that Lipper’s report contained information regarding comparisons of the proposed cost and expense structures of Barron’s 400 ETF with other funds’ cost and expense structures. The Independent Trustees noted that the fee was high relative to others in the Barron’s 400 ETF’s Lipper peer group. However, the Independent Trustees also took into account, among other things, the unique features of the Index, its historical performance, the work involved (including the expenses incurred by the Adviser to obtain the Barron’s license) and the costs and benefits of linkage to the Barron’s name. Based on the foregoing and the other information available to them, the Independent Trustees concluded that the advisory fee for the Barron’s 400 ETF was reasonable under the circumstances and in light of the quality of services provided.
The Independent Trustees also considered other benefits that may be realized by the Adviser from its relationship with the Barron’s 400 ETF and concluded that the advisory fee was reasonable taking into account such benefits. The Independent Trustees considered the extent to which economies of scale would be realized as the Barron’s 400 ETF grows and whether fee level reflects a reasonable sharing of such economies of scale for the benefit of the Fund’s investors. Because the Barron’s 400 ETF is newly organized, the Independent Trustees reviewed the unitary advisory fee proposed for Barron’s 400 ETF and anticipated expenses of the Fund and determined to review economies of scale in the future when the Barron’s 400 ETF had attracted assets.
Based on consideration of all factors deemed relevant, the Independent Trustees determined that approval of the Advisory Agreement was in the best interests of the Barron’s 400 ETF. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
In voting to approve the Advisory Agreement, the Trustees, including the Independent Trustees, concluded that the terms of the Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Trustees considered relevant in the exercise of their reasonable business judgment.
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November 30, 2013 (Unaudited) |
INDEPENDENT TRUSTEES
Name,
| Position(s) with Trust
| Term of Office
| Principal Occupation(s) During Past 5 Years
| Number of
| Other Directorships Held by Trustees
| |||||
Mary K. Anstine, 1940 | Trustee | Since March 2008 | Ms. Anstine was President/Chief Executive Officer of HealthONE Alliance, Denver, Colorado, and former Executive Vice President of First Interstate Bank of Denver. Ms. Anstine is also Trustee/Director of the following: AV Hunter Trust; Colorado Uplift Board. Ms. Anstine was formerly a Director of the Trust Bank of Colorado (later purchased and now known as Northern Trust Bank), HealthONE and Denver Area Council of the Boy Scouts of America and a member of the American Bankers Association Trust Executive Committee.
| 41 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder, Chief Operations Officer and Chief Financial Officer of Green Alpha Advisors, LLC. Prior to joining Green Alpha Advisors, Mr. Deems was CFO and Treasurer of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC, a private investment fund, and Sutton Place Management, LLC, an administrative services company, from 2004 to June 2007. Prior to this, Mr. Deems served as Controller of Forward Management, LLC, ReFlow Management Co., LLC, ReFlow Fund, LLC and Sutton Place Management, LLC.
| 41 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (30 funds); and Reaves Utility Income Fund. | |||||
Rick A. Pederson, 1952 | Trustee | Since March 2008 | Mr. Pederson is President, Foundation Properties, Inc. (a real estate investment management company), 1994 – present; Advisory Committee, Bow River Capital Partners (private equity management), 2003 – present; Advisor, Pauls Corporation (real estate investment management and development), 2008 – present; Chairman, Ross Consulting Group (real estate consulting services) 1983 – 2013; Advisory Board, Neenan Company (construction services) 2002 – present; Board Member, Urban Land Conservancy (a not- for-profit organization), 2004 –present; Director, National Western Stock Show (not-for-profit organization).
| 22 | Mr. Pederson is Trustee of Westcore Trust (12 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
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Trustees & Officers | November 30, 2013 (Unaudited) |
INTERESTED TRUSTEE
Name, Address
| Position(s) with Trust
| Term of Office
| Principal Occupation(s) During Past 5 Years
| Number of
| Other Directorships Held by Trustees
| |||||
Thomas A. Carter, 1966 | Trustee and President | Since March 2008 | Mr. Carter joined ALPS Fund Services, Inc. (“ALPS”) in 1994 and is currently President and Director of ALPS Advisors, Inc. (“AAI”), ALPS Distributors, Inc. (“ADI”) and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”). Because of his position with AHI, ALPS, ADI, APSD and AAI, Mr. Carter is deemed an affiliate of the Fund as defined under the 1940 Act. Before joining ALPS, Mr. Carter was with Deloitte & Touché LLP, where he worked with a diverse group of clients, primarily within the financial services industry. Mr. Carter is a Certified Public Accountant and received his Bachelor of Science in Accounting from the University of Colorado at Boulder.
| 29 | Mr. Carter is a Trustee of ALPS Variable Investment Trust (7 funds) and Principal Real Estate Income Fund. |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
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Trustees & Officers | November 30, 2013 (Unaudited) |
OFFICERS
Name, Address and Year of Birth of Officer*
| Position(s) Held with Trust
| Length of Time Served**
| Principal Occupation(s) During Past 5 Years
| |||
Melanie Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars currently serves as a Deputy Chief Compliance Officer with ALPS. Prior to joining ALPS in September 2009, Ms. Zimdars served as Principal Financial Officer, Treasurer and Secretary for the Wasatch Funds from February 2007 to December 2008. From November 2006 to February 2007, she served as Assistant Treasurer for the Wasatch Funds and served as a Senior Compliance Officer for Wasatch Advisors, Inc. since 2005. Because of her position with ALPS, Ms. Zimdars is deemed an affiliate of the Trust as defined under the 1940 Act. Ms. Zimdars is also the CCO of ALPS Variable Investment Trust, Liberty All-Star Growth Fund, Inc., Liberty All-Star Equity Fund and BPV Family of Funds.
| |||
William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer, AAI (since 2006); President of the Liberty All-Star Funds (since April 1999); Senior Vice President (2005 – 2006), Banc of America Investment Advisors, Inc. Because of his position with AAI, Mr. Parmentier is deemed an affiliate of the Trust as defined under the 1940 Act.
| |||
Patrick D. Buchanan, 1972 | Treasurer | Since June 2012 | Mr. Buchanan is Vice President of AAI. Mr. Buchanan joined ALPS in 2007 and because of his position with AAI, he is deemed an affiliate of the Trust as defined under the 1940 Act. Mr. Buchanan is also Treasurer of ALPS Variable Investment Trust and the Principal Real Estate Income Fund.
| |||
Erin D. Nelson, 1977 | Secretary | Since October 2013 | Ms. Nelson is Vice President and Assistant General Counsel of AAI, ALPS Fund Services, Inc., ALPS Distributors, Inc., and ALPS Portfolio Solutions Distributor, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson has served as Secretary of the Clough Global Allocation Fund since 2004, Clough Global Equity Fund since 2005, Clough Global Opportunities Fund since 2006, Liberty All-Star Equity Fund since 2013 and Liberty All-Star Growth Fund since 2013. Ms. Nelson received her Bachelor of Arts in Political Science, magna cum laude, from the University of New Hampshire and Juris Doctorate from the University of Denver.
| |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Senior Paralegal. Prior to joining ALPS, Ms. Craig was Legal Manager at Janus Capital Management LLC and served as Assistant Secretary of Janus Investment Fund, Janus Adviser Series and Janus Aspen Series. Because of her position with ALPS, Ms. Craig is deemed an affiliate of the Trust as defined under the 1940 Act.
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* | The business address of each Officer is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1100, Denver, Colorado 80203. |
** | This is the period for which the Officer began serving the Trust. Each Officer serves an indefinite term, until his successor is elected. |
27 | November 30, 2013
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Item 2. | Code of Ethics. |
(a) The Registrant, as of the end of the period covered by this 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) Not applicable.
(c) During the period covered by this report, no amendments to the provisions of the code of ethics adopted in 2(a) above were made.
(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.
(e) Not applicable.
(f) The Registrant’s Code of Ethics is attached as an Exhibit hereto.
Item 3. | Audit Committee Financial Expert. |
The Board of Trustees of the Registrant has determined that the Registrant has at least one Audit Committee Financial Expert serving on its audit committee. The Board of Trustees of the Registrant has designated Jeremy W. Deems as the Registrant’s “Audit Committee Financial Expert”. Mr. Deems is “independent” as defined in paragraph (a)(2) of Item 3 to Form N-CSR.
Item 4. | Principal Accountant Fees and Services. |
(a) | Audit Fees: For the Registrant’s fiscal year ended November 30, 2013 and November 30, 2012, the aggregate fees billed for professional services rendered by the principal accountant for the audit of the Registrant’s annual financial statements were $277,000 and $119,500, respectively. |
(b) | Audit-Related Fees: For the Registrant’s fiscal year ended November 30, 2013 and November 30, 2012, the aggregate fees billed for professional services rendered by the principal accountant were $0 and $0, respectively. |
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(c) | Tax Fees: For the Registrant’s fiscal year ended November 30, 2013 and November 30, 2012, the aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning were $85,665 and $28,250, respectively. The fiscal year 2013 and 2012 tax fees were for services pertaining to federal and state income tax return review, review of year end dividend distributions and excise tax preparation. |
(d) | All Other Fees: For the Registrant’s fiscal year ended November 30, 2013 and November 30, 2012, aggregate fees billed to the Registrant by the principal accountant for services provided by the principal accountant other than the services reported in paragraphs (a) through (c) of this Item 4 were $0 and $0, respectively. |
(e)(1) | Audit Committee Pre-Approval Policies and Procedures: All services to be performed by the Registrant’s principal accountant must be pre-approved by the Registrant’s audit committee. |
(e)(2) | No services described in paragraphs (b) through (d) of this Item were approved by the Registrant’s audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. |
(f) | Not applicable. |
(g) | The aggregate non-audit fees billed by the Registrant’s accountant for the fiscal year ended November 30, 2013 and November 30, 2012 of the Registrant were $307,165 and $238,250, respectively. These fees consisted of non-audit fees billed to (i) the Registrant of $85,665 and $28,250 as described in response to paragraph (c) above and (ii) to ALPS Fund Services, Inc. (“AFS”), an entity under common control with ALPS Advisors, Inc., the Registrant’s investment adviser, of $221,500 and $210,000, respectively. The non-audit fees billed to AFS related to SSAE 16 services and other compliance-related matters. |
(h) | The Registrant’s audit committee has considered whether the provision of non-audit services that were rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the Registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant’s independence. The Registrant’s audit committee determined that the provision of such non-audit services is compatible with maintaining the principal accountant’s independence. |
Item 5. | Audit Committee of Listed Registrants. |
Not applicable.
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Item 6. | Investments. |
(a) | Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form N-CSR. |
(b) | Not applicable. |
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
Item 10. | Submission of Matters to 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, where those changes were implemented after the Registrant last provided disclosure in response to the requirements of Item 407(c)(2) of Regulation S-K, or this Item.
Item 11. | Controls and Procedures. |
(a) | The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. |
(b) | There was no change in 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 second fiscal quarter of 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 12. | Exhibits. |
(a)(1) | Registrant’s Code of Ethics for Senior Financial Officers, which is the subject of the disclosure required by Item 2 of Form N-CSR, was filed as Exhibit 12(a)(1) to the Registrant’s Certified Shareholder Report on Form N-CSR, File No. 811-22175, on March 6, 2009. |
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(a)(2) | The certifications required by Rule 30a-2(a) of the Investment Company Act of 1940, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit 99.Cert. |
(a)(3) | Not applicable. |
(b) | The certifications by the Registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(b) of the Investment Company Act of 1940, as amended, and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit 99.906Cert. |
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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.
ALPS ETF TRUST | ||
By: | /s/ Thomas A. Carter | |
Thomas A. Carter | ||
President (Principal Executive Officer) | ||
Date: | February 7, 2014 |
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/ Thomas A. Carter | |
Thomas A. Carter | ||
President (Principal Executive Officer) | ||
Date: | February 7, 2014 | |
By: | /s/ Patrick D. Buchanan | |
Patrick D. Buchanan | ||
Treasurer (Principal Financial Officer) | ||
Date: | February 7, 2014 |