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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, 2013 – November 30, 2014
Table of Contents
Item 1. | Reports to Stockholders. |
Table of Contents
Table of Contents
CONTENTS
1 | ||||
4 | ||||
7 | ||||
8 | ||||
Financial Statements | ||||
9 | ||||
11 | ||||
12 | ||||
13 | ||||
14 | ||||
15 | ||||
17 | ||||
18 | ||||
19 | ||||
20 | ||||
21 | ||||
29 | ||||
Board Considerations Regarding Approval of Investment Advisory Agreement | ||||
31 | ||||
33 |
www.alpsfunds.com
Table of Contents
November 30, 2014 (Unaudited) |
INVESTMENT OBJECTIVE
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, storage, and processing of energy commodities.
PERFORMANCE OVERVIEW
During the twelve month period of December 1, 2013 to November 30, 2014, the Alerian MLP ETF (AMLP) delivered a total return of 8.8% (8.8% NAV). This compares to the Fund’s index, the Alerian MLP Infrastructure Index (“AMZI Index”), which gained 7.8% on a price-return and 13.8% on a total return basis. The difference in the performance between the Index and AMLP is primarily attributable to the Fund’s operating expenses and the tax impact of the Fund’s C-corporation(1) structure.
During the period, the fund paid four distributions:
• | $0.278 on February 13, 2014 |
• | $0.279 on May 13, 2014 |
• | $0.284 on August 13, 2014 |
• | $0.289 on November 14, 2014 |
These distributions represent 1.5%, 0.4%, 1.8%, and 1.8% increases from their previous quarters. On an annual basis, the Fund has increased its distribution by 5.5% when comparing the November 14, 2014 distribution versus the November 15, 2013 distribution of $0.274.
Top performers in the Index during the period include TC PipeLines (TCP) and Magellan Midstream Partners (MMP), both gaining more than 30% on a price-return basis. Underperforms during the period include ONEOK Partners (OKS) and Genesis Energy (GEL). During the period, Crestwood Midstream Partners (CMLP), EnLink Midstream Partners (ENLK), EQT Midstream Partners (EQM), and NGL Energy Partners (NGL) were added to the Index. Boardwalk Pipeline Partners (BWP), PVR Partners, Kinder Morgan Energy Partners, and El Paso Pipeline Partners were removed from the Index.
In mid-March, the Interstate Natural Gas Association of America (INGAA) updated and expanded its capital spending report, estimating the need for $641 billion of natural gas, crude, and natural gas liquid infrastructure spending through 2035. For perspective, the total market capitalization of the 25 names in the Index at November 30, 2014 was $310 billion. The new spending estimate is $390 billion higher than the organization’s 2011 estimate. Several companies have noted that “North America is undergoing a major repiping” in describing the construction of new and repurposing of existing midstream assets to accommodate new and growing supply areas. In 2014, many pipeline reversal and/or conversion projects were announced, and the industry even saw a revival in natural gas pipeline projects. Overlaid with increased international demand for cheaper energy resources, the stage is set for more natural gas and ethane export projects.
During the latter half of the period, master limited partnership equity prices told a different story. Starting in June and lasting even beyond November, crude prices plummeted. From its June 13 high of $107.49, West Texas Intermediate (WTI) oil prices had fallen nearly 40% to $65.94 by the end of November. However, MLP unit prices were relatively unaffected by the pullback until October. While the majority of MLPs operate toll-road business models that rarely take title to the underlying commodity, MLPs have not been immune to the headline risk. In the span of two months, the Index fell 7.1%. Investors that feared catching a falling knife took the opportunity to do some early tax loss harvesting, while longer-term investors used the selloffs to add to positions in defensive names, which tend to be larger, investment grade, and with less direct sensitivity to commodity prices. Over the long run, MLPs have exhibited a weak correlation to commodity prices, whether they are crude oil, natural gas, or natural gas liquids.
Despite the volatility, the amount of announced organic projects from master limited partnerships seemingly has not slowed down. Regardless of commodity prices, the MLP-owned energy infrastructure assets, including pipelines, storage facilities, and processing plants, are and will be the bridge 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 that MLPs continue to represent a compelling potential investment opportunity for investors seeking after-tax yield.
1 | November 30, 2014
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Alerian MLP ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
(1) | Under current law, the Fund is not eligible to elect treatment as a regulated investment company due to its investments primarily in MLPs. The Fund is classified for federal income tax purposes as a taxable regular corporation or so-called Subchapter “C” corporation. Whereas the NAV of Fund Shares is reduced by the accrual of any deferred tax liabilities, the Alerian MLP Infrastructure Index is calculated without any tax deductions. |
The views and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect the writer’s current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the fund or any securities or any sectors mentioned herein. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. ALPS Advisors, Inc. and Alerian do not accept any liability for losses either direct or consequential caused by the use of this information.
Performance (as of November 30, 2014)
1 Year | 3 Year | Since Inception^ | ||||
Alerian MLP ETF – NAV | 8.82% | 10.82% | 11.09% | |||
Alerian MLP ETF – Market Price* | 8.82% | 10.85% | 11.09% | |||
Alerian MLP Infrastructure Index | 13.79% | 17.38% | 17.96% | |||
S&P 500® Total Return Index | 16.86% | 20.93% | 19.67% |
Total Expense Ratio (per the current prospectus) 8.56%.
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. The Fund accrues deferred income taxes for future tax liabilities associated with the portion of MLP distributions considered to be a tax-deferred return of capital and for any net operating gains as well as capital appreciation of its investment. This deferred tax liability is reflected in the daily NAV and as a result the MLP fund’s after-tax performance could differ significantly from the underlying assets even if the pre-tax performance is closely tracked.
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 and provides investors with an unbiased benchmark for the infrastructure component of this emerging asset class.
S&P 500® Index is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.
One cannot invest directly in an index. Index performance does not reflect fund performance.
The Alerian MLP ETF is not suitable for all investors. Subject to investment risks, including possible loss of the principal amount invested.
2 | November 30, 2014
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Alerian MLP ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
Top 10 Holdings* (as of November 30, 2014)
Enterprise Products Partners LP | 10.32 | % | ||
Energy Transfer Partners LP | 7.53 | % | ||
Plains All American Pipeline LP | 7.48 | % | ||
MarkWest Energy Partners LP | 7.45 | % | ||
Magellan Midstream Partners LP | 7.38 | % | ||
Buckeye Partners LP | 5.90 | % | ||
Williams Partners LP | 4.86 | % | ||
Enbridge Energy Partners LP | 4.80 | % | ||
Regency Energy Partners LP | 4.68 | % | ||
ONEOK Partners LP | 4.28 | % | ||
Total % of Top 10 Holdings | 64.68 | % |
* | % of Total Investments |
Future holdings are subject to change.
Growth of $10,000 (as of November 30, 2014)
Comparison of change in value of a $10,000 investment in the Fund and the Indexes
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.
3 | November 30, 2014
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Performance Overview | November 30, 2014 (Unaudited) |
INVESTMENT OBJECTIVE
The Alerian Energy Infrastructure 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 Energy Infrastructure Index (AMEI) (the “Index”).
The Index is intended to give investors a means of tracking the overall performance of the North American energy infrastructure sector. The 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. The following five categories of issuers are included in the Index: master limited partnerships (“MLPs”) and limited liability companies taxed as partnerships known as “Midstream MLPs” (25% total index weight), U.S. MLP affiliates (30% total index weight) taxed as corporations, Canadian MLP affiliates (10% total index weight) taxed as corporations, U.S. energy infrastructure and power companies (15% total index weight) taxed as corporations and Canadian energy infrastructure companies (20% total index weight) taxed as corporations.
PERFORMANCE OVERVIEW
During the period of December 1, 2013 to November 30, 2014, the Alerian Energy Infrastructure ETF (ENFR) delivered a total return of 17.3% (17.1% NAV) This compares to the Fund’s index, the Alerian Energy Infrastructure Index (“AMEI Index” or “Index”), which gained 14.0% on a price-return and 18.3% on a total return basis.
During the period, the fund paid four distributions:
• | $0.066079 on January 3, 2014 |
• | $0.153455 on April 2, 2014 |
• | $0.180812 on July 2, 2014 |
• | $0.161968 on October 1, 2014 |
Top performers in the Index during the period include Targa Resources Corp (TRGP) and Williams Companies (WMB), both gaining more than 40% on a price-return basis, largely due to positive restructuring and merger and acquisition (M&A) activity. Underperformers in the Index included ONEOK Inc. (OKE) and CenterPoint Energy (CNP).
During the period, Buckeye Partners (BPL), Plains GP Holdings (PAGP), DTE Energy (DTE), EnLink Midstream LLC (ENLC), and EQT Midstream Partners (EQM) were added to the Index. Plains All American Pipeline (PAA), Crosstex Energy Inc (XTXI), Boardwalk Pipeline Partners (BWP), New Jersey Resources (NJR), and SemGroup (SEMG) were removed from the Index.
Energy infrastructure companies continue to benefit from the increase in natural gas, crude oil, and natural gas liquids production (NGL) known as the energy renaissance. In mid-March, the Interstate Natural Gas Association of America (INGAA) updated and expanded its capital spending report, estimating the need for $641 billion of natural gas, crude, and natural gas liquid (NGL) infrastructure spending through 2035. For perspective, the total market capitalization of the 30 names in the Index at November 30, 2014 was $505 billion. The new spending estimate is $390 billion higher than the organization’s 2011 estimate.
Several companies have noted that “North America is undergoing a major repiping” in describing the construction of new and repurposing of existing midstream assets to accommodate new and growing supply areas. In 2014, many U.S. pipeline reversal and/or conversion projects were announced, and the industry even saw a revival in natural gas pipeline projects. Overlaid with increased international demand for cheaper energy resources, the stage is set for more natural gas and ethane export projects.
Across the border in Canada, as heavy crude, condensate, and natural gas liquid production increased in 2014, midstream companies were busy announcing additional pipeline and terminal projects to and from major product hubs such as Edmonton and Hardisty. In addition, Canadian energy infrastructure companies saw an uptick in demand for their crude-by-rail businesses, which offer flexibility and an interim solution until adequate infrastructure is put in place.
Despite some equity price volatility towards the latter few months of the period from declining oil prices, there is still a vast opportunity for the constituents in the Index to participate in the energy infrastructure build-out of North America. With billions of dollars of infrastructure opportunities over the next few decades, we continue to believe that energy infrastructure companies represent a compelling potential investment opportunity for investors seeking total return.
4 | November 30, 2014
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Alerian Energy Infrastructure ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
The views and information discussed in this commentary are as of the date of publication, are subject to change, and may not reflect the writer’s current views. The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the fund or any securities or any sectors mentioned herein. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation. ALPS Advisors, Inc. and Alerian do not accept any liability for losses either direct or consequential caused by the use of this information.
Performance (as of November 30, 2014)
1 Year | Since Inception^ | |||
Alerian Energy Infrastructure ETF - NAV | 17.12% | 15.13% | ||
Alerian Energy Infrastructure ETF - Market Price* | 17.26% | 15.43% | ||
Alerian Energy Infrastructure Index | 18.31% | 16.40% | ||
S&P 500® Total Return Index | 16.86% | 18.73% |
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. |
* | 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.
One cannot invest directly in an index. Index performance does not reflect fund performance.
The Alerian Energy Infrastructure ETF is not suitable for all investors. Subject to investment risks, including possible loss of the principal amount invested.
Top 10 Holdings* (as of November 30, 2014)
Enbridge, Inc. | 5.08% | |||
Kinder Morgan, Inc. | 5.06% | |||
TransCanada Corp. | 4.82% | |||
Spectra Energy Corp. | 4.32% | |||
Energy Transfer Partners LP | 4.22% | |||
The Williams Cos., Inc. | 4.21% | |||
EnLink Midstream LLC | 4.18% | |||
Plains GP Holdings LP, Class A | 4.02% | |||
Targa Resources Corp. | 3.88% | |||
Magellan Midstream Partners LP | 3.72% | |||
Total % of Top 10 Holdings | 43.51% |
* | % of Total Investments |
Future holdings are subject to change.
5 | November 30, 2014
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Alerian Energy Infrastructure ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
Growth of $10,000 (as of November 30, 2014)
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.
6 | November 30, 2014
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Alerian Exchange Traded Funds | ||
November 30, 2014 (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, 2014.
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 deter- mine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning Account Value 6/1/14 | Ending Account Value 11/30/14 | Expense Ratio(a) | Expenses Paid During Period 6/1/14 - 11/30/14(b) | |||||
Alerian MLP ETF | ||||||||
Actual | $1,000.00 | $1,023.20 | 0.85% | $4.31 | ||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,020.81 | 0.85% | $4.31 | ||||
Alerian Energy Infrastructure ETF | ||||||||
Actual | $1,000.00 | $1,016.70 | 0.65% | $3.29 | ||||
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. |
7 | November 30, 2014
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Alerian Exchange Traded Funds | ||
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, 2014, 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 for the Alerian MLP ETF, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the year then ended and 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, 2014, 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 Alerian MLP ETF and Alerian Energy Infrastructure ETF of the ALPS ETF Trust as of November 30, 2014, the results of their operations for the year then ended, and 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 29, 2015
8 | November 30, 2014
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Alerian MLP ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||||
Master Limited Partnerships (110.91%) | ||||||||||
Gathering & Processing (38.93%) | ||||||||||
Access Midstream Partners LP | 6,582,078 | $ | 412,564,649 | |||||||
Atlas Pipeline Partners LP | 4,933,023 | 162,000,475 | ||||||||
Crestwood Midstream Partners LP | 9,693,570 | 194,646,885 | ||||||||
DCP Midstream Partners LP | 5,567,338 | 266,731,164 | ||||||||
EnLink Midstream Partners LP | 5,978,369 | 166,736,711 | ||||||||
MarkWest Energy Partners LP | 10,888,894 | 773,764,808 | ||||||||
Regency Energy Partners LP | 17,083,390 | 486,705,781 | ||||||||
Targa Resources Partners LP | 6,555,578 | 359,442,342 | ||||||||
Western Gas Partners LP | 4,397,444 | 311,910,703 | ||||||||
Williams Partners LP | 9,765,177 | 505,250,258 | ||||||||
|
| |||||||||
Total Gathering & Processing | 3,639,753,776 | |||||||||
|
| |||||||||
Natural Gas Transportation (31.06%) | ||||||||||
Energy Transfer Partners LP | 12,011,910 | 782,816,175 | ||||||||
Enterprise Products Partners LP | 28,705,103 | 1,071,848,546 | ||||||||
EQT Midstream Partners LP | 2,538,569 | 212,325,911 | ||||||||
ONEOK Partners LP | 10,084,028 | 444,503,954 | ||||||||
Spectra Energy Partners LP | 3,259,252 | 175,901,830 | ||||||||
TC PipeLines LP | 3,003,103 | 216,193,385 | ||||||||
|
| |||||||||
Total Natural Gas Transportation | 2,903,589,801 | |||||||||
|
| |||||||||
Petroleum Transportation (39.38%) | ||||||||||
Buckeye Partners LP | 7,974,056 | 612,965,685 | ||||||||
Enbridge Energy Partners LP | 13,295,482 | 498,580,575 | ||||||||
Genesis Energy LP | 4,730,930 | 208,302,848 | ||||||||
Magellan Midstream Partners LP | 9,244,901 | 766,309,844 | ||||||||
NuStar Energy LP | 4,210,250 | 235,774,000 | ||||||||
Plains All American Pipeline LP | 15,105,107 | 777,157,755 | ||||||||
Sunoco Logistics Partners LP | 9,225,637 | 444,122,165 | ||||||||
Tesoro Logistics LP | 2,428,051 | 139,054,481 | ||||||||
|
| |||||||||
Total Petroleum Transportation | 3,682,267,353 | |||||||||
|
| |||||||||
Propane (1.54%) | ||||||||||
NGL Energy Partners LP | 4,128,704 | 144,091,770 | ||||||||
|
| |||||||||
Total Master Limited Partnerships | 10,369,702,700 | |||||||||
|
| |||||||||
7 Day Yield | Shares | Value | ||||||||
Short Term Investments (0.22%) | ||||||||||
Dreyfus Treasury Prime Cash Management Fund, Institutional Shares | 0.000%(a) | 20,246,805 | 20,246,805 | |||||||
|
| |||||||||
Total Short Term Investments | ||||||||||
(Cost $20,246,805) | 20,246,805 | |||||||||
|
| |||||||||
Total Investments (111.13%) | ||||||||||
(Cost $7,842,089,290) | $ | 10,389,949,505 | ||||||||
Net Liabilities Less Other Assets (-11.13%) | (1,040,948,155) | |||||||||
|
| |||||||||
Net Assets (100.00%) | $ | 9,349,001,350 | ||||||||
|
|
9 | November 30, 2014
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Alerian MLP ETF | ||
Schedule of Investments | November 30, 2014 |
(a) | Less than 0.0005%. |
Common Abbreviations:
LP - Limited Partnership.
See Notes to Financial Statements. | ||
10 | November 30, 2014 |
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Alerian MLP ETF | ||
November 30, 2014 |
ASSETS: | ||||
Investments, at value | $ | 10,389,949,505 | ||
Receivable for securities sold | 18,562,357 | |||
Receivable for shares sold | 86,845 | |||
Income tax receivable | 5,547,683 | |||
Total Assets | 10,414,146,390 | |||
LIABILITIES: | ||||
Payable to custodian for overdraft | 10,107 | |||
Franchise tax payable | 571,206 | |||
Deferred tax liability | 1,039,371,378 | |||
Payable for shares redeemed | 18,577,200 | |||
Payable to adviser | 6,615,149 | |||
Total Liabilities | 1,065,145,040 | |||
NET ASSETS | $ | 9,349,001,350 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 7,907,097,124 | ||
Accumulated net investment loss, net of deferred income taxes | (103,488,439) | |||
Accumulated net realized loss on investments, net of deferred income taxes | (68,156,796) | |||
Net unrealized appreciation on investments, net of deferred income taxes | 1,613,549,461 | |||
NET ASSETS | $ | 9,349,001,350 | ||
INVESTMENTS, AT COST | $ | 7,842,089,290 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 9,349,001,350 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 516,512,100 | |||
Net Asset Value, offering and redemption price per share | $ | 18.10 |
See Notes to Financial Statements. | ||
11 | November 30, 2014 |
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Alerian MLP ETF | ||
For the Year Ended November 30, 2014 |
INVESTMENT INCOME: | ||||
Distributions from master limited partnerships | $ | 508,572,769 | ||
Less return of capital distributions | (508,572,769) | |||
Total Investment Income | – | |||
EXPENSES: | ||||
Franchise tax expense | 730,005 | |||
Investment adviser fee | 72,402,447 | |||
Total Expenses | 73,132,452 | |||
NET INVESTMENT LOSS, BEFORE INCOME TAXES | (73,132,452) | |||
Deferred income tax benefit | 26,414,177 | |||
NET INVESTMENT LOSS | (46,718,275) | |||
REALIZED AND UNREALIZED GAIN/(LOSS): | ||||
Net realized gain on investments, before income taxes | 421,995,992 | |||
Deferred income tax expense | (154,612,911) | |||
Net realized gain | 267,383,081 | |||
Net change in unrealized appreciation on investments, before income taxes | 735,432,882 | |||
Deferred income tax expense | (261,584,094) | |||
Net change in unrealized appreciation | 473,848,788 | |||
NET REALIZED AND UNREALIZED GAIN | 741,231,869 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 694,513,594 | ||
See Notes to Financial Statements. | ||
12 | November 30, 2014 |
Table of Contents
Alerian MLP ETF | ||
Statements of Changes in Net Assets |
For the Year Ended | For the Year Ended | |||||||
OPERATIONS: | ||||||||
Net investment loss | $ | (46,718,275) | $ | (33,135,067) | ||||
Net realized gain/(loss) on investments | 267,383,081 | (13,345,439) | ||||||
Net change in unrealized appreciation on investments | 473,848,788 | 841,731,398 | ||||||
Net increase in net assets resulting from operations | 694,513,594 | 795,250,892 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net realized gains | (343,269,132) | – | ||||||
From tax return of capital | (191,041,392) | (383,931,834) | ||||||
Total distributions | (534,310,524) | (383,931,834) | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 2,282,699,118 | 2,828,412,621 | ||||||
Issued to shareholders in reinvestment distributions | 4,571,254 | 2,121,281 | ||||||
Cost of shares redeemed | (483,156,705) | (323,983,737) | ||||||
Net increase from share transactions | 1,804,113,667 | 2,506,550,165 | ||||||
Net increase in net assets | 1,964,316,737 | 2,917,869,223 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 7,384,684,613 | 4,466,815,390 | ||||||
End of year * | $ | 9,349,001,350 | $ | 7,384,684,613 | ||||
*Including accumulated net investment loss, net of deferred income taxes of: | $ | (103,488,439) | $ | (56,770,164) | ||||
OTHER INFORMATION: | ||||||||
SHARE TRANSACTIONS: | ||||||||
Beginning shares | 417,561,799 | 273,740,266 | ||||||
Shares sold | 125,050,000 | 162,250,000 | ||||||
Distributions reinvested | 250,301 | 121,533 | ||||||
Shares redeemed | (26,350,000) | (18,550,000) | ||||||
Shares outstanding, end of year | 516,512,100 | 417,561,799 | ||||||
See Notes to Financial Statements. | ||
13 | November 30, 2014 |
Table of Contents
Alerian MLP ETF | ||
For a Share Outstanding Throughout the Periods Presented |
For the Year Ended November 30, 2014 | For the Year Ended November 30, 2013 | For the Year Ended November 30, 2012 | For the Period January 1, 2011 November 30, | For the Period August 25, 2010 (Inception) to December 31, 2010 | ||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 17.69 | $ | 16.32 | $ | 15.97 | $ | 16.05 | $ | 15.00 | ||||||||||
INCOME/(LOSS) FROM OPERATIONS: | ||||||||||||||||||||
Net investment loss(b) | (0.16) | (0.09) | (0.09) | (0.08) | (0.03) | |||||||||||||||
Net realized and unrealized gain on investments | 1.70 | 2.53 | 1.44 | 1.00 | 1.33 | |||||||||||||||
Total from investment operations | 1.54 | 2.44 | 1.35 | 0.92 | 1.30 | |||||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||
From net realized gains | (0.73) | – | (0.00) | (b)(c) | (0.14) | (b) | – | |||||||||||||
From tax return of capital | (0.40) | (1.07) | (1.00) | (0.86) | (0.25) | |||||||||||||||
Total distributions | (1.13) | (1.07) | (1.00) | (1.00) | (0.25) | |||||||||||||||
NET INCREASE/(DECREASE) IN NET ASSET VALUE | 0.41 | 1.37 | 0.35 | (0.08) | 1.05 | |||||||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 18.10 | $ | 17.69 | $ | 16.32 | $ | 15.97 | $ | 16.05 | ||||||||||
TOTAL RETURN(d) | 8.82 | % | 15.16 | % | 8.62 | % | 5.93 | % | 8.66 | % | ||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||
Net assets, end of period (000s) | $ | 9,349,001 | $ | 7,384,685 | $ | 4,466,815 | $ | 1,713,387 | $ | 611,467 | ||||||||||
RATIO TO AVERAGE NET ASSETS: | ||||||||||||||||||||
Expenses (excluding net current and deferred tax expenses/benefits and franchise tax expense) | 0.85 | % | 0.85 | % | 0.85 | % | 0.85 | %(e) | 0.85 | %(e) | ||||||||||
Expenses (including net current and deferred tax expenses/benefits)(f) | 5.43 | % | 8.56 | % | 4.85 | % | 4.86 | %(e) | 13.56 | %(e) | ||||||||||
Expenses (including current and deferred tax expenses/ | 0.55 | % | 0.55 | % | 0.54 | % | 0.53 | %(e) | 0.52 | %(e) | ||||||||||
Net investment loss (excluding deferred tax expenses/benefits and franchise tax expense) | (0.85) | % | (0.85) | % | (0.85) | % | (0.85) | %(e) | (0.85) | %(e) | ||||||||||
Net investment loss (including deferred tax expenses/benefits) | (0.55) | % | (0.55) | % | (0.54) | % | (0.53) | %(e) | (0.52) | %(e) | ||||||||||
PORTFOLIO TURNOVER RATE(h) | 29 | % | 12 | % | 12 | % | 10 | % | 12 | % |
(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) | Annualized. |
(f) | Includes amount of current and deferred taxes/benefits for all components of the Statement of Operations. |
(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. | ||
14 | November 30, 2014 |
Table of Contents
Alerian Energy Infrastructure ETF | ||
November 30, 2014 |
Security Description | Shares | Value | ||||||
Canadian Infrastructure (18.79%) | ||||||||
Energy (12.61%) | ||||||||
AltaGas, Ltd. | 11,465 | $ | 424,912 | |||||
Gibson Energy, Inc. | 16,062 | 382,763 | ||||||
Inter Pipeline, Ltd. | 15,994 | 456,252 | ||||||
Pembina Pipeline Corp. | 11,490 | 391,474 | ||||||
Veresen, Inc. | 32,262 | 504,737 | ||||||
|
| |||||||
Total Energy | 2,160,138 | |||||||
|
| |||||||
Utilities (6.18%) | ||||||||
Emera, Inc. | 17,631 | 607,487 | ||||||
Keyera Corp. | 6,069 | 451,075 | ||||||
|
| |||||||
Total Utilities | 1,058,562 | |||||||
|
| |||||||
Total Canadian Infrastructure (Cost $3,359,193) | 3,218,700 | |||||||
|
| |||||||
Canadian Master Limited Partnership Affiliates (9.88%) | ||||||||
Energy (9.88%) | ||||||||
Enbridge, Inc. | 18,919 | 868,603 | ||||||
TransCanada Corp. | 17,300 | 823,774 | ||||||
|
| |||||||
Total Energy | 1,692,377 | |||||||
|
| |||||||
Total Canadian Master Limited Partnership Affiliates (Cost $1,696,567) | 1,692,377 | |||||||
|
| |||||||
Master Limited Partnerships (28.88%) | ||||||||
Energy (28.88%) | ||||||||
Buckeye Partners LP | 7,953 | 611,347 | ||||||
Energy Transfer Partners LP | 11,074 | 721,693 | ||||||
Enterprise Products Partners LP | 15,702 | 586,313 | ||||||
EQT Midstream Partners LP | 6,650 | 556,206 | ||||||
Magellan Midstream Partners LP | 7,659 | 634,854 | ||||||
MarkWest Energy Partners LP | 7,949 | 564,856 | ||||||
Plains GP Holdings LP, Class A | 26,445 | 687,041 | ||||||
Western Gas Partners LP | 8,240 | 584,463 | ||||||
|
| |||||||
Total Energy | 4,946,773 | |||||||
|
| |||||||
Total Master Limited Partnerships (Cost $4,901,221) | 4,946,773 | |||||||
|
| |||||||
U.S. Infrastructure (16.92%) | ||||||||
Utilities (16.92%) | ||||||||
Atmos Energy Corp. | 8,011 | 430,191 | ||||||
CenterPoint Energy, Inc. | 16,428 | 393,286 | ||||||
Dominion Resources, Inc. | 5,765 | 418,251 | ||||||
DTE Energy Co. | 5,214 | 424,732 | ||||||
NiSource, Inc. | 10,171 | 425,555 | ||||||
OGE Energy Corp. | 10,906 | 389,235 | ||||||
Questar Corp. | 17,401 | 417,450 | ||||||
|
| |||||||
Total Utilities | 2,898,700 | |||||||
|
| |||||||
Total U.S. Infrastructure (Cost $2,776,547) | 2,898,700 | |||||||
|
|
15 | November 30, 2014
Table of Contents
Alerian Energy Infrastructure ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
U.S. Master Limited Partnership Affiliates (25.26%) | ||||||||
Energy (25.26%) | ||||||||
EnLink Midstream LLC | 19,754 | $ | 714,502 | |||||
Kinder Morgan, Inc. | 20,909 | 864,587 | ||||||
ONEOK, Inc. | 11,587 | 627,552 | ||||||
Spectra Energy Corp. | 19,499 | 738,622 | ||||||
Targa Resources Corp. | 5,806 | 662,697 | ||||||
The Williams Cos., Inc. | 13,900 | 719,325 | ||||||
|
| |||||||
Total Energy | 4,327,285 | |||||||
|
| |||||||
Total U.S. Master Limited Partnership Affiliates (Cost $4,391,526) | 4,327,285 | |||||||
|
| |||||||
Total Investments (99.73%) (Cost $17,125,054) | $ | 17,083,835 | ||||||
Net Other Assets and Liabilities (0.27%) | 47,008 | |||||||
|
| |||||||
Net Assets (100.00%) | $ | 17,130,843 | ||||||
|
|
Common Abbreviations:
LLC - Limited Liability Company.
LP - Limited Partnership.
Ltd. - Limited.
See Notes to Financial Statements. | ||
16 | November 30, 2014 |
Table of Contents
Alerian Energy Infrastructure ETF | ||
November 30, 2014 |
ASSETS: | ||||
Investments, at value | $ | 17,083,835 | ||
Foreign currency, at value (Cost $11,100) | 10,957 | |||
Receivable for investments sold | 270,487 | |||
Dividends receivable | 32,543 | |||
Total Assets | 17,397,822 | |||
LIABILITIES: | ||||
Payable for investments purchased | 175,991 | |||
Payable to adviser | 9,376 | |||
Payable to custodian for overdraft | 81,612 | |||
Total Liabilities | 266,979 | |||
NET ASSETS | $ | 17,130,843 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 17,081,254 | ||
Accumulated net investment income | 35,972 | |||
Accumulated net realized gain on investments and foreign currency transactions | 55,000 | |||
Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign | (41,383) | |||
NET ASSETS | $ | 17,130,843 | ||
INVESTMENTS, AT COST | $ | 17,125,054 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 17,130,843 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 600,002 | |||
Net Asset Value, offering and redemption price per share | $ | 28.55 |
See Notes to Financial Statements. | ||
17 | November 30, 2014 |
Table of Contents
Alerian Energy Infrastructure ETF | ||
For the Year Ended November 30, 2014 |
INVESTMENT INCOME: | ||||
Dividends | $ | 371,149 | ||
Foreign taxes withheld | (17,575) | |||
Total Investment Income | 353,574 | |||
EXPENSES: | ||||
Investment adviser fees | 63,341 | |||
Total Expenses | 63,341 | |||
NET INVESTMENT INCOME | 290,233 | |||
REALIZED AND UNREALIZED GAIN/(LOSS): | ||||
Net realized gain on investments | 323,420 | |||
Net realized loss on foreign currency transactions | (2,828) | |||
Net realized gain | 320,592 | |||
Net change in unrealized depreciation on investments | (19,447) | |||
Net change in unrealized depreciation on translation of assets and liabilities denominated in foreign currencies | (129) | |||
Net change in unrealized depreciation | (19,576) | |||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND FOREIGN CURRENCIES | 301,016 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 591,249 | ||
See Notes to Financial Statements. | ||
18 | November 30, 2014 |
Table of Contents
Alerian Energy Infrastructure ETF | ||
For the Year Ended November 30, 2014 | For the Period November 1, 2013 (Commencement of Operations) to November 30, 2013 | |||||||
| ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 290,233 | $ | 8,118 | ||||
Net realized gain on investments and foreign currency transactions | 320,592 | – | ||||||
Net change in unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies | (19,576) | (21,807) | ||||||
| ||||||||
Net increase/(decrease) in net assets resulting from operations | 591,249 | (13,689) | ||||||
| ||||||||
DISTRIBUTIONS: | ||||||||
From net investment income | (191,603) | – | ||||||
| ||||||||
Total distributions | (191,603) | – | ||||||
| ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 18,346,104 | 3,743,019 | ||||||
Cost of shares redeemed | (5,344,237) | – | ||||||
| ||||||||
Net increase from share transactions | 13,001,867 | 3,743,019 | ||||||
| ||||||||
Net increase in net assets | 13,401,513 | 3,729,330 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 3,729,330 | – | ||||||
| ||||||||
End of period * | $ | 17,130,843 | $ | 3,729,330 | ||||
| ||||||||
*Including accumulated net investment income of: | $ | 35,972 | $ | 4,749 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 150,002 | – | ||||||
Shares sold | 650,000 | – | ||||||
Shares redeemed | (200,000) | 150,002 | ||||||
| ||||||||
Shares outstanding, end of period | 600,002 | 150,002 | ||||||
|
See Notes to Financial Statements. | ||
19 | November 30, 2014 |
Table of Contents
Alerian Energy Infrastructure ETF | ||
For a Share Outstanding Throughout the Periods Presented |
For the Year Ended November 30, 2014 | For the Period November 1, 2013 (Commencement of Operations) to November 30, 2013 | |||||||
| ||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 24.86 | $ | 25.00 | ||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||
Net investment income(a) | 0.85 | 0.06 | ||||||
Net realized and unrealized gain/(loss) | 3.40 | (0.20) | ||||||
| ||||||||
Total from investment operations | 4.25 | (0.14) | ||||||
| ||||||||
DISTRIBUTIONS: | ||||||||
From net investment income | (0.56) | – | ||||||
| ||||||||
Total distributions | (0.56) | – | ||||||
| ||||||||
NET INCREASE/(DECREASE) IN NET ASSET VALUE | 3.69 | (0.14) | ||||||
| ||||||||
NET ASSET VALUE, END OF PERIOD | $ | 28.55 | $ | 24.86 | ||||
| ||||||||
TOTAL RETURN(b) | 17.12% | (0.56)% | ||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||
Net assets, end of period (000s) | $ | 17,131 | $ | 3,729 | ||||
Ratio of expenses to average net assets | 0.65% | 0.65%(c) | ||||||
Ratio of net investment income to average net assets | 2.98% | 3.21%(c) | ||||||
Portfolio turnover rate(d) | 27 % | 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. | ||
20 | November 30, 2014 |
Table of Contents
Alerian Exchange Traded Funds | ||
November 30, 2014 |
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, 2014, the Trust consisted of sixteen 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 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 investment advisor uses a “passive” or index approach to try to achieve each Fund’s investment objective. Each Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
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.
Pursuant to 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.
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. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
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 NASDAQ Stock Market LLC (“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 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
21 | November 30, 2014
Table of Contents
Alerian Exchange Traded Funds | ||
Notes to Financial Statements | November 30, 2014 |
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. 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. Investments in open-end mutual funds are valued at their closing 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 Fund’s investments at November 30, 2014:
Alerian MLP ETF
Investments in Securities at Value* | Level 1- Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3- Significant Inputs | Total | ||||||||||||
Master Limited Partnerships | $ | 10,369,702,700 | $ | – | $ | – | $ | 10,369,702,700 | ||||||||
Short Term Investments | 20,246,805 | – | – | 20,246,805 | ||||||||||||
TOTAL | $ | 10,389,949,505 | $ | – | $ | – | $ | 10,389,949,505 | ||||||||
22 | November 30, 2014
Table of Contents
Alerian Exchange Traded Funds | ||
Notes to Financial Statements | November 30, 2014 |
Alerian Energy Infrastructure ETF
Investments in Securities at Value* | Level 1- Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3- Significant Inputs | Total | ||||||||||||
Canadian Infrastructure | $ | 3,218,700 | $ | – | $ | – | $ | 3,218,700 | ||||||||
Canadian Master Limited Partnership Affiliates | 1,692,377 | – | – | 1,692,377 | ||||||||||||
Master Limited Partnerships | 4,946,773 | – | – | 4,946,773 | ||||||||||||
U.S. Infrastructure | 2,898,700 | – | – | 2,898,700 | ||||||||||||
U.S. Master Limited Partnership Affiliates | 4,327,285 | – | – | 4,327,285 | ||||||||||||
TOTAL | $ | 17,083,835 | $ | – | $ | – | $ | 17,083,835 | ||||||||
* | For a detailed breakdown 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, 2014, 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.
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 last in, first out (“LIFO”) cost basis. Dividend income and capital gains distributions, if any, are recorded on the ex-dividend date, net of any foreign taxes withheld. Interest income, if any, is recorded on the accrual basis, including amortization of premiums and accretion of discounts.
E. 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 the Alerian Energy Infrastructure ETF, 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.
The Alerian MLP ETF also expects a portion of the distributions it receives from MLPs to 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.
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 November 30, 2014, the Alerian MLP ETF distributed $534,310,524 of which 35% is anticipated to be characterized as return of capital from MLP distributions received.
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Alerian Exchange Traded Funds | ||
Notes to Financial Statements | November 30, 2014 |
F. 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 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, 2014 | |||||||||||||
Current | Deferred | Total | ||||||||||||
Federal | $ | – | $ | 378,193,686 | $ | 378,193,686 | ||||||||
State | – | 11,589,142 | 11,589,142 | |||||||||||
Total tax expense | $ | – | $ | 389,782,828 | $ | 389,782,828 | ||||||||
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, 2014 | |||||||||||||
Deferred tax assets: | ||||||||||||||
Accrued franchise taxes | $ | 201,812 | ||||||||||||
Charitable contribution carryforward | 180,987 | |||||||||||||
Income recognized from MLP investments |
| 103,261,310 | ||||||||||||
Credit for prior year minimum tax | 331,761 | |||||||||||||
Federal net operating loss carryforward |
| 174,838,187 | ||||||||||||
Less Deferred tax liabilities: | ||||||||||||||
Net unrealized loss on investment securities |
| (1,268,231,136 | ) | |||||||||||
State taxes, net of federal benefit | (49,954,299 | ) | ||||||||||||
Net Deferred tax liability | $ | (1,039,371,378 | ) | |||||||||||
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Alerian Exchange Traded Funds | ||
Notes to Financial Statements | November 30, 2014 |
The net operating loss carryforward is available to offset future taxable income. The net operating loss can be carried forward for 20 years and, accordingly, would begin to expire as of November 30, 2032. The Fund has net operating loss carryforwards for federal income tax purposes as follows:
Alerian MLP ETF | Period-Ended | Amount | Expiration | |||||||||||
Federal | 11/30/2012 | $ | 92,112,756 | 11/30/2032 | ||||||||||
Federal | 11/30/2013 | 349,770,934 | 11/30/2033 | |||||||||||
Federal | 11/30/2014 | 57,653,987 | 11/30/2034 | |||||||||||
Total | $ | 499,537,677 | ||||||||||||
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 | Period-Ended | Amount | Expiration | |||||||||||
State | 11/30/2012 | $ | 2,950,477 | Varies by State (5-20 years) | ||||||||||
State | 11/30/2013 | 10,853,441 | Varies by State (5-20 years) | |||||||||||
State | 11/30/2014 | 1,108,430 | Varies by State (5-20 years) | |||||||||||
Total | $ | 14,912,348 | ||||||||||||
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.
As of November 30, 2014 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 | As of November 30, 2014 | |||||
Income tax expense at statutory rate | $ | 379,503,748 | ||||
State income taxes (net of federal benefit) | 20,846,207 | |||||
Permanent differences, net | (1,662,209 | ) | ||||
Change in estimated state referral rate | (4,813,538 | ) | ||||
Other | (4,091,380 | ) | ||||
Net income tax expense | $ | 389,782,828 | ||||
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:
Alerian MLP ETF | Inception to November 30, 2014 | |||||
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 | – | |||||
Net income tax expense | $ | – | ||||
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Alerian Exchange Traded Funds | ||
Notes to Financial Statements | November 30, 2014 |
The Fund recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. For the period from inception to November 30, 2014, 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. Currently, the tax period ending November 30, 2011 is under examination by the Internal Revenue Service. The tax period ended November 30, 2014 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.
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 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.
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 year ended November 30, 2014, 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, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
For the year ended November 30, 2014, permanent book and tax differences resulting primarily from differing treatment of investments in partnerships were identified and reclassified among components of the Fund’s net assets as follows:
Fund | Accumulated Net Investment Income | Accumulated Net Realized Gain on Investments and Foreign Currency Transactions | Paid-in Capital | |||||||||
Alerian Energy Infrastructure ETF | $ | (67,407 | ) | $ | (268,961 | ) | $ | 336,368 |
Net investment income and net realized (loss), as disclosed on the Statement of Operations and net assets were not affected by this reclassification.
At November 30, 2014, the Fund had available for tax purposes unused capital loss carryforwards as follows:
Short-Term | Long-Term | |||||||
Alerian Energy Infrastructure ETF | $ | 41,326 | $ | – |
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 | ||||||||||
November 30, 2014 | ||||||||||||
Alerian Energy Infrastructure ETF | $ | 191,603 | $ | – | $ | – | ||||||
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Alerian Exchange Traded Funds | ||
Notes to Financial Statements | November 30, 2014 |
As of November 30, 2014, the components of distributable earnings on a tax basis were as follows:
Alerian Energy | ||||
Infrastructure ETF | ||||
Undistributed net investment income | $ | 35,972 | ||
Accumulated net realized loss on investments | (41,326 | ) | ||
Net unrealized appreciation on investments | 54,943 | |||
Total | $ | 49,589 | ||
As of November 30, 2014, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Alerian Energy | ||||||||
Alerian MLP ETF | Infrastructure ETF | |||||||
Cost of investments for income tax purposes | $ | 7,053,621,442 | $ | 17,028,728 | ||||
Gross appreciation (excess of value over tax cost) | $ | 3,585,206,601 | $ | 598,807 | ||||
Gross depreciation (excess of tax cost over value) | (248,878,538 | ) | (543,700 | ) | ||||
Net depreciation of foreign currency and derivatives | – | (164 | ) | |||||
Net unrealized appreciation (depreciation) | $ | 3,336,328,063 | $ | 54,943 | ||||
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.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Adviser”) acts as each Fund’s 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 Adviser a unitary fee for the services and facilities it provides payable on a monthly basis as a percentage of the relevant Fund’s average daily net assets as set out below.
Fund | Advisory Fee | |||
Alerian MLP ETF | 0.85%* | |||
Alerian Energy Infrastructure ETF | 0.65% |
* | Effective June 9, 2014, the Alerian MLP ETF’s unitary advisory fee as a percentage of net assets is subject to the following breakpoints: (i) 85 basis points (0.85%) for average net assets up to and including $10 billion, (ii) 80 basis points (0.80%) for average net assets greater than $10 billion up to and including $15 billion, (iii) 75.5 basis points (0.755%) for average net assets greater than $15 billion up to and including $20 billion, and (iv) 71.5 basis points (0.715%) for average net assets greater than $20 billion. |
Out of the unitary management fees, the Adviser pays substantially all expenses of the Funds, including the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for taxes, interest expenses, distribution fees or expenses, brokerage expenses, and extraordinary expenses such as litigation, and other expenses not incurred in the ordinary course of the each Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all the Funds’ expenses and to compensate the Adviser for providing services for each Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Funds.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee or $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings.
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Alerian Exchange Traded Funds | ||
Notes to Financial Statements | November 30, 2014 |
4. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 2014, 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 | ||||||
Alerian MLP ETF | $ | 2,785,181,875 | $ | 3,378,798,625 | ||||
Alerian Energy Infrastructure ETF | 2,641,138 | 2,795,844 |
For the year ended November 30, 2014, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
Alerian MLP ETF | $ | 2,280,790,200 | $ | – | ||||
Alerian Energy Infrastructure ETF | 17,085,979 | 3,859,942 |
Gains on in-kind transactions are not considered taxable for federal income tax purposes.
5. MASTER LIMITED PARTNERSHIPS
MLPs are publicly traded partnerships engaged in, among other things, the transportation, storage and processing of minerals and natural resources, and are treated as partnerships for U.S. federal income tax purposes. 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 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.
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Alerian Exchange Traded Funds | ||
November 30, 2014 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
The Trust is required to disclose annually each Fund’s complete proxy voting record on Form N-PX covering the period July 1 through June 30 and file it with the SEC no later than August 31. Form N-PX for each Fund also will be available at no charge upon request by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203. Each Fund’s Form N-PX also is available on the SEC’s website at www.sec.gov.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of each Fund’s portfolio holdings with the SEC on Form N-Q. The Trust will also disclose a complete schedule of each Fund’s portfolio holdings with the SEC on Form N-CSR after its second and fourth quarters. Form N-Q and Form N-CSR for each Fund will be available on the SEC’s website at http://www.sec.gov. Each Fund’s Form N-Q and Form N-CSR may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-202-551-5850. Each Fund’s Form N-Q and Form N-CSR will be available without charge, upon request, by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
TAX INFORMATION
The Fund designates the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2013:
Qualified Dividend Income | Dividend Received Deduction | |||
Alerian Energy Infrastructure ETF | 100.00 % | 64.86 % |
In early 2014, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2013 via Form 1099. The Fund will notify shareholders in early 2015 of amounts paid to them by the Funds, if any, during the calendar year 2014.
LICENSING AGREEMENTS
Alerian MLP ETF
Alerian (the “Licensor”) has entered into an index licensing agreement with ALPS Advisors Inc. (the “Adviser”) to allow the Adviser’s use of the underlying index of the Alerian MLP ETF (the “Product”). The following disclosure relates to the Licensor:
The Product is not issued, sponsored, endorsed, sold or promoted by Licensor or its affiliates. Licensor makes no representation or warranty, express or implied, to the owners of the Product or any member of the public regarding the advisability of investing in securities generally or in the Product particularly or the ability of the Alerian MLP Infrastructure Index (“Index”) to track general market performance. Licensor’s only relationship to the Licensee is the licensing of the Index which is determined, composed and calculated by Licensor without regard to the Licensee or the Product. Licensor has no obligation to take the needs of the Licensee or the owners of the Product into consideration in determining, composing or calculating the Index. Licensor is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Product to be issued or in the determination or calculation of the equation by which the Product is to be converted into cash. Licensor has no obligation or liability in connection with the issuance, administration, marketing or trading of the Product. Alerian MLP Infrastructure Index and AMZI are trademarks of GKD Index Partners, LLC and their general use is granted under a license from GKD Index Partners, LLC.
LICENSOR DOES NOT GUARANTEE THE QUALITY, ACCUARCY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN AND SHALL HAVE NO LIABLITY FOR ERRORS OR OMMISSIONS OF ANY KIND RELATED TO THE INDEX OR DATA. LICENSOR MAKES NOT WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED TO LICENSEE OR FOR ANY OTHER USE. LICENSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL LICENSOR HAVE ANY LIABILTY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBLITY OF SUCH DAMAGES.
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Alerian Exchange Traded Funds | ||
Additional Information | November 30, 2014 (Unaudited) |
Alerian Energy Infrastructure ETF
Alerian (the “Licensor”) has entered into an index licensing agreement with ALPS Advisors Inc. (the “Adviser”) to allow the Adviser’s use of the underlying index of the Alerian Energy Infrastructure ETF (the “Product”). The following disclosure relates to the Licensor:
The Product is not issues, sponsored, endorsed, sold or promoted by Licensor or its affiliates. Licensor makes no representation or warranty, express or implied, to the owners of the Product or any member of the public regarding the advisability of investing in securities generally or in the Product particularly or the ability of the Alerian Energy Infrastructure Index (“Index”) to track general market performance. Licensor’s only relationship to the Licensee is the licensing of the Index which is determined, composed and calculated by Licensor without regard to the Licensee or the Product. Licensor has no obligation to take the needs of the Licensee or the owners of the Product into consideration in determining, composing or calculating the Index. Licensor is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Product to be issued or in the determination or calculation of the equation by which the Product is to be converted into cash. Licensor has no obligation or liability in connection with the issuance, administration, marketing or trading of the Product. Alerian Energy Infrastructure Index is a trademark of Alerian and its general use is granted under a license from Alerian.
LICENSOR DOES NOT GUARANTEE THE QUALITY, ACCUARCY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN AND SHALL HAVE NO LIABLITY FOR ERRORS OR OMMISSIONS OF ANY KIND RELATED TO THE INDEX OR DATA. LICENSOR MAKES NOT WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED TO LICENSEE OR FOR ANY OTHER USE. LICENSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL LICENSOR HAVE ANY LIABILTY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBLITY OF SUCH DAMAGES.
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Board Considerations Regarding Approval of Investment Advisory Agreement | November 30, 2014 (Unaudited) |
At an in-person meeting held on June 9, 2014, 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 including (i) the nature, extent and quality of the services to be provided by the Adviser with respect to AMLP under the Advisory Agreement; (ii) the advisory fees and other expenses to be paid by AMLP compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to AMLP by the Adviser and the profits realized by the Adviser and its affiliates from its relationship to AMLP; (iv) the extent to which economies of scale would be realized if and as AMLP assets increase and whether the fee level in the Advisory Agreement reflects these economies of scale; and (v) any additional benefits and other considerations, as further 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 services to be provided under the Advisory Agreement, the investment parameters of the index of AMLP, financial information regarding the Adviser and its parent company, information describing the Adviser’s current organization and the background and experience of the persons responsible for the day-to-day management of AMLP.
The Independent Trustees reviewed information on the performance of AMLP and the performance of its benchmark index. The Trustees also evaluated the correlation and tracking error between the underlying index and AMLP’s performance. Based on its review, the Trustees 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 fee for AMLP was a unitary fee 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 the 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 Lipper identified peer expense group. The Independent Trustees also noted that the advisory fee rate for AMLP was higher than the median of its Lipper peer group. The Independent Trustees also considered a supplemental comparative expense data provided by the Adviser and accorded the Lipper data and the Adviser’s supplemental data such weight as they deemed appropriate. 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 provided by the Adviser about the costs and profitability of the Adviser in respect of AMLP.
The Independent Trustees then 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. The Independent Trustees also considered the brand recognition of AMLP’s index provider as well as the trading volumes of AMLP. The Independent Trustees considered the breakpoint scale proposed by the Adviser, as set forth below, for AMLP and whether the implementation of breakpoints would benefit shareholders and appropriately reflect economies of scale achieved by the Adviser with respect to AMLP. The Independent Trustees determined that implementing breakpoints as follows would be appropriate:
Assets above $ 10,000,000,000 | 0.80% | |||
Assets above $ 15,000,000,000 | 0.755% | |||
Assets above $ 20,000,000,000 | 0.715% |
Based on the foregoing and the other information available to them, the Independent Trustees concluded that the advisory fee for AMLP, subject to the breakpoints discussed above, was reasonable under the circumstances and in light of the quality of services provided. The Independent
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Alerian MLP ETF | ||
Board Considerations Regarding Approval of Investment Advisory Agreement | November 30, 2014 (Unaudited) |
Trustees also considered other benefits that may be realized by the Adviser from its relationship with AMLP and concluded that the advisory fee, subject to the addition of the breakpoints discussed above, was reasonable taking into account any such benefits.
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 Independent Trustees considered relevant in the exercise of their reasonable business judgment.
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Alerian Exchange Traded Funds | ||
November 30, 2014 (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. | 45 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder and Chief Financial Officer of Green Alpha Advisors, LLC. Mr. Deems is Co-Portfolio Manager of the Shelton Green Alpha Fund. 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 1998 to June 2007. | 45 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 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 Board member, 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, Prosci Inc. (private business services), 2013 – present; Board Member, Citywide Banks (Colorado community bank) 2014 – present; Director, National Western Stock Show (not-for- profit organization); Director, Biennial of the Americas (not-for-profit organization). | 23 | Mr. Pederson is Trustee of Westcore Trust (12 funds) and Principal Real Estate Income Fund. |
* | 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. |
*** | 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, 2014 (Unaudited) |
INTERESTED TRUSTEE
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 | |||||
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”), and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”) and ALPS Distributors, Inc. (“ADI”). 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 (9 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, 2014 (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 is Vice President and 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. 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 Broadview Funds Trust, BLDRS Index Funds Trust and Powershares QQQ Trust. | |||
William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer of AAI (since 2006); President and Chief Executive Officer 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 ALPS Advisors, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson is also Secretary of the Principal Real Estate Income Fund since 2014, 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. Because of her position with ALPS, Ms. Nelson is deemed an affiliate of the Trust as defined under the 1940 Act. | |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Assistant Vice-Principal and Paralegal Manager of ALPS. 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. |
35 | November 30, 2014
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CONTENTS
1 | ||||
4 | ||||
5 | ||||
6 | ||||
13 | ||||
14 | ||||
15 | ||||
16 | ||||
17 | ||||
22 | ||||
Board Considerations Regarding Approval of Investment Advisory Agreement | 23 | |||
24 |
www.alpsfunds.com
Table of Contents
ALPS STOXX Europe 600 ETF | ||
November 30, 2014 (Unaudited) |
Investment Objective
The Fund employs a “passive management” – or indexing –investment approach designed to seek investment results that correspond (before fees and expenses) generally to the performance of the STOXX® Europe 600 Index (the “Underlying Index”).
The Underlying Index, compiled by STOXX, is a fixed component benchmark index that consists of the 600 largest developed market stocks of the STOXX Europe Total Market Index, which is an aggregate of the STOXX Total Market country indices representing certain developed market countries within Europe. These countries include Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom. Each Country Index aims to represent a broad market by covering 95% of the free-float* market capitalization of the applicable country.
Performance Overview
The ALPS STOXX Europe 600 ETF is a diversified international equity fund with a large cap bias. The Fund is designed to track the performance of the underlying index, the STOXX Europe 600 index, which consists of the 600 largest developed market stocks in the STOXX Europe Total Market Index. Since the Fund’s inception on 10/30/2014, and for the period ended 11/30/2014, it returned 5.42% (3.75% NAV), in line with the Fund’s Net Total Return Index, net of fees, which returned 3.87%.
From a macro perspective, drivers influencing returns in Europe included geopolitical conflicts in the Baltic states involving Russia, concerns over slowing growth in China, the precipitous drop in oil prices, ambiguity surrounding the elections in Greece, and a strengthening U.S. dollar. Returns were buoyed against a further drop by expectations of possible supportive actions or quantitative easing by European central banks.
Geographically, Germany, France, and the United Kingdom were the top contributors to the Fund’s return for the period, contributing 0.97%, 0.77%, and 0.71% respectively, while Norway was the top detractor. Looking at sector allocations, Fund holdings in nine of the ten GICS sectors had positive contributions to return. The Fund’s performance was bolstered by holdings in Financials and Consumer Discretionary which contributed 0.82% and 0.81% respectively, but was partially offset by slightly unfavorable performance in Energy holdings.
Novartis AG (NOVN VX) was the fund’s top contributor, returning 5.48% for the period. The Switzerland based pharmaceutical company beat estimates during its 3rd quarter and showed strong sales of new products, most notably Glivec, its new leukemia drug. Vodafone Group (VOD LN) was also a top contributor to the fund, posting a return of 13.85% for the period. The second largest mobile operator in the world, Vodafone posted strong earnings in early November, upped its earnings guidance, and increased its interim dividend by 2%. Bayer AG (BAYN GR), Sanofi (SAN FP), and Anheuser- Busch (ABI BB), with returns of 7.41%, 7.47%, and 9.54% respectively, were other strong contributors to the fund’s performance.
Adversely, BG Group PLC (BG/LN) was the largest detractor to the Fund’s performance, with a loss of -12.14% for the period on slumping oil prices. Also impacted by the drop in the commodity price of oil were other unfavorable contributors BHP Billiton PLC (BLT LN) with a return of -8.15%, BP PLC (BP/LN) with a return of -3.41%, Statoil ASA (STL NO) which returned -11.36%, and Seadrill Ltd (SDRL NO) which fell 30.70%.
Moving forward, the Fund continues to be positioned to give quality exposure to well capitalized large cap European names. As part of the 12/22/14 fourth quarter rebalance and in line with the index, the fund dropped 8 holdings and had 10 new additions to maintain its coverage of the 600 largest stocks in developed Europe, as measured by free float.
* | Free-float methodology market capitalization is calculated by taking the equity’s price and multiplying it by the number of shares readily available in the market. |
1 | November 30, 2014
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ALPS STOXX Europe 600 ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
Fund Performance (as of November 30, 2014)
Since Inception^ | ||
ALPS STOXX Europe 600 ETF – NAV | 3.75% | |
ALPS STOXX Europe 600 ETF – Market Price* | 5.42% | |
STOXX® Europe 600 Net Index USD | 3.87% | |
STOXX® Europe 600 Price Index USD | 3.71% |
Total Expense Ratio (per the current prospectus) 0.25%
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 31, 2014. Total return for a period of less than one year is not annualized. The index inception date is June 15, 1998. |
* | 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 STOXX® Europe 600 Index (Ticker: SXXP) is derived from the STOXX Europe Total Market Index and is a subset of the STOXX Global 1800 Index. With a fixed number of 600 components, the Underlying Index represents large, mid and small capitalization companies across 18 countries of the European region: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Ireland, Italy, Luxembourg, the Netherlands, Norway, Portugal, Spain, Sweden, Switzerland and the United Kingdom.
The Fund is subject to foreign investing risks including currency fluctuations and political uncertainty. Small-cap and mid-cap companies generally will have greater volatility in price than stocks of large companies. Investments concentrated in certain regions, economies, countries, markets, industries or sectors generally will be more volatile.
The Fund is a new product with a limited operating history.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
ALPS Portfolio Solutions Distributor, Inc. is the distributor for the ALPS STOXX Europe 600 ETF.
2 | November 30, 2014
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ALPS STOXX Europe 600 ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
Top Ten Holdings* (as of November 30, 2014)
Novartis AG, Registered Shares | 2.76 | % | ||
Nestle SA, Registered Shares | 2.69 | % | ||
Roche Holding AG | 2.33 | % | ||
HSBC Holdings PLC | 2.11 | % | ||
Total SA | 1.48 | % | ||
Royal Dutch Shell PLC, A Shares | 1.46 | % | ||
Bayer AG, Registered Shares | 1.38 | % | ||
BP PLC | 1.34 | % | ||
Sanofi | 1.30 | % | ||
GlaxoSmithKline PLC | 1.25 | % | ||
Top Ten Holdings | 18.11 | % |
* | % of Total Investments. |
Holdings and sector allocations are subject to change.
Sector Allocation* (as of November 30, 2014)
Growth of $10,000 (as of November 30, 2014)
Comparison of change in value of a $10,000 investment in the Fund and the Indexes
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.
3 | November 30, 2014
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ALPS STOXX Europe 600 ETF | ||
November 30, 2014 (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, 2014.
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 6/1/14 | Ending Account 11/30/14 | Expense Ratio(a) | Expenses Paid During Period 6/1/14 - 11/30/14(b) | |||||
ALPS STOXX Europe 600 ETF | ||||||||
Actual(c) | $1,000.00 | $1,037.50 | 0.25% | $0.22 | ||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,023.82 | 0.25% | $1.27 |
(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 (31), divided by 365. |
(c) | Actual expenses paid during the period are based on the commencement of operations date of October 31, 2014. |
4 | November 30, 2014
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ALPS STOXX Europe 600 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 ALPS STOXX Europe 600 ETF, one of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2014, and the related statements of operations, changes in net assets, and the financial highlight for the period October 31, 2014 (Commencement of Operations) to November 30, 2014. 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, 2014, 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 ALPS STOXX Europe 600 ETF of the ALPS ETF Trust as of November 30, 2014, the results of its operations, the changes in its net assets, and the financial highlights for the period October 31, 2014 (Commencement of Operations) to November 30, 2014, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 29, 2015
5 | November 30, 2014
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ALPS STOXX Europe 600 ETF | ||
November 30, 2014 |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.02%) | ||||||||
Australia (0.56%) | ||||||||
BHP Billiton PLC | 1,232 | $ | 29,193 | |||||
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Total Australia | 29,193 | |||||||
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Austria (0.32%) | ||||||||
ANDRITZ AG | 40 | 2,162 | ||||||
Erste Group Bank AG | 176 | 4,766 | ||||||
IMMOFINANZ AG(a) | 548 | 1,643 | ||||||
OMV AG | 84 | 2,429 | ||||||
Raiffeisen Bank International AG | 68 | 1,407 | ||||||
Telekom Austria AG | 52 | 355 | ||||||
Vienna Insurance Group AG Wiener Versicherung Gruppe | 24 | 1,194 | ||||||
Voestalpine AG | 64 | 2,658 | ||||||
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| |||||||
Total Austria | 16,614 | |||||||
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| |||||||
Belgium (1.88%) | ||||||||
Ackermans & van Haaren NV | 12 | 1,473 | ||||||
Ageas | 128 | 4,578 | ||||||
Anheuser-Busch InBev NV | 444 | 52,151 | ||||||
Belgacom SA | 80 | 3,158 | ||||||
bpost SA | 56 | 1,453 | ||||||
Cofinimmo | 12 | 1,399 | ||||||
Colruyt SA | 36 | 1,674 | ||||||
Delhaize Group SA | 60 | 4,386 | ||||||
Groupe Bruxelles Lambert SA | 48 | 4,342 | ||||||
KBC Groep NV(a) | 144 | 8,237 | ||||||
Solvay SA | 36 | 4,946 | ||||||
Telenet Group Holding NV(a) | 28 | 1,601 | ||||||
UCB SA | 76 | 5,961 | ||||||
Umicore SA | 64 | 2,602 | ||||||
|
| |||||||
Total Belgium | 97,961 | |||||||
|
| |||||||
Czech Republic (0.09%) | ||||||||
CEZ AS | 96 | 2,674 | ||||||
Komercni Banka AS | 8 | 1,777 | ||||||
|
| |||||||
Total Czech Republic | 4,451 | |||||||
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| |||||||
Denmark (2.28%) | ||||||||
A P Moller-Maersk AS | 4 | 8,343 | ||||||
Carlsberg AS, Class B | 60 | 5,344 | ||||||
Chr. Hansen Holding AS | 56 | 2,371 | ||||||
Coloplast AS | 68 | 5,892 | ||||||
Danske Bank AS | 396 | 11,251 | ||||||
DSV AS | 104 | 3,257 | ||||||
FLSmidth & Co. AS | 28 | 1,184 | ||||||
GN Store Nord | 96 | 2,050 | ||||||
ISS AS(a) | 56 | 1,582 | ||||||
Jyske Bank AS(a) | 40 | 2,065 | ||||||
Novo Nordisk AS, Class B | 1,068 | 48,709 | ||||||
Novozymes AS | 124 | 5,448 | ||||||
Pandora AS | 76 | 6,744 | ||||||
Sydbank AS(a) | 44 | 1,377 | ||||||
TDC AS | 468 | 3,793 | ||||||
Topdanmark AS(a) | 48 | 1,548 | ||||||
TrygVesta AS | 16 | 1,845 |
Security Description | Shares | Value | ||||||
Denmark (continued) | ||||||||
Vestas Wind Systems AS(a) | 128 | $ | 4,715 | |||||
William Demant Holding(a) | 16 | 1,148 | ||||||
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| |||||||
Total Denmark | 118,666 | |||||||
|
| |||||||
Finland (1.46%) | ||||||||
Amer Sports OYJ | 68 | 1,387 | ||||||
Elisa OYJ | 88 | 2,552 | ||||||
Fortum OYJ | 252 | 6,323 | ||||||
Huhtamaki OYJ | 52 | 1,318 | ||||||
Kesko OYJ | 40 | 1,557 | ||||||
Kone OYJ, B Shares | 220 | 10,122 | ||||||
Metso OYJ | 64 | 1,984 | ||||||
Neste Oil OYJ | 76 | 1,803 | ||||||
Nokia OYJ | 2,160 | 17,968 | ||||||
Nokian Renkaat OYJ | 76 | 2,146 | ||||||
Orion OYJ | 56 | 1,921 | ||||||
Outokumpu OYJ(a) | 168 | 1,000 | ||||||
Sampo OYJ | 284 | 14,009 | ||||||
Stora Enso OYJ | 328 | 2,906 | ||||||
UPM-Kymmene OYJ | 308 | 5,113 | ||||||
Wartsila OYJ | 88 | 3,941 | ||||||
|
| |||||||
Total Finland | 76,050 | |||||||
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| |||||||
France (14.70%) | ||||||||
Accor SA | 104 | 4,906 | ||||||
Aeroports de Paris | 20 | 2,454 | ||||||
Air France-KLM(a) | 144 | 1,518 | ||||||
Air Liquide | 200 | 25,168 | ||||||
Airbus Group NV | 332 | 20,227 | ||||||
Alcatel-Lucent(a) | 1,624 | 5,781 | ||||||
Alstom SA(a) | 128 | 4,476 | ||||||
Arkema SA | 36 | 2,450 | ||||||
AtoS | 44 | 3,126 | ||||||
AXA SA | 1,200 | 28,970 | ||||||
BNP Paribas SA | 644 | 41,289 | ||||||
Bollore SA | 4 | 1,975 | ||||||
Bouygues SA | 152 | 5,718 | ||||||
Bureau Veritas SA | 124 | 2,958 | ||||||
Cap Gemini SA | 92 | 6,741 | ||||||
Carrefour SA | 360 | 11,390 | ||||||
Casino Guichard Perrachon SA | 32 | 3,083 | ||||||
Christian Dior SA | 32 | 6,128 | ||||||
Cie de St-Gobain | 288 | 13,229 | ||||||
Cie Generale des Etablissements Michelin | 108 | 9,931 | ||||||
CNP Assurances | 88 | 1,629 | ||||||
Credit Agricole SA | 648 | 9,109 | ||||||
Danone SA | 344 | 24,275 | ||||||
Dassault Systemes SA | 76 | 4,968 | ||||||
Edenred | 116 | 3,345 | ||||||
Eiffage SA | 44 | 2,141 | ||||||
Electricite de France SA | 168 | 5,029 | ||||||
Essilor International SA | 124 | 13,923 | ||||||
Eurazeo SA | 24 | 1,670 | ||||||
Eurofins Scientific | 4 | 971 | ||||||
Eutelsat Communications SA | 84 | 2,778 |
6 | November 30, 2014
Table of Contents
ALPS STOXX Europe 600 ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
France (continued) | ||||||||
Fonciere Des Regions | 16 | $ | 1,527 | |||||
GDF Suez | 924 | 22,767 | ||||||
Gecina SA | 20 | 2,705 | ||||||
Groupe Eurotunnel SA, Registered Shares | 268 | 3,464 | ||||||
Havas SA | 148 | 1,245 | ||||||
Hermes International | 4 | 1,339 | ||||||
ICADE, REIT | 20 | 1,600 | ||||||
Iliad SA | 16 | 3,929 | ||||||
Imerys SA | 20 | 1,512 | ||||||
Ingenico | 28 | 3,025 | ||||||
JC Decaux SA | 40 | 1,316 | ||||||
Kering(a) | 44 | 9,088 | ||||||
Klepierre, REIT | 56 | 2,513 | ||||||
Lafarge SA | 108 | 7,679 | ||||||
Lagardere SCA | 60 | 1,701 | ||||||
Legrand SA | 152 | 7,969 | ||||||
L’Oreal SA | 140 | 23,884 | ||||||
LVMH Moet Hennessy Louis Vuitton SA | 156 | 28,030 | ||||||
Natixis SA | 508 | 3,589 | ||||||
Neopost SA | 20 | 1,418 | ||||||
Orange SA | 1,116 | 19,657 | ||||||
Orpea | 20 | 1,260 | ||||||
Pernod-Ricard SA | 120 | 14,222 | ||||||
Peugeot SA(a) | 260 | 3,330 | ||||||
Publicis Groupe SA | 112 | 8,225 | ||||||
Remy Cointreau SA | 12 | 902 | ||||||
Renault SA | 120 | 9,627 | ||||||
Rexel SA | 156 | 2,888 | ||||||
Rubis SCA | 20 | 1,173 | ||||||
Safran SA | 188 | 12,163 | ||||||
Sanofi | 696 | 67,384 | ||||||
Schneider Electric SE | 336 | 27,408 | ||||||
SCOR SE | 104 | 3,245 | ||||||
SEB SA | 16 | 1,307 | ||||||
Societe BIC SA | 16 | 2,133 | ||||||
Societe Generale SA | 464 | 23,015 | ||||||
Societe Television Francaise 1 | 68 | 1,085 | ||||||
Sodexo SA | 56 | 5,649 | ||||||
Suez Environnement Co. | 192 | 3,404 | ||||||
Technip SA | 64 | 4,162 | ||||||
Teleperformance | 32 | 2,234 | ||||||
Thales SA | 56 | 2,971 | ||||||
Total SA | 1,372 | 76,754 | ||||||
Unibail-Rodamco SE, REIT | 56 | 14,797 | ||||||
Valeo SA | 44 | 5,414 | ||||||
Vallourec SA | 68 | 2,255 | ||||||
Veolia Environnement | 260 | 4,741 | ||||||
Vinci SA | 308 | 16,650 | ||||||
Vivendi SA | 740 | 18,845 | ||||||
Wendel SA | 20 | 2,356 | ||||||
Zodiac Aerospace | 112 | 3,711 | ||||||
|
| |||||||
Total France | 764,623 | |||||||
|
|
Security Description | Shares | Value | ||||||
Germany (12.39%) | ||||||||
adidas AG | 120 | $ | 9,624 | |||||
Allianz SE | 264 | 45,449 | ||||||
Axel Springer SE | 24 | 1,413 | ||||||
BASF SE | 532 | 48,298 | ||||||
Bayer AG, Registered Shares | 476 | 71,589 | ||||||
Bayerische Motoren Werke AG | 184 | 21,038 | ||||||
Beiersdorf AG | 56 | 4,984 | ||||||
Bilfinger Berger SE | 28 | 1,658 | ||||||
Brenntag AG | 88 | 4,846 | ||||||
Commerzbank AG(a) | 544 | 8,324 | ||||||
Continental AG | 64 | 13,465 | ||||||
Daimler AG, Registered Shares | 576 | 48,561 | ||||||
Deutsche Bank AG, Registered Shares | 748 | 24,448 | ||||||
Deutsche Boerse AG | 112 | 8,182 | ||||||
Deutsche Euroshop AG | 28 | 1,240 | ||||||
Deutsche Lufthansa AG | 132 | 2,356 | ||||||
Deutsche Post AG, Registered Shares | 552 | 18,337 | ||||||
Deutsche Telekom AG, Registered Shares | 1,788 | 30,459 | ||||||
Deutsche Wohnen AG | 156 | 3,745 | ||||||
E.ON SE | 1,156 | 20,491 | ||||||
Evonik Industries AG | 40 | 1,319 | ||||||
Fraport AG Frankfurt Airport Services Worldwide | 20 | 1,221 | ||||||
Freenet AG | 76 | 2,244 | ||||||
Fresenius Medical Care AG & Co. KGaA | 124 | 9,157 | ||||||
Fresenius SE & Co. KGaA | 228 | 12,360 | ||||||
GEA Group AG | 104 | 4,970 | ||||||
Gerresheimer AG | 20 | 1,105 | ||||||
Hannover Rueckversicherung AG | 36 | 3,212 | ||||||
HeidelbergCement AG | 80 | 6,065 | ||||||
HUGO BOSS AG | 20 | 2,634 | ||||||
Infineon Technologies AG | 652 | 6,387 | ||||||
K+S AG | 104 | 3,121 | ||||||
Kabel Deutschland Holding AG(a) | 12 | 1,665 | ||||||
Lanxess AG | 52 | 2,582 | ||||||
LEG Immobilien AG | 28 | 2,078 | ||||||
Leoni AG | 20 | 1,199 | ||||||
Linde AG | 100 | 18,869 | ||||||
MAN SE | 20 | 2,279 | ||||||
Merck KGaA | 76 | 7,568 | ||||||
Metro AG(a) | 84 | 2,853 | ||||||
MorphoSys AG(a) | 16 | 1,575 | ||||||
MTU Aero Engines AG | 32 | 2,852 | ||||||
Muenchener Rueckversicherungs- Gesellschaft AG in Muenchen, Registered Shares | 88 | 18,126 | ||||||
OSRAM Licht AG(a) | 52 | 2,160 | ||||||
ProSiebenSat.1 Media AG | 128 | 5,467 | ||||||
Rheinmetall AG | 24 | 1,018 | ||||||
Rhoen Klinikum AG | 28 | 815 | ||||||
RTL Group | 24 | 2,311 | ||||||
RWE AG | 280 | 10,142 |
7 | November 30, 2014
Table of Contents
ALPS STOXX Europe 600 ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
Germany (continued) | ||||||||
SAP SE | 548 | $ | 38,623 | |||||
Siemens AG, Registered Shares | 480 | 56,797 | ||||||
Sky Deutschland AG(a) | 228 | 1,882 | ||||||
Stada Arzneimittel | 36 | 1,296 | ||||||
Symrise AG | 72 | 4,303 | ||||||
Telefonica Deutschla | 300 | 1,573 | ||||||
ThyssenKrupp AG(a) | 252 | 6,667 | ||||||
TUI AG | 112 | 1,912 | ||||||
United Internet AG | 64 | 2,819 | ||||||
Wirecard AG | 68 | 2,886 | ||||||
|
| |||||||
Total Germany | 644,619 | |||||||
|
| |||||||
Greece (0.20%) | ||||||||
Alpha Bank AE(a) | 2,480 | 1,610 | ||||||
Eurobank Ergasias SA(a) | 5,484 | 1,698 | ||||||
Hellenic Telecommunications Organization SA(a) | 140 | 1,715 | ||||||
National Bank of Greece SA(a) | 872 | 2,082 | ||||||
OPAP SA | 124 | 1,554 | ||||||
Piraeus Bank SA(a) | 1,152 | 1,747 | ||||||
|
| |||||||
Total Greece | 10,406 | |||||||
|
| |||||||
Ireland (1.29%) | ||||||||
Bank of Ireland(a) | 13,692 | 5,618 | ||||||
C&C Group PLC | 200 | 935 | ||||||
CRH PLC | 428 | 10,112 | ||||||
DCC PLC | 52 | 2,892 | ||||||
Glanbia PLC | 100 | 1,547 | ||||||
Kerry Group | 88 | 6,532 | ||||||
Kingspan Group PLC | 80 | 1,289 | ||||||
Paddy Power PLC | 28 | 2,159 | ||||||
Ryanair Holdings PLC(a) | 800 | 8,517 | ||||||
Shire PLC | 344 | 24,486 | ||||||
Smurfit Kappa Group PLC | 132 | 3,058 | ||||||
|
| |||||||
Total Ireland | 67,145 | |||||||
|
| |||||||
Italy (3.45%) | ||||||||
Assicurazioni Generali SpA | 780 | 16,866 | ||||||
Atlantia SpA | 236 | 5,951 | ||||||
Azimut Holding SpA | 60 | 1,380 | ||||||
Banca Monte dei Paschi di Siena SpA(a) | 2,952 | 2,382 | ||||||
Banca Popolare dell’Emilia Romagna SC(a) | 276 | 1,956 | ||||||
Banca Popolare di Milano Scarl(a) | 2,356 | 1,723 | ||||||
Banca Popolare Di Sondrio | 260 | 1,037 | ||||||
Banco Popolare SC(a) | 208 | 2,868 | ||||||
Davide Campari-Milano SpA | 164 | 1,146 | ||||||
Enel Green Power SpA | 888 | 2,137 | ||||||
Enel SpA | 3,732 | 18,005 | ||||||
Eni SpA | 1,556 | 31,093 | ||||||
EXOR SpA | 56 | 2,493 | ||||||
Finmeccanica SpA(a) | 232 | 2,250 | ||||||
Intesa Sanpaolo SpA | 8,084 | 24,909 | ||||||
Luxottica Group SpA | 108 | 5,775 | ||||||
Mediaset SpA(a) | 400 | 1,617 |
Security Description | Shares | Value | ||||||
Italy (continued) | ||||||||
Mediobanca SpA | 344 | $ | 3,080 | |||||
Pirelli & C. SpA | 184 | 2,611 | ||||||
Prysmian SpA | 116 | 2,084 | ||||||
Saipem SpA(a) | 144 | 2,061 | ||||||
Snam SpA | 1,200 | 6,363 | ||||||
Telecom Italia SpA(a) | 6,008 | 6,768 | ||||||
Terna Rete Elettrica Nazionale SpA | 812 | 3,922 | ||||||
UniCredit SpA | 3,216 | 23,774 | ||||||
Unione di Banche Italiane SCPA | 520 | 3,996 | ||||||
UnipolSai SpA | 480 | 1,373 | ||||||
|
| |||||||
Total Italy | 179,620 | |||||||
|
| |||||||
Jersey (0.07%) | ||||||||
Randgold Resources, Ltd. | 52 | 3,454 | ||||||
|
| |||||||
Total Jersey | 3,454 | |||||||
|
| |||||||
Luxembourg (0.42%) | ||||||||
Altice SA(a) | 48 | 3,229 | ||||||
ArcelorMittal | 584 | 7,164 | ||||||
SES SA | 184 | 6,846 | ||||||
Tenaris SA | 268 | 4,432 | ||||||
|
| |||||||
Total Luxembourg | 21,671 | |||||||
|
| |||||||
Mexico (0.02%) | ||||||||
Fresnillo PLC | 108 | 1,201 | ||||||
|
| |||||||
Total Mexico | 1,201 | |||||||
|
| |||||||
Netherlands (4.56%) | ||||||||
Aalberts Industries NV | 56 | 1,571 | ||||||
Aegon NV | 1,068 | 8,384 | ||||||
Akzo Nobel NV | 140 | 9,672 | ||||||
ASM International NV | 32 | 1,342 | ||||||
ASML Holding NV | 220 | 23,234 | ||||||
Boskalis Westminster | 48 | 2,693 | ||||||
Corio NV, REIT | 40 | 2,024 | ||||||
Delta Lloyd NV | 112 | 2,574 | ||||||
Fugro NV | 40 | 917 | ||||||
Gemalto NV | 48 | 4,078 | ||||||
Heineken Holding NV | 56 | 3,829 | ||||||
Heineken NV | 124 | 9,752 | ||||||
ING Groep NV(a) | 2,228 | 32,636 | ||||||
Koninklijke Ahold NV | 516 | 9,114 | ||||||
Koninklijke DSM NV | 104 | 6,837 | ||||||
Koninklijke KPN NV | 1,852 | 6,149 | ||||||
Koninklijke Philips NV | 552 | 16,648 | ||||||
Koninklijke Vopak NV | 36 | 1,809 | ||||||
Nutreco NV | 36 | 2,059 | ||||||
OCI NV(a) | 52 | 1,864 | ||||||
PostNL NV(a) | 256 | 991 | ||||||
Randstad Holding NV | 72 | 3,553 | ||||||
Royal Dutch Shell PLC, A Shares | 2,276 | 75,974 | ||||||
SBM Offshore NV(a) | 108 | 1,458 | ||||||
TNT Express NV | 272 | 1,833 | ||||||
Wereldhave NV, REIT | 12 | 941 |
8 | November 30, 2014
Table of Contents
ALPS STOXX Europe 600 ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
Netherlands (continued) | ||||||||
Wolters Kluwer NV | 176 | $ | 5,157 | |||||
|
| |||||||
Total Netherlands | 237,093 | |||||||
|
| |||||||
Norway (1.06%) | ||||||||
Aker Solutions ASA(a) | 84 | 504 | ||||||
DNB ASA | 528 | 8,768 | ||||||
Gjensidige Forsikring ASA | 108 | 1,852 | ||||||
Marine Harvest ASA | 176 | 2,496 | ||||||
Norsk Hydro ASA | 784 | 4,591 | ||||||
Orkla ASA | 444 | 3,304 | ||||||
Petroleum Geo-Services ASA | 124 | 608 | ||||||
Schibsted ASA | 48 | 3,157 | ||||||
Seadrill, Ltd. | 204 | 2,922 | ||||||
Statoil ASA | 608 | 11,483 | ||||||
Storebrand ASA(a) | 260 | 1,211 | ||||||
Telenor ASA | 404 | 8,529 | ||||||
TGS Nopec Geophysical Co. ASA | 60 | 1,334 | ||||||
Yara International ASA | 100 | 4,252 | ||||||
|
| |||||||
Total Norway | 55,011 | |||||||
|
| |||||||
Portugal (0.25%) | ||||||||
Banco Comercial Portugues SA(a) | 25,196 | 2,600 | ||||||
EDP-Energias de Portugal SA | 1,508 | 6,186 | ||||||
Galp Energia SGPS SA | 224 | 2,730 | ||||||
Jeronimo Martins SGPS SA | 140 | 1,422 | ||||||
|
| |||||||
Total Portugal | 12,938 | |||||||
|
| |||||||
Russia (0.02%) | ||||||||
Polyus Gold International(a) | 384 | 1,101 | ||||||
|
| |||||||
Total Russia | 1,101 | |||||||
|
| |||||||
South Africa (0.13%) | ||||||||
Investec PLC | 312 | 2,885 | ||||||
Mondi PLC | 212 | 3,626 | ||||||
|
| |||||||
Total South Africa | 6,511 | |||||||
|
| |||||||
Spain (5.25%) | ||||||||
Abengoa SA | 312 | 792 | ||||||
Abertis Infraestructuras SA | 224 | 4,794 | ||||||
ACS Actividades de Construccion y | ||||||||
Servicios SA | 112 | 3,957 | ||||||
Amadeus IT Holding SA, A Shares | 244 | 9,713 | ||||||
Banco Bilbao Vizcaya Argentaria SA | 3,396 | 36,476 | ||||||
Banco de Sabadell SA | 2,200 | 6,240 | ||||||
Banco Popular ESP | 1,092 | 6,002 | ||||||
Banco Santander SA | 6,920 | 62,376 | ||||||
Bankia SA(a) | 2,560 | 4,488 | ||||||
Bankinter SA | 372 | 3,334 | ||||||
Bolsas y Mercados Espanoles SA | 44 | 1,813 | ||||||
CaixaBank SA(a) | 1,328 | 7,333 | ||||||
Distribuidora International | 344 | 2,391 | ||||||
Enagas SA | 124 | 4,152 | ||||||
Endesa SA | 48 | 928 | ||||||
Ferrovial SA | 252 | 5,164 | ||||||
Gamesa Corp. Tecnologica SA(a) | 116 | 1,184 | ||||||
Gas Natural SDG SA | 204 | 5,779 |
Security Description | Shares | Value | ||||||
Spain (continued) | ||||||||
Grifols SA | 88 | $ | 3,920 | |||||
Iberdrola SA | 3,088 | 22,831 | ||||||
Inditex SA | 608 | 17,702 | ||||||
Jazztel PLC(a) | 124 | 1,974 | ||||||
Mapfre SA | 572 | 2,099 | ||||||
Red Electrica Corp. SA | 64 | 5,863 | ||||||
Repsol SA | 568 | 12,748 | ||||||
Telefonica SA | 2,300 | 36,836 | ||||||
Viscofan SA | 24 | 1,381 | ||||||
Zardoya Otis SA | 96 | 1,023 | ||||||
|
| |||||||
Total Spain | 273,293 | |||||||
|
| |||||||
Sweden (4.57%) | ||||||||
Alfa Laval AB | 180 | 3,582 | ||||||
Assa Abloy AB | 192 | 10,434 | ||||||
Atlas Copco AB | 372 | 10,726 | ||||||
BillerudKorsnas AB | 104 | 1,536 | ||||||
Boliden AB | 148 | 2,501 | ||||||
Castellum AB | 100 | 1,619 | ||||||
Electrolux AB | 136 | 4,042 | ||||||
Elekta AB | 212 | 2,161 | ||||||
Getinge AB | 112 | 2,592 | ||||||
Hennes & Mauritz AB | 544 | 23,302 | ||||||
Hexagon AB, B Shares | 140 | 4,450 | ||||||
Hexpol AB | 16 | 1,408 | ||||||
Husqvarna AB | 232 | 1,708 | ||||||
ICA Gruppen AB(a) | 44 | 1,699 | ||||||
Industrivarden AB | 112 | 2,115 | ||||||
Intrum Justitia AB | 44 | 1,319 | ||||||
Investment AB Kinnevik | 136 | 4,718 | ||||||
Investor AB, B Shares | 264 | 9,917 | ||||||
JM AB | 44 | 1,401 | ||||||
Lundin Petroleum AB(a) | 136 | 1,917 | ||||||
Meda AB | 136 | 1,950 | ||||||
Modern Times Group AB | 32 | 1,019 | ||||||
NCC AB | 48 | 1,489 | ||||||
Nordea Bank AB | 1,840 | 22,986 | ||||||
Ratos AB | 120 | 783 | ||||||
Sandvik AB | 640 | 6,703 | ||||||
Securitas AB | 184 | 2,222 | ||||||
Skandinaviska Enskilda Banken AB | 908 | 11,994 | ||||||
Skanska AB | 232 | 4,997 | ||||||
SKF AB | 220 | 4,532 | ||||||
Svenska Cellulosa AB SCA, Class B | 336 | 7,926 | ||||||
Svenska Handelsbanken AB | 288 | 14,067 | ||||||
Swedbank AB, A Shares | 540 | 14,165 | ||||||
Swedish Match AB | 116 | 4,006 | ||||||
Tele2 AB | 180 | 2,331 | ||||||
Telefonaktiebolaget LM Ericsson | 1,756 | 22,113 | ||||||
TeliaSonera AB | 1,316 | 9,389 | ||||||
Trelleborg AB | 140 | 2,276 | ||||||
Volvo AB | 876 | 9,586 | ||||||
|
| |||||||
Total Sweden | 237,681 | |||||||
|
| |||||||
Switzerland (14.57%) | ||||||||
ABB, Ltd. | 1,336 | 29,990 |
9 | November 30, 2014
Table of Contents
ALPS STOXX Europe 600 ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
Switzerland (continued) | ||||||||
Actelion, Ltd. | 68 | $ | 8,086 | |||||
Adecco SA | 104 | 7,303 | ||||||
Aryzta AG | 52 | 4,149 | ||||||
Baloise Holding AG, Registered Shares | 28 | 3,657 | ||||||
Cie Financiere Richemont SA | 300 | 28,207 | ||||||
Clariant AG | 168 | 3,043 | ||||||
Coca-Cola HBC AG | 116 | 2,631 | ||||||
Credit Suisse Group AG | 880 | 23,515 | ||||||
DKSH Holding AG | 20 | 1,531 | ||||||
Dufry Group(a) | 16 | 2,545 | ||||||
EMS-Chemie Holding AG | 4 | 1,484 | ||||||
Flughafen Zuerich AG, Registered Shares | 4 | 2,629 | ||||||
Galenica AG | 4 | 3,405 | ||||||
GAM Holding, Ltd. | 96 | 1,699 | ||||||
Geberit AG, Registered Shares | 24 | 8,360 | ||||||
Georg Fischer AG | 4 | 2,449 | ||||||
Givaudan SA, Registered Shares | 4 | 7,129 | ||||||
Glencore PLC | 5,720 | 28,627 | ||||||
Helvetia Holding AG | 4 | 1,966 | ||||||
Holcim, Ltd. | 132 | 9,747 | ||||||
Julius Baer Group, Ltd. | 128 | 5,800 | ||||||
Kaba Holding AG | 4 | 2,063 | ||||||
Kuehne + Nagel International AG | 32 | 4,309 | ||||||
Logitech International SA | 88 | 1,307 | ||||||
Lonza Group AG, Registered Shares | 32 | 3,762 | ||||||
Nestle SA, Registered Shares | 1,860 | 139,656 | ||||||
Novartis AG, Registered Shares | 1,484 | 143,600 | ||||||
OC Oerlikon Corp AG | 112 | 1,385 | ||||||
Pargesa Holding SA | 16 | 1,273 | ||||||
Partners Group Holding AG | 12 | 3,446 | ||||||
PSP Swiss Property AG | 24 | 2,088 | ||||||
Roche Holding AG | 404 | 121,001 | ||||||
Schindler Holding AG | 24 | 3,423 | ||||||
SGS SA | 4 | 8,652 | ||||||
Sonova Holding AG | 32 | 4,842 | ||||||
STMicroelectronics | 380 | 2,856 | ||||||
Sulzer AG | 12 | 1,340 | ||||||
The Swatch Group AG | 20 | 9,883 | ||||||
Swiss Life Holding AG, Registered Shares | 16 | 3,666 | ||||||
Swiss Prime Site AG | 36 | 2,776 | ||||||
Swiss Re AG | 200 | 17,097 | ||||||
Swisscom AG | 16 | 9,712 | ||||||
Syngenta AG, Registered Shares | 52 | 17,130 | ||||||
UBS AG | 2,076 | 37,277 | ||||||
Zurich Insurance Group AG | 88 | 27,577 | ||||||
|
| |||||||
Total Switzerland | 758,073 | |||||||
|
| |||||||
United Kingdom (29.32%) | ||||||||
3i Group PLC | 560 | 3,884 | ||||||
Aberdeen Asset Management PLC | 564 | 3,963 | ||||||
Admiral Group PLC | 124 | 2,402 | ||||||
Afren PLC(a) | 636 | 514 | ||||||
Aggreko PLC | 148 | 3,544 |
Security Description | Shares | Value | ||||||
United Kingdom (continued) | ||||||||
Amec Foster Wheeler PLC | 176 | $ | 2,569 | |||||
Amlin PLC | 292 | 2,031 | ||||||
Anglo American PLC | 812 | 16,761 | ||||||
Antofagasta PLC | 224 | 2,579 | ||||||
ARM Holdings PLC | 812 | 11,599 | ||||||
Ashmore Group PLC | 220 | 1,057 | ||||||
Ashtead Group PLC | 292 | 4,807 | ||||||
Associated British Foods PLC | 208 | 10,406 | ||||||
AstraZeneca PLC | 728 | 54,355 | ||||||
Atkins WS PLC | 60 | 1,307 | ||||||
AVEVA Group PLC | 36 | 813 | ||||||
Aviva PLC | 1,700 | 13,490 | ||||||
Babcock International Group PLC | 292 | 5,186 | ||||||
BAE Systems PLC | 1,820 | 13,677 | ||||||
Balfour Beatty PLC | 400 | 1,145 | ||||||
Barclays PLC | 9,476 | 36,286 | ||||||
Barratt Developments PLC | 568 | 4,084 | ||||||
BBA Aviation PLC | 252 | 1,351 | ||||||
Bellway PLC | 72 | 2,119 | ||||||
Berendsen PLC | 100 | 1,606 | ||||||
Berkeley Group Holdings PLC | 76 | 3,047 | ||||||
BG Group PLC | 1,968 | 27,673 | ||||||
Booker Group PLC | 852 | 1,887 | ||||||
BP PLC | 10,628 | 69,758 | ||||||
British American Tobacco PLC | 1,076 | 63,775 | ||||||
The British Land Co. PLC | 596 | 7,150 | ||||||
Britvic PLC | 144 | 1,492 | ||||||
BT Group PLC | 4,704 | 30,140 | ||||||
BTG PLC(a) | 208 | 2,622 | ||||||
Bunzl PLC | 192 | 5,356 | ||||||
Burberry Group PLC | 256 | 6,598 | ||||||
Cable & Wireless Communications | 1,460 | 1,129 | ||||||
Cairn Energy PLC(a) | 332 | 843 | ||||||
Capita PLC | 388 | 6,485 | ||||||
Capital & Counties Properties PLC | 428 | 2,519 | ||||||
Carillion PLC | 248 | 1,347 | ||||||
Catlin Group, Ltd. | 208 | 1,792 | ||||||
Centrica PLC | 2,940 | 13,070 | ||||||
Close Brothers Group PLC | 80 | 1,896 | ||||||
CNH Industrial NV | 568 | 4,446 | ||||||
Cobham PLC | 656 | 3,090 | ||||||
Compass Group PLC | 972 | 16,549 | ||||||
Croda International | 80 | 3,067 | ||||||
Daily Mail & General Trust PLC | 164 | 2,157 | ||||||
Derwent London PLC, REIT | 60 | 2,848 | ||||||
Diageo PLC | 1,448 | 44,806 | ||||||
Direct Line Ins. | 864 | 3,975 | ||||||
Dixons Carphone PLC | 584 | 3,861 | ||||||
Drax Group PLC | 232 | 2,209 | ||||||
DS Smith PLC | 544 | 2,447 | ||||||
easyJet PLC | 116 | 2,995 | ||||||
Electrocomponents | 252 | 825 | ||||||
Elementis PLC | 268 | 1,068 | ||||||
Essentra PLC | 140 | 1,651 | ||||||
Experian PLC | 596 | 9,431 | ||||||
Fiat Chrysler Automobiles NV(a) | 504 | 6,286 |
10 | November 30, 2014
Table of Contents
ALPS STOXX Europe 600 ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
United Kingdom (continued) | ||||||||
Firstgroup PLC(a) | 696 | $ | 1,228 | |||||
Friends Life Group | 820 | 4,729 | ||||||
G4S PLC | 896 | 3,868 | ||||||
Genel Energy PLC(a) | 96 | 986 | ||||||
GKN PLC | 960 | 5,178 | ||||||
GlaxoSmithKline PLC | 2,804 | 65,041 | ||||||
Great Portland Estates PLC, REIT | 200 | 2,245 | ||||||
Greene King PLC | 128 | 1,541 | ||||||
Halma PLC | 220 | 2,302 | ||||||
Hammerson PLC, REIT | 452 | 4,399 | ||||||
Hargreaves Lansdown PLC | 144 | 2,194 | ||||||
Hays PLC | 780 | 1,618 | ||||||
Henderson Group PLC | 648 | 2,254 | ||||||
Hikma Pharma PLC | 80 | 2,450 | ||||||
Hiscox, Ltd. | 192 | 2,108 | ||||||
Home Retail Group | 468 | 1,465 | ||||||
Howden Joinery Group | 372 | 2,273 | ||||||
HSBC Holdings PLC | 11,024 | 109,689 | ||||||
Hunting PLC | 80 | 720 | ||||||
ICAP PLC | 320 | 2,083 | ||||||
IG Group Holdings PLC | 212 | 2,244 | ||||||
IMI PLC | 164 | 3,025 | ||||||
Imperial Tobacco Group PLC | 552 | 25,522 | ||||||
Inchcape PLC | 244 | 2,738 | ||||||
Informa PLC | 348 | 2,619 | ||||||
Inmarsat PLC | 260 | 3,227 | ||||||
Intercontinental Hotels Group PLC | 144 | 6,096 | ||||||
Intermediate Capital Group PLC | 232 | 1,665 | ||||||
International Consolidated Airlines Group SA(a) | 600 | 4,288 | ||||||
International Personal Finance PLC | 140 | 1,050 | ||||||
Intertek Group PLC | 92 | 3,356 | ||||||
Intu Properties PLC | 524 | 2,921 | ||||||
ITV PLC | 2,176 | 7,281 | ||||||
J Sainsbury PLC | 816 | 2,975 | ||||||
John Wood Group PLC | 216 | 1,996 | ||||||
Johnson Matthey PLC | 120 | 6,234 | ||||||
Jupiter Fund Management | 264 | 1,496 | ||||||
Kingfisher PLC(a) | 1,368 | 6,667 | ||||||
Ladbrokes PLC | 552 | 960 | ||||||
Lancashire Holdings, Ltd. | 108 | 911 | ||||||
Land Securities Group PLC, REIT | 464 | 8,610 | ||||||
Legal & General Group PLC | 3,416 | 13,163 | ||||||
Lloyds Banking Group PLC(a) | 30,936 | 38,827 | ||||||
London Stock Exchange Group PLC | 136 | 4,790 | ||||||
Man Group PLC | 1,012 | 2,262 | ||||||
Marks & Spencer Grp | 944 | 7,203 | ||||||
Meggitt PLC | 464 | 3,646 | ||||||
Melrose Industries PLC | 620 | 2,505 | ||||||
Merlin Entertainment | 375 | 2,220 | ||||||
Michael Page International PLC | 184 | 1,185 | ||||||
Mitie Group PLC | 216 | 945 | ||||||
National Grid PLC | 2,224 | 32,307 | ||||||
Next PLC | 88 | 9,313 | ||||||
Ocado Group PLC(a) | 336 | 1,706 | ||||||
Old Mutual PLC | 2,832 | 8,861 |
Security Description | Shares | Value | ||||||
United Kingdom (continued) | ||||||||
Ophir Energy PLC(a) | 308 | $ | 699 | |||||
Pearson PLC | 472 | 9,076 | ||||||
Pennon Group PLC | 224 | 3,130 | ||||||
Persimmon PLC | 176 | 4,214 | ||||||
Petrofac, Ltd. | 152 | 1,959 | ||||||
Phoenix Group Holdings | 128 | 1,603 | ||||||
Premier Oil PLC | 300 | 876 | ||||||
Provident Financial PLC | 80 | 2,859 | ||||||
Prudential PLC | 1,480 | 35,786 | ||||||
QinetiQ Group PLC | 376 | 1,162 | ||||||
Reckitt Benckiser Group PLC | 380 | 31,192 | ||||||
Reed Elsevier NV | 388 | 9,538 | ||||||
Reed Elsevier PLC | 660 | 11,474 | ||||||
Rentokil Initial PLC | 1,052 | 1,957 | ||||||
Rexam PLC | 408 | 2,883 | ||||||
Rightmove PLC | 60 | 2,046 | ||||||
Rio Tinto PLC | 716 | 33,468 | ||||||
Rolls-Royce Holdings PLC | 1,088 | 14,318 | ||||||
Rotork PLC | 52 | 1,788 | ||||||
Royal Bank of Scotland Group PLC(a) | 1,356 | 8,373 | ||||||
Royal Mail PLC | 296 | 1,932 | ||||||
RSA Insurance Group(a) | 584 | 4,271 | ||||||
SABMiller PLC | 588 | 32,734 | ||||||
The Sage Group PLC | 644 | 4,095 | ||||||
Schroders PLC | 76 | 3,199 | ||||||
Segro PLC | 428 | 2,623 | ||||||
Serco Group PLC | 316 | 865 | ||||||
Severn Trent PLC | 140 | 4,468 | ||||||
Shaftesbury PLC | 160 | 1,999 | ||||||
Sky PLC | 604 | 8,793 | ||||||
Smith & Nephew PLC | 528 | 9,155 | ||||||
Smiths Group PLC | 228 | 4,121 | ||||||
Spectris PLC | 72 | 2,122 | ||||||
Spirax-Sarco Engineering PLC | 44 | 1,962 | ||||||
Sports Direct International(a) | 148 | 1,527 | ||||||
SSE PLC | 564 | 14,448 | ||||||
St. James’s Place PLC | 300 | 3,721 | ||||||
Stagecoach Group PLC | 248 | 1,570 | ||||||
Standard Chartered PLC | 1,168 | 17,097 | ||||||
Standard Life PLC | 1,380 | 9,140 | ||||||
Subsea 7 SA | 152 | 1,514 | ||||||
TalkTalk Telecom | 316 | 1,541 | ||||||
Tate & Lyle PLC | 268 | 2,526 | ||||||
Taylor Wimpey PLC | 1,876 | 3,933 | ||||||
Telecity Group PLC | 116 | 1,470 | ||||||
Tesco PLC | 4,684 | 13,642 | ||||||
Thomas Cook Group PLC(a) | 844 | 1,606 | ||||||
Travis Perkins PLC | 144 | 4,064 | ||||||
TUI Travel PLC | 292 | 2,028 | ||||||
Tullow Oil PLC | 524 | 3,487 | ||||||
UBM PLC | 144 | 1,070 | ||||||
Ultra Electronics Holdings PLC | 40 | 1,093 | ||||||
Unilever NV | 900 | 36,656 | ||||||
Unilever PLC | 756 | 31,955 | ||||||
United Utilities Group PLC | 392 | 5,544 | ||||||
Victrex PLC | 48 | 1,352 |
11 | November 30, 2014
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ALPS STOXX Europe 600 ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
United Kingdom (continued) | ||||||||
Vodafone Group PLC | 15,292 | $ | 55,882 | |||||
The Weir Group PLC | 124 | 3,634 | ||||||
Whitbread PLC | 104 | 7,452 | ||||||
William Hill PLC | 504 | 2,637 | ||||||
WM Morrison Supermarkets PLC(a) | 1,348 | 3,758 | ||||||
Wolseley PLC | 152 | 8,524 | ||||||
WPP PLC | 780 | 16,326 | ||||||
|
| |||||||
Total United Kingdom | 1,524,947 | |||||||
|
| |||||||
United States (0.16%) | ||||||||
Carnival PLC | 108 | 4,757 | ||||||
QIAGEN NV(a) | 140 | 3,345 | ||||||
|
| |||||||
Total United States | 8,102 | |||||||
|
| |||||||
TOTAL COMMON STOCKS (Cost $4,974,985) | 5,150,424 | |||||||
|
| |||||||
PREFERRED STOCK (0.79%) | ||||||||
Germany (0.79%) | ||||||||
Fuchs Petrolub AG | 40 | 1,655 | ||||||
Henkel AG & Co. KGaA | 104 | 11,538 | ||||||
Porsche Automobil Holding SE | 88 | 7,664 | ||||||
Volkswagen AG | 88 | 20,265 | ||||||
|
| |||||||
Total Germany | 41,122 | |||||||
|
| |||||||
TOTAL PREFERRED STOCK (Cost $37,064) | 41,122 | |||||||
|
| |||||||
RIGHTS (0.03%) | ||||||||
France (0.00%)(b) | ||||||||
Arkema SA, Strike price 38.50 (EUR), Expires 12/03/2014 | 36 | 106 | ||||||
|
| |||||||
Total France | 106 | |||||||
|
| |||||||
Spain (0.02%) | ||||||||
CaixaBank, Strike price Zero (Bonus Rights issue), Expires 12/09/2014 | 1,328 | 89 | ||||||
Telefonica SA, Strike price Zero (Bonus Rights issue), Expires 12/03/2014 | 2,300 | 1,053 | ||||||
|
| |||||||
Total Spain | 1,142 | |||||||
|
| |||||||
Sweden (0.00%)(b) | ||||||||
Meda AB, Strike price 61 (SEK), Expires 12/04/2014 | 136 | 84 | ||||||
|
| |||||||
Total Sweden | 84 | |||||||
|
| |||||||
United Kingdom (0.01%) | ||||||||
UBM PLC(a) | 112 | 313 | ||||||
|
| |||||||
Total United Kingdom | 313 | |||||||
|
| |||||||
TOTAL RIGHTS (Cost $1,348) | 1,645 | |||||||
|
|
7 Day Yield | Shares | Value | ||||||
SHORT TERM INVESTMENTS (0.06%) |
| |||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(c) | 3,136 | 3,136 | |||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $3,136) | 3,136 | |||||||
|
| |||||||
TOTAL INVESTMENTS (99.90%) (Cost $5,016,533) | $ | 5,196,327 | ||||||
NET OTHER ASSETS AND LIABILITIES (0.10%) | 5,275 | |||||||
|
| |||||||
NET ASSETS (100.00%) | $ | 5,201,602 | ||||||
|
|
(a) | Non-income producing security. |
(b) | Less than 0.005% of Net Assets. |
(c) | Less than 0.0005%. |
Common Abbreviations:
AB | - | Aktiebolag is the Swedish equivalent of the term corporation. | ||
AG | - | Aktiengesellschaft is a German term that refers to a corporation that is limited by shares, i.e., owned by shareholders. | ||
AS | - | Andonim Sirketi, Joint Stock Company in Turkey. | ||
ASA | - | Allmennaksjeselskap is the Norwegian term for public limited company. | ||
KGaA | - | Kommanditgesellschaft auf Aktien is a German corporate designation standing for partnership limited by shares. | ||
Ltd. | - | Limited. | ||
NV | - | Naamloze Vennootschap is the Dutch term for a public limited liability corporation. | ||
OYJ | - | Osakeyhtio is the Finnish equivalent of a public limited company. | ||
REIT | - | Real Estate Investment Trust. | ||
PLC | - | Public Limited Company. | ||
SA | - | Generally designated corporations in various countries, mostly those employing civil law. | ||
SCA | - | Societe en commandite pe actiuni is the Romanian term for limited liability partnership. | ||
SE | - | SE Regulation. A European Company which can operate on a Europe-wide basis and be governed by Community law directly applicable in all Member States. | ||
SpA | - | Societa per Azione. |
See Notes to Financial Statements.
12 | November 30, 2014
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ALPS STOXX Europe 600 ETF | ||
Statement of Assets and Liabilities | November 30, 2014 |
ASSETS: | ||||
Investments, at value | $ | 5,196,327 | ||
Foreign currency, at value (Cost $386) | 384 | |||
Foreign tax reclaims | 77 | |||
Dividends receivable | 5,894 | |||
Total Assets | 5,202,682 | |||
LIABILITIES: | ||||
Payable to adviser | 1,080 | |||
Total Liabilities | 1,080 | |||
NET ASSETS | $ | 5,201,602 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 5,014,298 | ||
Accumulated net investment income | 7,522 | |||
Accumulated net realized gain on investments and foreign currency transactions | 33 | |||
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | 179,749 | |||
NET ASSETS | $ | 5,201,602 | ||
INVESTMENTS, AT COST | $ | 5,016,533 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 5,201,602 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 200,000 | |||
Net Asset Value, offering and redemption price per share | $ | 26.01 |
See Notes to Financial Statements.
13 | November 30, 2014 |
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ALPS STOXX Europe 600 ETF | ||
For the Period Ended October 31, 2014 (Commencement) to November 30, 2014 |
INVESTMENT INCOME: | ||||
Dividends(a) | $ | 8,602 | ||
Total Investment Income | 8,602 | |||
EXPENSES: | ||||
Investment adviser fees | 1,080 | |||
Total Expense | 1,080 | |||
NET INVESTMENT INCOME | 7,522 | |||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized gain on investments | 33 | |||
Net change in unrealized appreciation on investments | 179,794 | |||
Net change in unrealized depreciation on translation of assets and liabilities denominated in foreign currencies | (45) | |||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 179,782 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 187,304 | ||
(a) | Net of foreign tax withholding $591. |
See Notes to Financial Statements.
14 | November 30, 2014 |
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ALPS STOXX Europe 600 ETF | ||
For the Period October 31, 2014 (Commencement of Operations) to November 30, 2014 | ||||
OPERATIONS: | ||||
Net investment income | $ | 7,522 | ||
Net realized gain on investments and foreign currency transactions | 33 | |||
Net change in unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | 179,749 | |||
Net increase in net assets resulting from operations | 187,304 | |||
CAPITAL SHARE TRANSACTIONS: | ||||
Proceeds from sale of shares | 5,014,298 | |||
Net increase from capital share transactions | 5,014,298 | |||
Net increase in net assets | 5,201,602 | |||
NET ASSETS: | ||||
Beginning of period | – | |||
End of period * | $ | 5,201,602 | ||
*Including accumulated net investment income of: | $ | 7,522 | ||
OTHER INFORMATION: | ||||
CAPITAL SHARE TRANSACTIONS: | ||||
Beginning shares | – | |||
Shares sold | 200,000 | |||
Shares outstanding, end of period | 200,000 | |||
See Notes to Financial Statements.
15 | November 30, 2014 |
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ALPS STOXX Europe 600 ETF | ||
For a Share Outstanding Throughout the Period Presented |
For the Period to November 30, | ||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 25.07 | ||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||
Net investment income (a) | 0.04 | |||
Net realized and unrealized gain | 0.90 | |||
Total from investment operations | 0.94 | |||
Net increase in net asset value | 0.94 | |||
NET ASSET VALUE, END OF PERIOD | $ | 26.01 | ||
TOTAL RETURN(b) | 3.75 | % | ||
RATIOS/SUPPLEMENTAL DATA: | ||||
Net assets, end of period (000s) | $ | 5,202 | ||
Ratio of expenses to average net assets | 0.25% | (c) | ||
Ratio of net investment income to average net assets | 1.74% | (c) | ||
Portfolio turnover rate(d) | 0% | (e) |
(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 for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions. |
(e) | Less than 0.005%. |
See Notes to Financial Statements. | ||
16 | November 30, 2014 |
Table of Contents
ALPS STOXX Europe 600 ETF | ||
November 30, 2014 |
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, 2014, the Trust consists of sixteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the ALPS STOXX Europe 600 ETF (the “Fund”). The investment objective of the Fund is to seek investment results that correspond (before fees and expenses) generally to the performance of its underlying index, the STOXX® Europe 600 Index (the “Underlying Index”). The investment advisor uses a “passive” or index approach to try to achieve the Fund’s investment objective. The Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund. The Fund commenced operations on October 31, 2014.
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.
Pursuant to 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.
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. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
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 NASDAQ Stock Market LLC (“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.
17 | November 30, 2014
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ALPS STOXX Europe 600 ETF | ||
Notes to Financial Statements | November 30, 2014 |
B. 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 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 at November 30, 2014:
Investments in Securities at Value * | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 5,150,424 | $ | – | $ | – | $ | 5,150,424 | ||||||||
Preferred Stocks | 41,122 | – | – | 41,122 | ||||||||||||
Rights | 1,645 | – | – | 1,645 | ||||||||||||
Short Term Investments | 3,136 | – | – | 3,136 | ||||||||||||
TOTAL | $ | 5,196,327 | $ | – | $ | – | $ | 5,196,327 | ||||||||
* For | a detailed country 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, 2014, 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.
C. European Economic Risk
The Economic and Monetary Union (the “EMU”) of the European Union (“EU”) requires compliance with restrictions on inflation rates, deficits, interest rates, debt levels and fiscal and monetary controls, each of which may significantly affect every country in Europe. Decreasing imports or exports, changes in governmental or EU regulations on trade, changes in the exchange rate of the Euro, the default or threat of default by an EU member country on its sovereign debt, and/or an economic recession in an EU member country may have a significant adverse effect on the economies of EU member countries and their trading partners. The European financial markets have recently experienced volatility and adverse trends due to concerns about economic downturns or rising government debt levels in several European countries, including Greece, Ireland, Italy, Portugal and Spain. A default or debt restructuring by any European country would adversely impact holders of that country’s debt, and sellers of
18 | November 30, 2014
Table of Contents
ALPS STOXX Europe 600 ETF | ||
Notes to Financial Statements | November 30, 2014 |
credit default swaps linked to that country’s creditworthiness (which may be located in countries other than those listed in the previous sentence). These events have adversely affected the exchange rate of the Euro, the common currency of certain EU countries, and may continue to significantly affect every country in Europe, including countries that do not use the Euro.
D. Foreign Investment Risk
The Fund’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 than U.S. securities and less complete financial information than for U.S. issuers. In addition, adverse political, economic or social developments could undermine the value of the Fund’s investments or prevent the Fund from realizing the full value of its investments. Financial reporting standards for companies based in foreign markets differ from those in the United States. Finally, the value of the currency of the country in which the Fund has invested could decline relative to the value of the U.S. dollar, which may affect the value of the investment to U.S. investors. The Fund will not enter into transactions to hedge against declines in the value of the Fund’s assets that are denominated in a foreign currency.
E. 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.
F. Concentration Risk
The Fund seeks to track the Underlying Index, which itself may have concentration 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 Fund.
G. 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 and capital gains distributions, if any, are recorded on the ex-dividend date, net of any foreign taxes withheld. Interest income, if any, is recorded on the accrual basis.
H. 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.
I. 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.
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.
As of November 30, 2014, the components of distributable earnings on a tax basis were as follows:
ALPS STOXX Europe 600 ETF | ||||
Undistributed net investment income | $ | 11,769 | ||
Net unrealized appreciation on investments | 175,535 | |||
Total | $ | 187,304 | ||
19 | November 30, 2014
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ALPS STOXX Europe 600 ETF | ||
Notes to Financial Statements | November 30, 2014 |
As of November 30, 2014, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
ALPS STOXX Europe 600 ETF | ||||
Gross appreciation (excess of value over tax cost) | $ | 233,101 | ||
Gross depreciation (excess of tax cost over value) | (57,521) | |||
Net depreciation of foreign currency | (45) | |||
Net unrealized appreciation (depreciation) | $ | 175,535 | ||
Cost of investments for income tax purposes | $ | 5,020,747 | ||
The differences between book-basis and tax-basis are due to the deferral of losses from Passive Foreign Investment Company (“PFIC”) adjustments.
J. 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, 2014, 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, but may extend to four years in certain jurisdictions. Being that the Fund commenced operations on October 31, 2014; no tax returns have been filed as of the date of this report.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “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 Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.25% of the Fund’s average daily net assets. From time to time, the Adviser may waive all or a portion of its fee.
Out of the unitary management fee, the Adviser pays substantially all expenses of the Fund, including the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses, such as litigation, not incurred in the ordinary course of the Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all of the Fund’s expenses and to compensate the Adviser for providing services for the Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee or $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings.
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ALPS STOXX Europe 600 ETF | ||
Notes to Financial Statements | November 30, 2014 |
4. PURCHASES AND SALES OF SECURITIES
For the period ended November 30, 2014, 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 STOXX Europe 600 ETF | $ | 3,321 | $ | 4,255 |
For the period ended November 30, 2014, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
ALPS STOXX Europe 600 ETF | $ | 5,014,298 | $ | – |
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.
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ALPS STOXX Europe 600 ETF | ||
November 30, 2014 (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 INFORMATION
Pursuant to Section 853(c) of the Internal Revenue Code, the following Fund designated the following:
Foreign Taxes Paid | Foreign Source Income | |||||||
ALPS STOXX Europe 600 ETF | $ 306 | $ 3,251 |
LICENSING AGREEMENT
The STOXX® Europe 600 is the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland and/or its licensors (“Licensors”), which is used under license. The securities based on the Index are in no way sponsored, endorsed, sold or promoted by STOXX and its Licensors and neither of the Licensors shall have any liability with respect thereto.
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ALPS STOXX Europe 600 ETF | ||
Board Considerations Regarding Approval of Investment Advisory Agreements | November 30, 2014 (Unaudited) |
At an in-person meeting held on September 8, 2014 (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 “1940 Act”) (the “Independent Trustees”), evaluated a proposal to approve the Advisory Agreement (the “STOXX ETF Advisory Agreement”) between the Trust and ALPS Advisors, Inc. (the “Adviser”) with respect to the ALPS STOXX Europe 600 ETF (the “STOXX ETF”). The Independent Trustees also met separately to consider the STOXX ETF Advisory Agreement.
In evaluating whether to approve the STOXX ETF Advisory Agreement for the STOXX ETF, the Board considered numerous factors including (i) the nature, extent and quality of the services expected to be provided by the Adviser with respect to the STOXX ETF under the STOXX ETF Advisory Agreement; (ii) the advisory fees and other expenses proposed to be paid by the STOXX ETF compared to those of similar funds managed by other investment advisers; (iii) the expected profitability to the Adviser of its proposed advisory relationship with the STOXX ETF and reasonableness of compensation to the Adviser; (iv) the extent to which economies of scale would be realized if and as the STOXX ETF assets increase and whether the fee level in the STOXX ETF Advisory Agreement reflects these economies of scale; and (v) any additional benefits and other considerations, as further described below.
With respect to the nature, extent and quality of the services to be provided by the Adviser under the STOXX ETF Advisory Agreement, representatives from the Adviser presented the Adviser’s material regarding consideration of the STOXX ETF 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 STOXX ETF Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the nature of the services proposed to be provided under the STOXX ETF Advisory Agreement, the proposed investment parameters of the index for the STOXX ETF, financial information regarding the Adviser and 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 STOXX ETF, the anticipated financial support of the STOXX ETF and 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 STOXX ETF are expected to be satisfactory.
At the Meeting, the Independent Trustees considered and approved an annual advisory fee of 0.25% of STOXX ETF’s average daily net assets. The Independent Trustees noted that the advisory fee proposed for the STOXX ETF was a unitary fee pursuant to which the Adviser will assume all expenses of the STOXX 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 STOXX ETF to the Adviser was not unreasonable.
The Independent Trustees also reviewed comparative fee and expense data provided by Lipper Analytical Services (“Lipper”) regarding the STOXX ETF. The Independent Trustees noted that Lipper’s report contained information regarding comparisons of the proposed cost and expense structures of STOXX ETF with members of a Lipper identified peer expense group. The Independent Trustees noted the services to be provided by the Adviser for the annual advisory fee of 0.25% of the STOXX 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 STOXX 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 STOXX ETF’s business) out of the unitary fee. The Independent Trustees considered that, taking into account the impact of the STOXX ETF’s unitary advisory fee, the STOXX ETF’s expense ratio was lower than the median of its Lipper peer group. In evaluating the reasonableness of the fee, the Independent Trustees considered, among other things, a supplementary peer universe provided by the Adviser. Based on the foregoing and the other information available to them, the Independent Trustees concluded that the advisory fee for the STOXX 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 relationships with the STOXX ETF and concluded that the advisory fees were reasonable taking into account such benefits.
The Independent Trustees considered the extent to which economies of scale would be realized as the STOXX ETF grows and whether fee levels reflect a reasonable sharing of such economies of scale for the benefit of the Fund’s investors. Because the STOXX ETF is newly organized, the Independent Trustees reviewed the unitary advisory fee proposed for STOXX ETF and anticipated expenses of the STOXX ETF and determined to review economies of scale in the future when the STOXX 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 STOXX 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 Independent Trustees considered relevant in the exercise of their reasonable business judgment.
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ALPS STOXX Europe 600 ETF | ||
November 30, 2014 (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. | 45 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (9 funds); Financial InvestorsTrust (32 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder and Chief Financial Officer of Green Alpha Advisors, LLC. Mr. Deems is Co-Portfolio Manager of the Shelton Green Alpha Fund.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 1998 to June 2007. | 45 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 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 Board member, 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, Prosci Inc. (private business services), 2013 – present; Board Member, Citywide Banks (Colorado community bank)2014 – present; Director, National Western Stock Show (not-for- profit organization); Director, Biennial of the Americas (not-for-profit organization). | 23 | 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 STOXX Europe 600 ETF | ||
Trustees & Officers | November 30, 2014 (Unaudited) |
INTERESTED TRUSTEE
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 | |||||
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”), and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”) and ALPS Distributors, Inc. (“ADI”). 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 (9 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 STOXX Europe 600 ETF | ||
Trustees & Officers | November 30, 2014 (Unaudited) |
OFFICERS
Name, Address and Year of Birth of Officer*
| Position(s) Held with
| Length of Time
| Principal Occupation(s) During Past 5 Years | |||
Melanie Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 |
Ms. Zimdars is Vice President and 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. 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, Broadview Funds Trust, BLDRS Index Funds Trust and Powershares QQQ Trust.
| |||
William Parmentier, 1952 | Vice President | Since March 2008 |
Mr. Parmentier is Chief Investment Officer of AAI (since 2006); President and Chief Executive Officer 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 ALPS Advisors, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson is also Secretary of the Principal Real Estate Income Fund since 2014, 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. Because of her position with ALPS, Ms. Nelson is deemed an affiliate of the Trust as defined under the 1940 Act.
| |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 |
Ms. Craig joined ALPS in 2007 and is currently Assistant Vice-Principal and Paralegal Manager of ALPS. 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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Barron’s 400SM ETF | ||
November 30, 2014 (Unaudited) |
Investment Objective
The Barron’s 400SM ETF (the “Fund”) seeks investment results that correspond generally, before fees and expenses, to the performance of the Barron’s 400 IndexSM (the “Underlying Index”). The Underlying Index is a rules-based index intended to give investors a means of tracking the overall performance of high performing equity securities of U.S. companies. The Fund will invest at least 80% of its total assets in the equity securities which comprise the Underlying Index.
The Underlying Index generally consists of 400 stocks. The Underlying Index’s stocks are constituents of the MarketGrader U.S. Coverage Universe. In compiling the Index, MarketGrader Capital, LLC (the “Index Provider”) selects the 400 stocks from the MarketGrader U.S. Coverage Universe by using a methodology that selects components based on the strength of their fundamentals in growth, value, profitability and cash flow and then screens such potential Index components for certain criteria regarding concentration, market capitalization and liquidity. The eligible stocks that are selected for inclusion in the Underlying Index’s portfolio are equally weighted. The Underlying Index is rebalanced by the Index Provider semiannually, on the third Friday of March and September each year.
Performance Overview
The Barron’s 400 ETF (BFOR) recorded another strong performance during its second fiscal year, ended on November 30, 2014, gaining 8.18% net of fees since the end of its previous fiscal year. This trailed the total return of its benchmark, the Barron’s 400 Index (B400), which gained 8.96% during the same period.
Following a very strong fiscal 2013, the Barron’s 400 Index underperformed the Dow Jones U.S. Total Stock Market Index (DWCF), the broadest measure of the U.S. equity market, by 648 basis points, in large part as a result of its equal-weighting design. The index nevertheless still maintains a cumulative advantage of 1510 basis points (15.1 percentage points) over the aforementioned total stock market index in the five-year period ended on November 301.
Below, we have included a table with a list of the top ten and bottom ten performing stocks in B400 during last fiscal year. As a matter of summary, it is worth mentioning that within the three selection periods that were part of last fiscal year, B400 held 669 stocks, 419 of which had a net positive return compared to 250 with a net negative return2.
Barron’s 400 Index Top and Bottom Ten Performing Stocks as of 11/30/2014
Top Ten Performers
Name | Sector | Return (%) | ||
Skyworks Solutions, Inc. | Technology | 155.48 | ||
Allergan, Inc. | Health Care | 120.67 | ||
Keurig Green Mountain, Inc. | Consumer Staples | 112.94 | ||
Edwards Lifesciences Corporation | Health Care | 97.89 | ||
Pilgrim’s Pride Corporation | Consumer Staples | 97.19 | ||
Spirit Airlines, Inc. | Industrials | 80.27 | ||
Under Armour, Inc. | Consumer Discretionary | 79.65 | ||
Monster Beverage Corporation | Consumer Staples | 65.19 | ||
United Rentals, Inc. | Financials | 64.86 | ||
Sigma-Aldrich Corporation | Materials | 59.28 | ||
Bottom Ten Performers | ||||
Name | Sector | Return (%) | ||
Barrett Business Services, Inc. | Industrials | -73.68 | ||
Geospace Technologies Corporation | Energy | -69.79 | ||
Nu Skin Enterprises, Inc. | Consumer Staples | -66.44 | ||
Oasis Petroleum, Inc. | Energy | -60.16 | ||
Warren Resources, Inc. | Energy | -57.38 | ||
American Vanguard Corporation | Materials | -57.19 | ||
Triangle Petroleum Corporation | Energy | -55.12 | ||
Approach Resources | Energy | -53.49 | ||
U.S. Silica Holdings, Inc. | Materials | -50.57 | ||
Sturm, Ruger & Company, Inc. | Consumer Discretionary | -49.05 |
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Barron’s 400SM ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
1 | Based on cumulative 5-year performance of 128.5% for the Barron’s 400 Index (total return) vs. 113.4% for the Dow Jones U.S. Total Stock Market Index (total return). Source: Bloomberg. |
2 | Based on total returns. Sources: FactSet and MarketGrader.com |
Performance (as of November 30, 2014)
1 Year | Since Inception^ | |||
Barron’s 400SM ETF – NAV | 8.18% | 17.23% | ||
Barron’s 400SM ETF – Market Price* | 8.21% | 17.25% | ||
Barron’s 400 IndexSM | 8.96% | 18.05% |
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. |
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 measures all U.S. equity securities that have readily available prices.
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.
Top 10 Holdings* (as of November 30, 2014)
Stamps.com, Inc. | 0.37% | |
Universal Insurance Holdings, Inc. | 0.37% | |
USANA Health Sciences, Inc. | 0.36% | |
Ambarella, Inc. | 0.36% | |
Inteliquent, Inc. | 0.35% | |
DTS, Inc. | 0.34% | |
Overstock.com, Inc. | 0.34% | |
Hawaiian Holdings, Inc. | 0.33% | |
EPAM Systems, Inc. | 0.32% | |
AmTrust Financial Services, Inc. | 0.32% | |
Total % of Top 10 Holdings | 3.46% |
* | % of Total Investments |
Future holdings are subject to change.
Sector Allocation* (as of November 30, 2014)
2 | November 30, 2014
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Barron’s 400SM ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
Growth of $10,000 (as of November 30, 2014)
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.
3 | November 30, 2014
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Barron’s 400SM ETF | ||
November 30, 2014 (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, 2014.
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 6/1/14 | Ending Account 11/30/14 | Expense Ratio(a) | Expenses Paid During Period 6/1/14 - 11/30/14(b) | |||||
Actual | $ 1,000.00 | $ 1,045.30 | 0.65% | $ 3.33 | ||||
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. |
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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, 2014, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlight for the year then ended and 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 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, 2014, 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 Barron’s 400SM ETF of the ALPS ETF Trust as of November 30, 2014, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year then ended and 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 29, 2015
5 | November 30, 2014
Table of Contents
Barron’s 400SM ETF | ||
November 30, 2014 |
Security Description | Shares | Value | ||||||
COMMON STOCKS (97.71%) | ||||||||
Consumer Discretionary (20.40%) | ||||||||
Advance Auto Parts, Inc. | 3,994 | $ | 587,438 | |||||
American Axle & Manufacturing Holdings, Inc.(a) | 30,347 | 647,605 | ||||||
American Public Education, Inc.(a) | 18,888 | 634,637 | ||||||
Bed Bath & Beyond, Inc.(a) | 8,377 | 614,620 | ||||||
Best Buy Co. Inc | 15,718 | 619,446 | ||||||
BorgWarner, Inc. | 9,398 | 531,551 | ||||||
Brunswick Corp. | 12,213 | 606,742 | ||||||
Buckle, Inc. | 11,280 | 577,423 | ||||||
Buffalo Wild Wings, Inc.(a) | 3,808 | 648,160 | ||||||
Chipotle Mexican Grill, Inc.(a) | 840 | 557,441 | ||||||
Chuy’s Holdings, Inc.(a) | 17,350 | 371,463 | ||||||
Comcast Corp., Class A | 9,515 | 540,547 | ||||||
Dick’s Sporting Goods, Inc. | 11,910 | 602,765 | ||||||
Dollar General Corp.(a) | 8,546 | 570,360 | ||||||
Dollar Tree, Inc.(a) | 9,663 | 660,563 | ||||||
Dorman Products, Inc.(a) | 13,789 | 652,633 | ||||||
Drew Industries, Inc. | 11,624 | 547,490 | ||||||
DSW, Inc., Class A | 17,722 | 628,777 | ||||||
Finish Line, Inc., Class A | 17,241 | 492,058 | ||||||
Five Below, Inc.(a) | 12,812 | 597,808 | ||||||
Foot Locker, Inc. | 9,423 | 539,844 | ||||||
Fossil Group, Inc.(a) | 5,559 | 621,051 | ||||||
Fox Factory Holding Corp.(a) | 34,428 | 472,008 | ||||||
Francesca’s Holdings Corp.(a) | 38,706 | 490,792 | ||||||
GameStop Corp., Class A | 12,327 | 466,084 | ||||||
Gap, Inc. | 12,401 | 491,080 | ||||||
Gentex Corp. | 18,433 | 655,477 | ||||||
Gentherm, Inc.(a) | 11,033 | 415,834 | ||||||
Grand Canyon Education, Inc.(a) | 12,945 | 591,198 | ||||||
H&R Block, Inc. | 16,806 | 565,354 | ||||||
Harley-Davidson, Inc. | 8,718 | 607,470 | ||||||
Hibbett Sports, Inc.(a) | 12,540 | 629,132 | ||||||
Home Depot, Inc. | 5,970 | 593,418 | ||||||
HSN, Inc. | 9,120 | 665,122 | ||||||
Interval Leisure Group, Inc. | 25,329 | 550,652 | ||||||
Las Vegas Sands Corp. | 8,672 | 552,320 | ||||||
Lithia Motors, Inc., Class A | 6,542 | 480,902 | ||||||
Lowe’s Cos, Inc. | 10,090 | 644,045 | ||||||
Macy’s, Inc. | 8,907 | 578,153 | ||||||
McDonald’s Corp. | 5,797 | 561,208 | ||||||
Nautilus, Inc.(a) | 43,146 | 553,563 | ||||||
Nexstar Broadcasting Group, Inc., Class A | 12,361 | 634,243 | ||||||
NIKE, Inc., Class B | 6,661 | 661,371 | ||||||
NVR, Inc.(a) | 475 | 597,868 | ||||||
O’Reilly Automotive, Inc.(a) | 3,461 | 632,463 | ||||||
Outerwall, Inc.(a) | 8,999 | 632,450 | ||||||
Overstock.com, Inc.(a) | 29,727 | 739,013 | ||||||
Oxford Industries, Inc. | 8,260 | 547,060 | ||||||
Panera Bread Co., Class A(a) | 3,397 | 568,658 | ||||||
PetSmart, Inc. | 7,657 | 603,065 | ||||||
Polaris Industries, Inc. | 3,653 | 572,462 | ||||||
Pool Corp. | 9,738 | 578,535 | ||||||
Priceline Group, Inc.(a) | 425 | 493,081 | ||||||
PulteGroup, Inc. | 27,986 | 605,337 |
Security Description | Shares | Value | ||||||
Consumer Discretionary (continued) |
| |||||||
Ross Stores, Inc. | 7,221 | $ | 660,577 | |||||
Sinclair Broadcast Group, Inc., Class A | 19,827 | 578,155 | ||||||
Six Flags Entertainment Corp. | 15,716 | 638,855 | ||||||
Skechers U.S.A. Inc., Class A(a) | 9,276 | 569,639 | ||||||
Smith & Wesson Holding Corp.(a) | 53,869 | 537,074 | ||||||
Standard Pacific Corp.(a) | 66,222 | 499,976 | ||||||
Steven Madden, Ltd.(a) | 15,893 | 541,951 | ||||||
Strattec Security Corp. | 6,456 | 669,875 | ||||||
Sturm Ruger & Co., Inc. | 10,576 | 402,840 | ||||||
Tenneco, Inc.(a) | 9,405 | 511,162 | ||||||
Time Warner Cable, Inc. | 3,552 | 530,243 | ||||||
TJX Cos, Inc. | 9,023 | 596,962 | ||||||
Tractor Supply Co. | 8,952 | 688,677 | ||||||
Tumi Holdings, Inc.(a) | 26,526 | 580,654 | ||||||
Ulta Salon Cosmetics & Fragrance, Inc.(a) | 4,552 | 575,782 | ||||||
Under Armour, Inc., Class A(a) | 7,878 | 571,076 | ||||||
Vera Bradley, Inc.(a) | 22,853 | 525,390 | ||||||
Walt Disney Co. | 6,037 | 558,483 | ||||||
William Lyon Homes, Class A(a) | 21,530 | 443,087 | ||||||
Williams-Sonoma, Inc. | 7,987 | 595,511 | ||||||
Winnebago Industries, Inc. | 21,616 | 544,291 | ||||||
Wyndham Worldwide Corp. | 6,728 | 560,846 | ||||||
Wynn Resorts Ltd. | 3,006 | 536,902 | ||||||
Zumiez, Inc.(a) | 18,266 | 653,375 | ||||||
|
| |||||||
Total Consumer Discretionary | 44,851,223 | |||||||
|
| |||||||
Consumer Staples (6.10%) | ||||||||
Boston Beer Co., Inc., Class A(a) | 2,390 | 628,498 | ||||||
Brown-Forman Corp., Class B | 5,887 | 571,333 | ||||||
Cal-Maine Foods, Inc. | 12,168 | 509,596 | ||||||
Coca-Cola Enterprises, Inc. | 11,810 | 518,931 | ||||||
Constellation Brands, Inc., | 6,203 | 597,969 | ||||||
CVS Health Corp. | 6,568 | 600,053 | ||||||
Dr. Pepper Snapple Group, Inc. | 8,632 | 638,768 | ||||||
Estee Lauder Cos, Inc., Class A | 7,272 | 539,146 | ||||||
Hain Celestial Group, Inc.(a) | 5,268 | 596,443 | ||||||
Hershey Co. | 5,797 | 581,323 | ||||||
Keurig Green Mountain, Inc. | 3,953 | 561,879 | ||||||
Kroger Co. | 10,406 | 622,695 | ||||||
Mead Johnson Nutrition Co. | 5,540 | 575,274 | ||||||
Monster Beverage Corp.(a) | 5,943 | 666,508 | ||||||
Nu Skin Enterprises, Inc., Class A | 12,525 | 523,545 | ||||||
Omega Protein Corp.(a) | 36,974 | 375,286 | ||||||
PepsiCo, Inc. | 5,820 | 582,582 | ||||||
Pilgrim’s Pride Corp.(a) | 17,240 | 556,852 | ||||||
Reynolds American, Inc. | 9,546 | 629,177 | ||||||
Sanderson Farms, Inc. | 6,056 | 525,721 | ||||||
Tyson Foods, Inc., Class A | 14,070 | 595,724 | ||||||
USANA Health Sciences, Inc.(a) | 7,457 | 795,215 | ||||||
Wal-Mart Stores, Inc. | 7,130 | 624,160 | ||||||
|
| |||||||
Total Consumer Staples | 13,416,678 | |||||||
|
| |||||||
Energy (6.45%) | ||||||||
Abraxas Petroleum Corp.(a) | 92,840 | 308,693 |
6 | November 30, 2014
Table of Contents
Barron’s 400SM ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
Energy (continued) | ||||||||
Approach Resources, Inc.(a) | 33,647 | $ | 327,049 | |||||
Atwood Oceanics, Inc. | 12,341 | 396,023 | ||||||
Cabot Oil & Gas Corp. | 16,065 | 530,788 | ||||||
Callon Petroleum Co.(a) | 57,046 | 280,096 | ||||||
Cimarex Energy Co. | 3,981 | 417,806 | ||||||
Diamondback Energy, Inc.(a) | 7,000 | 394,800 | ||||||
Dril-Quip, Inc.(a) | 5,951 | 474,592 | ||||||
EOG Resources, Inc. | 5,161 | 447,562 | ||||||
FMC Technologies, Inc.(a) | 9,740 | 465,280 | ||||||
Geospace Technologies | 13,091 | 345,079 | ||||||
Green Plains, Inc. | 13,814 | 414,558 | ||||||
Halliburton Co. | 8,174 | 344,943 | ||||||
Helix Energy Solutions Group, Inc.(a) | 21,444 | 490,424 | ||||||
Kodiak Oil & Gas Corp.(a) | 36,716 | 269,128 | ||||||
Matador Resources Co.(a) | 20,442 | 359,575 | ||||||
Oasis Petroleum, Inc.(a) | 11,790 | 216,700 | ||||||
Oceaneering International, Inc. | 8,335 | 522,688 | ||||||
Pacific Ethanol, Inc.(a) | 32,252 | 375,091 | ||||||
Panhandle Oil and Gas, Inc., Class A | 17,264 | 304,537 | ||||||
Parker Drilling Co.(a) | 98,744 | 350,541 | ||||||
Petroquest Energy, Inc.(a) | 91,300 | 339,636 | ||||||
Range Resources Corp. | 7,458 | 489,618 | ||||||
REX American Resources Corp.(a) | 6,270 | 396,703 | ||||||
Ring Energy, Inc.(a) | 36,067 | 344,800 | ||||||
Rosetta Resources, Inc.(a) | 11,584 | 340,801 | ||||||
RPC, Inc. | 25,524 | 339,214 | ||||||
SandRidge Permian Trust, Royalty Trust | 50,105 | 429,400 | ||||||
SM Energy Co. | 6,182 | 268,608 | ||||||
Southwestern Energy Co.(a) | 14,420 | 464,036 | ||||||
Targa Resources Corp. | 3,908 | 446,059 | ||||||
Triangle Petroleum Corp.(a) | 46,238 | 222,867 | ||||||
US Silica Holdings, Inc. | 7,544 | 237,032 | ||||||
Vaalco Energy, Inc.(a) | 57,960 | 332,111 | ||||||
Valero Energy Corp. | 11,266 | 547,640 | ||||||
Vantage Drilling Co.(a) | 330,565 | 254,535 | ||||||
Warren Resources, Inc.(a) | 92,810 | 190,260 | ||||||
Western Refining, Inc. | 12,481 | 513,094 | ||||||
|
| |||||||
Total Energy | 14,192,367 | |||||||
|
| |||||||
Financials (19.21%) | ||||||||
Affiliated Managers Group, | 2,580 | 525,262 | ||||||
American Express Co. | 6,086 | 562,468 | ||||||
AMERISAFE, Inc. | 14,086 | 587,245 | ||||||
AmTrust Financial Services, Inc. | 13,609 | 698,414 | ||||||
Apollo Commercial Real Estate Finance, Inc. | 32,982 | 550,140 | ||||||
Apollo Investment Corp. | 63,495 | 523,199 | ||||||
Arch Capital Group Ltd.(a) | 9,992 | 572,741 | ||||||
Aspen Insurance Holdings Ltd. | 12,626 | 558,448 | ||||||
Assurant, Inc. | 8,256 | 558,023 | ||||||
Axis Capital Holdings Ltd. | 11,352 | 568,168 | ||||||
Banner Corp. | 13,999 | 576,619 | ||||||
Berkshire Hathaway, Inc., Class B(a) | 3,840 | 570,970 | ||||||
BofI Holding, Inc.(a) | 7,152 | 564,436 |
Security Description | Shares | Value | ||||||
Financials (continued) | ||||||||
CBOE Holdings, Inc. | 9,812 | $ | 587,837 | |||||
CBRE Group, Inc., Class A(a) | 17,993 | 607,084 | ||||||
Chemical Financial Corp. | 19,440 | 563,177 | ||||||
City National Corp. | 6,900 | 532,611 | ||||||
Cohen & Steers, Inc. | 13,270 | 574,193 | ||||||
Columbia Banking System, Inc. | 20,962 | 575,826 | ||||||
Credit Acceptance Corp.(a) | 4,400 | 658,900 | ||||||
Discover Financial Services | 8,375 | 548,981 | ||||||
Eagle Bancorp, Inc.(a) | 16,439 | 564,186 | ||||||
East West Bancorp, Inc. | 15,615 | 574,164 | ||||||
Eaton Vance Corp. | 13,974 | 583,973 | ||||||
Employers Holdings, Inc. | 27,428 | 556,240 | ||||||
Encore Capital Group, Inc.(a) | 11,982 | 514,148 | ||||||
Enstar Group Ltd.(a) | 3,908 | 570,373 | ||||||
Erie Indemnity Co., Class A | 7,000 | 610,610 | ||||||
Evercore Partners, Inc., Class A | 10,782 | 544,491 | ||||||
Everest Re Group, Ltd. | 3,327 | 583,523 | ||||||
Federated National Holding Co. | 22,160 | 559,762 | ||||||
First Cash Financial Services, Inc.(a) | 9,632 | 556,537 | ||||||
First Midwest Bancorp, Inc. | 32,252 | 539,576 | ||||||
Forestar Group, Inc.(a) | 28,900 | 462,400 | ||||||
Franklin Resources, Inc. | 9,738 | 553,703 | ||||||
Hanover Insurance Group, Inc. | 8,718 | 621,419 | ||||||
HCI Group, Inc. | 13,829 | 559,106 | ||||||
Home BancShares, Inc. | 17,535 | 555,333 | ||||||
Home Loan Servicing Solutions Ltd. | 24,350 | 475,799 | ||||||
Huntington Bancshares, Inc. | 53,693 | 542,836 | ||||||
Jones Lang LaSalle, Inc. | 4,228 | 615,850 | ||||||
MarketAxess Holdings, Inc. | 9,230 | 605,211 | ||||||
Marsh & McLennan Cos, Inc. | 10,253 | 580,217 | ||||||
McGraw Hill Financial, Inc. | 6,270 | 585,994 | ||||||
Medley Capital Corp. | 43,891 | 489,824 | ||||||
Montpelier Re Holdings Ltd. | 16,892 | 575,173 | ||||||
Moody’s Corp. | 5,729 | 578,686 | ||||||
Navigators Group, Inc.(a) | 8,632 | 630,568 | ||||||
New Mountain Finance | 36,432 | 549,759 | ||||||
New Residential Investment Corp. | 43,244 | 560,442 | ||||||
OFG Bancorp | 33,698 | 503,448 | ||||||
Oritani Financial Corp. | 37,813 | 550,179 | ||||||
PartnerRe Ltd. | 4,810 | 560,413 | ||||||
Piper Jaffray Cos(a) | 9,620 | 552,188 | ||||||
PNC Financial Services Group, Inc. | 6,227 | 544,676 | ||||||
PRA Group, Inc.(a) | 9,881 | 578,236 | ||||||
Prosperity Bancshares, Inc. | 9,024 | 506,968 | ||||||
Protective Life Corp. | 7,816 | 544,853 | ||||||
SEI Investments Co. | 14,500 | 574,635 | ||||||
SLM Corp. | 60,681 | 587,392 | ||||||
South State Corp. | 9,089 | 562,882 | ||||||
Southside Bancshares, Inc. | 16,620 | 537,325 | ||||||
St Joe Co.(a) | 25,524 | 474,491 | ||||||
T Rowe Price Group, Inc. | 6,810 | 568,431 | ||||||
TPG Specialty Lend | 32,338 | 577,233 | ||||||
Triangle Capital Corp. | 20,445 | 438,954 | ||||||
Universal Insurance Holdings, Inc. | 41,461 | 804,343 | ||||||
Virtus Investment Partners, Inc. | 2,952 | 454,608 | ||||||
Waddell & Reed Financial, Inc., Class A | 10,014 | 481,473 |
7 | November 30, 2014
Table of Contents
Barron’s 400SM ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
Financials (continued) | ||||||||
Wells Fargo & Co. | 10,364 | $ | 564,631 | |||||
Wintrust Financial Corp. | 11,452 | 511,790 | ||||||
WisdomTree Investments, Inc. | 45,559 | 692,041 | ||||||
World Acceptance Corp.(a) | 7,428 | 566,979 | ||||||
WR Berkley Corp. | 11,266 | 588,536 | ||||||
WSFS Financial Corp. | 7,458 | 560,096 | ||||||
|
| |||||||
Total Financials | 42,251,446 | |||||||
|
| |||||||
Health Care (9.18%) | ||||||||
Air Methods Corp.(a) | 9,906 | 439,628 | ||||||
Alexion Pharmaceuticals, Inc.(a) | 3,364 | 655,644 | ||||||
Align Technology, Inc.(a) | 10,091 | 574,178 | ||||||
Allergan, Inc. | 3,206 | 685,731 | ||||||
Amgen, Inc. | 3,813 | 630,327 | ||||||
Anika Therapeutics, Inc.(a) | 13,100 | 535,659 | ||||||
Biogen Idec, Inc.(a) | 1,701 | 523,381 | ||||||
Cambrex Corp.(a) | 24,415 | 555,441 | ||||||
Centene Corp.(a) | 6,814 | 673,019 | ||||||
Cerner Corp.(a) | 9,272 | 597,117 | ||||||
Charles River Laboratories International, Inc.(a) | 9,004 | 583,009 | ||||||
Cigna Corp. | 5,724 | 588,942 | ||||||
Computer Programs & Systems, Inc. | 8,972 | 527,015 | ||||||
CR Bard, Inc. | 3,736 | 625,220 | ||||||
Cyberonics, Inc.(a) | 10,264 | 546,558 | ||||||
Cynosure, Inc., Class A(a) | 23,706 | 653,574 | ||||||
Depomed, Inc.(a) | 36,060 | 558,569 | ||||||
Edwards Lifesciences | 5,255 | 681,468 | ||||||
Enanta Pharmaceuticals, Inc.(a) | 13,542 | 635,662 | ||||||
Endocyte, Inc.(a) | 66,406 | 430,975 | ||||||
Gilead Sciences, Inc.(a) | 5,185 | 520,159 | ||||||
Globus Medical, Inc., | 27,528 | 634,245 | ||||||
HCA Holdings, Inc.(a) | 7,530 | 524,766 | ||||||
Insys Therapeutics, Inc.(a) | 15,990 | 619,293 | ||||||
Johnson & Johnson | 5,081 | 550,018 | ||||||
Lannett Co., Inc.(a) | 13,310 | 653,920 | ||||||
Mettler-Toledo International, | 2,056 | 602,943 | ||||||
Myriad Genetics, Inc.(a) | 14,190 | 475,791 | ||||||
PAREXEL International Corp.(a) | 8,831 | 516,702 | ||||||
PDL BioPharma, Inc. | 63,936 | 528,111 | ||||||
Regeneron Pharmaceuticals, | 1,493 | 621,252 | ||||||
ResMed, Inc. | 10,559 | 561,739 | ||||||
Team Health Holdings, | 9,047 | 517,127 | ||||||
United Therapeutics Corp.(a) | 4,180 | 554,143 | ||||||
UnitedHealth Group, Inc. | 6,261 | 617,522 | ||||||
|
| |||||||
Total Health Care | 20,198,848 | |||||||
|
| |||||||
Industrials (14.44%) | ||||||||
3M Co. | 3,737 | 598,256 | ||||||
Air Lease Corp. | 15,275 | 580,908 | ||||||
Alaska Air Group, Inc. | 11,701 | 690,710 | ||||||
Allegiant Travel Co. | 4,289 | 601,575 | ||||||
Alliant Techsystems, Inc. | 3,994 | 454,038 | ||||||
AMERCO | 2,019 | 561,686 | ||||||
American Railcar Industries, Inc. | 6,972 | 411,208 |
Security Description | Shares | Value | ||||||
Industrials (continued) | ||||||||
AMETEK, Inc. | 10,450 | $ | 532,532 | |||||
Argan, Inc. | 14,664 | 465,875 | ||||||
Astronics Corp.(a) | 9,929 | 486,720 | ||||||
Barrett Business Services, Inc. | 10,613 | 231,576 | ||||||
Boeing Co. | 4,274 | 574,255 | ||||||
Crane Co. | 8,002 | 472,358 | ||||||
Deere & Co. | 6,523 | 565,022 | ||||||
Delta Air Lines, Inc. | 13,907 | 649,040 | ||||||
Deluxe Corp. | 9,279 | 542,357 | ||||||
DXP Enterprises, Inc.(a) | 6,857 | 402,917 | ||||||
Emerson Electric Co. | 8,358 | 532,822 | ||||||
Fastenal Co. | 11,810 | 533,812 | ||||||
Generac Holdings, Inc.(a) | 12,816 | 555,958 | ||||||
Graco, Inc. | 7,229 | 579,043 | ||||||
Greenbrier Cos, Inc. | 7,358 | 408,222 | ||||||
H&E Equipment Services, Inc. | 13,420 | 469,700 | ||||||
Hawaiian Holdings, Inc.(a) | 35,888 | 728,167 | ||||||
Heartland Express, Inc. | 22,307 | 591,805 | ||||||
Honeywell International, Inc. | 5,627 | 557,467 | ||||||
Huntington Ingalls Industries, Inc. | 5,094 | 555,093 | ||||||
Huron Consulting Group, Inc.(a) | 8,546 | 591,041 | ||||||
JB Hunt Transport Services, Inc. | 7,304 | 602,799 | ||||||
Kansas City Southern | 4,452 | 529,521 | ||||||
Landstar System, Inc. | 7,544 | 606,387 | ||||||
Lennox International, Inc. | 6,664 | 624,217 | ||||||
Lincoln Electric Holdings, Inc. | 7,441 | 536,050 | ||||||
Lydall, Inc.(a) | 18,438 | 489,898 | ||||||
Manpowergroup, Inc. | 7,172 | 479,520 | ||||||
Middleby Corp.(a) | 6,040 | 577,666 | ||||||
Old Dominion Freight Line, Inc.(a) | 7,613 | 616,957 | ||||||
Pall Corp. | 6,519 | 626,541 | ||||||
Patrick Industries, Inc.(a) | 12,930 | 576,549 | ||||||
PGT, Inc.(a) | 51,326 | 482,978 | ||||||
Primoris Services Corp. | 18,166 | 475,041 | ||||||
Proto Labs, Inc.(a) | 7,111 | 461,504 | ||||||
RBC Bearings, Inc. | 8,990 | 571,584 | ||||||
Robert Half International, Inc. | 10,673 | 606,120 | ||||||
Rollins, Inc. | 17,945 | 583,751 | ||||||
RR Donnelley & Sons Co. | 31,363 | 528,153 | ||||||
Snap-on, Inc. | 4,326 | 585,438 | ||||||
Southwest Airlines Co. | 15,717 | 657,285 | ||||||
Spirit Airlines, Inc.(a) | 7,857 | 649,695 | ||||||
Stanley Black & Decker, Inc. | 5,893 | 556,535 | ||||||
Sun Hydraulics Corp. | 13,908 | 560,075 | ||||||
Toro Co. | 9,171 | 602,351 | ||||||
Trex Co. Inc(a) | 14,630 | 616,508 | ||||||
Trinity Industries, Inc. | 11,147 | 357,373 | ||||||
Union Pacific Corp. | 4,949 | 577,895 | ||||||
United Rentals, Inc.(a) | 4,584 | 519,413 | ||||||
WABCO Holdings, Inc.(a) | 5,773 | 592,425 | ||||||
Wabtec Corp. | 6,520 | 576,955 | ||||||
|
| |||||||
Total Industrials | 31,751,347 | |||||||
|
| |||||||
Information Technology (17.66%) |
| |||||||
Advanced Energy Industries, | 28,516 | 582,582 | ||||||
Akamai Technologies, Inc.(a) | 8,664 | 559,781 | ||||||
Alliance Data Systems | 2,229 | 637,204 |
8 | November 30, 2014
Table of Contents
Barron’s 400SM ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
Information Technology (continued) | ||||||||
Ambarella, Inc.(a) | 14,444 | $ | 794,420 | |||||
Apple, Inc. | 5,311 | 631,637 | ||||||
Applied Materials, Inc. | 24,108 | 579,797 | ||||||
Aspen Technology, Inc.(a) | 13,830 | 521,944 | ||||||
Blackhawk Network Holdings, | 19,168 | 696,182 | ||||||
Broadridge Financial Solutions, Inc. | 12,821 | 580,663 | ||||||
Cisco Systems, Inc. | 21,493 | 594,066 | ||||||
Cognex Corp.(a) | 12,540 | 510,503 | ||||||
Cognizant Technology Solutions Corp., Class A(a) | 12,103 | 653,441 | ||||||
CommVault Systems, Inc.(a) | 10,264 | 485,487 | ||||||
Daktronics, Inc. | 41,056 | 489,798 | ||||||
DST Systems, Inc. | 6,105 | 605,921 | ||||||
DTS, Inc.(a) | 23,076 | 744,201 | ||||||
EMC Corp. | 18,353 | 557,014 | ||||||
EnerNOC, Inc.(a) | 27,798 | 405,573 | ||||||
EPAM Systems, Inc.(a) | 13,756 | 701,969 | ||||||
F5 Networks, Inc.(a) | 4,357 | 562,881 | ||||||
Fabrinet(a) | 35,342 | 592,685 | ||||||
Facebook, Inc., Class A(a) | 7,070 | 549,339 | ||||||
FARO Technologies, Inc.(a) | 9,992 | 548,861 | ||||||
Fiserv, Inc.(a) | 8,334 | 595,798 | ||||||
FleetCor Technologies, Inc.(a) | 3,739 | 567,917 | ||||||
Gartner, Inc.(a) | 7,172 | 613,063 | ||||||
Google, Inc., Class A(a) | 956 | 524,920 | ||||||
Google, Inc., Class C(a) | 956 | 517,989 | ||||||
Integrated Device Technology, | 32,982 | 615,444 | ||||||
Intel Corp. | 15,494 | 577,151 | ||||||
InterDigital, Inc. | 13,170 | 656,920 | ||||||
International Business Machines Corp. | 2,829 | 458,779 | ||||||
IPG Photonics Corp.(a) | 8,088 | 583,064 | ||||||
Jack Henry & Associates, Inc. | 9,398 | 577,601 | ||||||
Lam Research Corp. | 7,172 | 592,694 | ||||||
Linear Technology Corp. | 11,996 | 552,176 | ||||||
Lionbridge Technologies, Inc.(a) | 124,912 | 633,304 | ||||||
Manhattan Associates, Inc.(a) | 16,802 | 664,687 | ||||||
Mastercard, Inc., Class A | 7,107 | 620,370 | ||||||
MAXIMUS, Inc. | 13,073 | 684,894 | ||||||
Methode Electronics, Inc. | 13,418 | 519,947 | ||||||
Microchip Technology, Inc. | 11,166 | 504,145 | ||||||
Micron Technology, Inc.(a) | 16,932 | 608,705 | ||||||
Microsoft Corp. | 11,628 | 555,935 | ||||||
MTS Systems Corp. | 8,033 | 532,829 | ||||||
NCR Corp.(a) | 15,628 | 463,370 | ||||||
NetScout Systems, Inc.(a) | 11,798 | 450,094 | ||||||
NeuStar, Inc., Class A(a) | 20,430 | 556,717 | ||||||
NIC, Inc. | 29,872 | 538,293 | ||||||
NVIDIA Corp. | 28,344 | 594,374 | ||||||
OSI Systems, Inc.(a) | 8,295 | 585,378 | ||||||
Paychex, Inc. | 12,722 | 603,150 | ||||||
Pegasystems, Inc. | 25,652 | 536,640 | ||||||
PTC, Inc.(a) | 14,236 | 556,201 | ||||||
QUALCOMM, Inc. | 7,201 | 524,953 | ||||||
Skyworks Solutions, Inc. | 9,716 | 655,539 |
Security Description | Shares | Value | ||||||
Information Technology (continued) |
| |||||||
SolarWinds, Inc.(a) | 12,449 | $ | 646,352 | |||||
Stamps.com, Inc.(a) | 17,235 | 814,354 | ||||||
Synchronoss Technologies, Inc.(a) | 12,439 | 532,762 | ||||||
Syntel, Inc.(a) | 12,322 | 548,329 | ||||||
Take-Two Interactive Software, Inc.(a) | 23,582 | 652,278 | ||||||
Texas Instruments, Inc. | 11,166 | 607,654 | ||||||
Tyler Technologies, Inc.(a) | 6,084 | 660,601 | ||||||
Ubiquiti Networks, Inc. | 12,144 | 350,962 | ||||||
Universal Display Corp.(a) | 14,993 | 415,906 | ||||||
Virtusa Corp.(a) | 15,444 | 618,841 | ||||||
Western Digital Corp. | 5,540 | 572,116 | ||||||
|
| |||||||
Total Information Technology | 38,829,145 | |||||||
|
| |||||||
Materials (3.40%) | ||||||||
Celanese Corp., Series A | 8,832 | 530,538 | ||||||
Eastman Chemical Co. | 6,438 | 533,839 | ||||||
Ferro Corp.(a) | 40,152 | 516,756 | ||||||
FutureFuel Corp. | 42,829 | 477,972 | ||||||
Innospec, Inc. | 14,015 | 600,683 | ||||||
KapStone Paper and Packaging Corp. | 18,055 | 539,303 | ||||||
Neenah Paper, Inc. | 9,473 | 542,234 | ||||||
NewMarket Corp. | 1,320 | 519,710 | ||||||
Packaging Corp. of America | 8,238 | 611,919 | ||||||
Praxair, Inc. | 4,061 | 521,351 | ||||||
RPM International, Inc. | 11,538 | 550,363 | ||||||
Sherwin-Williams Co. | 2,489 | 609,457 | ||||||
Valspar Corp. | 6,742 | 565,721 | ||||||
Westlake Chemical Corp. | 5,737 | 364,873 | ||||||
|
| |||||||
Total Materials | 7,484,719 | |||||||
|
| |||||||
Telecommunication Services (0.61%) |
| |||||||
Inteliquent, Inc. | 42,144 | 776,293 | ||||||
Verizon Communications, Inc. | 11,029 | 557,957 | ||||||
|
| |||||||
Total Telecommunication Services |
| 1,334,250 | ||||||
|
| |||||||
Utilities (0.26%) | ||||||||
ITC Holdings Corp. | 14,816 | 562,860 | ||||||
|
| |||||||
Total Utilities | 562,860 | |||||||
|
| |||||||
TOTAL COMMON STOCKS (Cost $204,461,704) | 214,872,883 | |||||||
|
| |||||||
LIMITED PARTNERSHIPS (2.08%) |
| |||||||
Energy (1.18%) | ||||||||
Alliance Holdings GP LP | 7,552 | 506,210 | ||||||
Alliance Resource Partners LP | 11,288 | 519,925 | ||||||
Golar LNG Partners LP | 14,302 | 470,536 | ||||||
Magellan Midstream Partners LP | 6,489 | 537,873 | ||||||
Spectra Energy Partners LP | 10,264 | 553,948 | ||||||
|
| |||||||
Total Energy | 2,588,492 | |||||||
|
| |||||||
Financials (0.76%) | ||||||||
Blackstone Group LP | 16,534 | 554,220 |
9 | November 30, 2014
Table of Contents
Barron’s 400SM ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||||
Financials (continued) |
| |||||||||
Fortress Investment Group LLC, Class A | 75,412 | $ | 582,935 | |||||||
KKR & Co., LP | 23,987 | 534,430 | ||||||||
|
| |||||||||
Total Financials | 1,671,585 | |||||||||
|
| |||||||||
Materials (0.14%) | ||||||||||
Hi-Crush Partners LP | 8,632 | 318,003 | ||||||||
|
| |||||||||
Total Materials | 318,003 | |||||||||
|
| |||||||||
TOTAL LIMITED PARTNERSHIPS (Cost $4,644,783) |
| 4,578,080 | ||||||||
|
| |||||||||
7 Day Yield | Shares | Value | ||||||||
SHORT TERM INVESTMENTS (0.14%) |
| |||||||||
Dreyfus Treasury Prime Cash Management, Institutional Shares | 0.000% (b) | 298,585 | 298,585 | |||||||
|
| |||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $298,585) |
| 298,585 | ||||||||
|
| |||||||||
TOTAL INVESTMENTS (99.93%) (Cost $209,405,072) |
| $ | 219,749,548 | |||||||
NET OTHER ASSETS AND |
| 151,300 | ||||||||
|
| |||||||||
NET ASSETS (100.00%) |
| $ | 219,900,848 | |||||||
|
|
(a) | Non-income producing security. |
(b) | Less than 0.005% of net assets. |
Common Abbreviations:
LLC - Limited Liability Company.
LP - Limited Partnership.
Ltd. - Limited.
See Notes to Financial Statements. | ||
10 | November 30, 2014 |
Table of Contents
Barron’s 400SM ETF | ||
November 30, 2014 |
ASSETS: | ||||||
Investments, at value | $ | 219,749,548 | ||||
Foreign tax reclaims | 203 | |||||
Dividends receivable | 270,409 | |||||
| ||||||
Total Assets | 220,020,160 | |||||
| ||||||
LIABILITIES: | ||||||
Payable to adviser | 119,312 | |||||
| ||||||
Total Liabilities | 119,312 | |||||
| ||||||
NET ASSETS | $ | 219,900,848 | ||||
| ||||||
NET ASSETS CONSIST OF: | ||||||
Paid-in capital | $ | 215,132,968 | ||||
Accumulated net investment income | 1,213,185 | |||||
Accumulated net realized loss on investments | (6,789,781) | |||||
Net unrealized appreciation on investments | 10,344,476 | |||||
| ||||||
NET ASSETS | $ | 219,900,848 | ||||
| ||||||
INVESTMENTS, AT COST | $ | 209,405,072 | ||||
PRICING OF SHARES | ||||||
Net Assets | $ | 219,900,848 | ||||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 6,950,002 | |||||
Net Asset Value, offering and redemption price per share | $ | 31.64 |
See Notes to Financial Statements. | ||
11 | November 30, 2014 |
Table of Contents
Barron’s 400SM ETF | ||
For the Year Ended November 30, 2014 |
INVESTMENT INCOME: | ||||
Dividends(a) | $ | 3,182,778 | ||
Total investment income | 3,182,778 | |||
EXPENSES: | ||||
Investment adviser fees | 1,473,651 | |||
Total expenses | 1,473,651 | |||
NET INVESTMENT INCOME | 1,709,127 | |||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized gain on investments | 17,568,969 | |||
Net change in unrealized depreciation on investments | (2,498,910) | |||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 15,070,059 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 16,779,186 | ||
(a) | Net of foreign tax withholding $601. |
See Notes to Financial Statements. | ||
12 | November 30, 2014 |
Table of Contents
Barron’s 400SM ETF | ||
For the Year Ended | For the Period June 4, 2013 (Commencement) to November 30, 2013 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,709,127 | $ | 333,420 | ||||
Net realized gain on investments | 17,568,969 | 2,436,210 | ||||||
Net change in unrealized appreciation/(depreciation) on investments | (2,498,910) | 12,843,386 | ||||||
Net Increase in Net Assets Resulting from Operations | 16,779,186 | 15,613,016 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (356,623) | – | ||||||
Total distributions | (356,623) | – | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 186,188,412 | 197,335,901 | ||||||
Cost of shares redeemed | (164,362,020) | (31,297,024) | ||||||
Net increase from share transactions | 21,826,392 | 166,038,877 | ||||||
Net increase in net assets | 38,248,955 | 181,651,893 | ||||||
NET ASSETS | ||||||||
Beginning of period | 181,651,893 | – | ||||||
End of period * | $ | 219,900,848 | $ | 181,651,893 | ||||
*Including accumulated net investment income of: | $ | 1,213,185 | $ | 239,977 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 6,200,002 | – | ||||||
Shares sold | 6,100,000 | 7,350,002 | ||||||
Shares redeemed | (5,350,000) | (1,150,000) | ||||||
Shares outstanding, end of period | 6,950,002 | 6,200,002 | ||||||
See Notes to Financial Statements. | ||
13 | November 30, 2014 |
Table of Contents
Barron’s 400SM ETF | ||
For a Share Outstanding Throughout the Periods Presented |
For the Year Ended November 30, 2014 | For the Period June 4, 2013 (Commencement) to November 30, 2013 | |||
NET ASSET VALUE, BEGINNING OF PERIOD | $29.30 | $25.00 | ||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||
Net investment income(a) | 0.23 | 0.10 | ||
Net realized and unrealized gain | 2.16 | 4.20 | ||
Total from investment operations | 2.39 | 4.30 | ||
DISTRIBUTIONS: | ||||
From net investment income | (0.05) | – | ||
Total distributions | (0.05) | – | ||
NET INCREASE IN NET ASSET VALUE | 2.34 | 4.30 | ||
NET ASSET VALUE, END OF PERIOD | $31.64 | $29.30 | ||
TOTAL RETURN(b) | 8.18% | 17.20% | ||
RATIOS/SUPPLEMENTAL DATA: | ||||
Net assets, end of period (000s) | $219,901 | $181,652 | ||
Ratio of expenses to average net assets | 0.65% | 0.65%(c) | ||
Ratio of net investment income to average net assets | 0.75% | 0.78%(c) | ||
Portfolio turnover rate(d) | 55% | 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 received or delivered from processing creations or redemptions. |
See Notes to Financial Statements. | ||
14 | November 30, 2014 |
Table of Contents
Barron’s 400SM ETF | ||
November 30, 2014 |
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, 2014, the Trust consisted of sixteen 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 has elected to qualifiy as a diversified series of the Trust under the 1940 Act.
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.
Pursuant to 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.
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. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
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 NASDAQ Stock Market LLC (“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.
15 | November 30, 2014
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Barron’s 400SM ETF | ||
Notes to Financial Statements | November 30, 2014 |
B. 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 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, 2014:
Investments in Securities at Value* | Level 1 -Unadjusted Quoted Prices | Level 2 -Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total | ||||||||||||
| ||||||||||||||||
Common Stocks | $ | 214,872,883 | $ | – | $ | – | $ | 214,872,883 | ||||||||
Limited Partnerships | 4,578,080 | – | – | 4,578,080 | ||||||||||||
Short Term Investments | 298,585 | – | – | 298,585 | ||||||||||||
| ||||||||||||||||
TOTAL | $ | 219,749,548 | $ | – | $ | – | $ | 219,749,548 | ||||||||
|
* | 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 year ended November 30, 2014, 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.
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 and capital gains distributions, if any, are recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
16 | November 30, 2014
Table of Contents
Barron’s 400SM ETF | ||
Notes to Financial Statements | November 30, 2014 |
D. 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.
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 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, 2014, 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 | $ | 24,274,352 | $ | (379,296 | ) | $ | (23,895,056 | ) |
Net investment income and net realized gain, as disclosed on the Statement of Operations, and net assets were not affected by these reclassifications.
At November 30, 2014, the Fund had available for tax purposes unused capital loss carry forwards as follows:
Short-Term | Long-Term | |
$ 4,415,435 | $ 1,914,449 |
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 | ||||
November 30, 2014 | ||||
Barron’s 400SM ETF | $ | 356,623 |
As of November 30, 2014, the components of distributable earnings on a tax basis were as follows:
Barron’s 400SM ETF | ||||
Undistributed net investment income | $ | 1,213,185 | ||
Accumulated net realized loss on investments | (6,329,884 | ) | ||
Net unrealized appreciation on investments | 9,884,579 | |||
| ||||
Total | $ | 4,767,880 | ||
|
17 | November 30, 2014
Table of Contents
Barron’s 400SM ETF | ||
Notes to Financial Statements | November 30, 2014 |
As of November 30, 2014, 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 | ||||
(excess of value over tax cost) | $ | 22,926,480 | ||
Gross depreciation | ||||
(excess of tax cost over value) | (13,041,901 | ) | ||
Net unrealized appreciation (depreciation) | 9,884,579 | |||
Cost of investments for income tax purposes | $ | 209,864,969 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales and investments in partnerships.
F. 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, 2014, 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, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “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 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 Adviser may waive all or a portion of its fee.
Out of the unitary management fee, the Adviser pays substantially all expenses of the Fund, including the licensing fee of the Index provider, the cost of transfer agency, custody, fund administration, legal, audit, independent 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. The Adviser’s unitary management fee is designed to pay substantially all of the Fund’s expenses and to compensate the Adviser for providing services for the Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee or $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings.
18 | November 30, 2014
Table of Contents
Barron’s 400SM ETF | ||
Notes to Financial Statements | November 30, 2014 |
4. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 2014, the cost of purchases and proceeds from sales of investment securities, excluding in-kind transactions and short-term investments, were as follows:
Fund | Purchases | Sales | ||||||
Barron’s 400SM ETF | $ | 196,164,484 | $ | 122,784,639 |
For the year ended November 30, 2014, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
Barron’s 400SM ETF | $ | 112,247,070 | $ | 162,277,131 |
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.
19 | November 30, 2014
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Barron’s 400SM ETF | ||
November 30, 2014 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
The Trust is required to disclose annually each Fund’s complete proxy voting record on Form N-PX covering the period July 1 through June 30 and file it with the SEC no later than August 31. Form N-PX for each Fund also will be available at no charge upon request by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203. Each Fund’s Form N-PX also is available on the SEC’s website at www.sec.gov.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of each Fund’s portfolio holdings with the SEC on Form N-Q. The Trust will also disclose a complete schedule of each Fund’s portfolio holdings with the SEC on Form N-CSR after its second and fourth quarters. Form N-Q and Form N-CSR for each Fund will be available on the SEC’s website at http://www.sec.gov. Each Fund’s Form N-Q and Form N-CSR may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-202-551-5850. Each Fund’s Form N-Q and Form N-CSR will be available without charge, upon request, by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
TAX INFORMATION
The Fund designates the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2013:
Qualified Dividend Income | Dividend Received Deduction | |||
Barron’s 400SM ETF | 100.00 % | 100.00 % |
In early 2014, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2013 via Form 1099. The Fund will notify shareholders in early 2015 of amounts paid to them by the Funds, if any, during the calendar year 2014.
LICENSING AGREEMENT
MarketGrader Capital LLC has entered into a license agreement with Dow Jones & Company to use the “Barron’s” name and certain related intellectual property in connection with the underlying index of the Barron’s 400 ETF. MarketGrader Capital LLC also has entered into a license and services agreement with its parent company, MarketGrader.com, to use the methodology for constructing the underlying index. MarketGrader Capital LLC in turn has entered into the Sublicense Agreement with ALPS Advisers, Inc. to use the underlying index. The following disclosure relates to such licensing agreements:
Barron’s® is a service mark of Dow Jones & Company, Inc. and has been licensed to MarketGrader Capital LLC for use with the Barron’s 400 Index and sublicensed for use by Barron’s 400 ETF. The Barron’s 400 ETF, based on the Barron’s 400 IndexSM, is not sponsored, endorsed, sold or promoted by Dow Jones, or its affiliates, and Dow Jones and its affiliates make no representation regarding the advisability of investing in such product.
The Barron’s 400 IndexSM is calculated and published by MarketGrader Capital LLC (“MarketGrader”). “Barron’s”, “Barron’s 400” and “Barron’s 400 Index” are trademarks or service marks of DJC & Company, Inc. or its affiliates and have been licensed to MarketGrader and sublicensed for certain purposes by Barron’s 400 Exchange Traded Fund, a sub-fund of that certain ALPS ETF Trust, a Delaware Statutory Trust (“Sub-Licensee”).
The Barron’s 400 ETF (the “Product”) is not sponsored, endorsed, sold or promoted by DJC or its affiliates. DJC and its affiliates make no representation or warranty, express or implied, to the Licensee or to the owners of the Product or any member of the public regarding the advisability of trading in the Product. DJC and its affiliates’ only relationship to the Licensee is the licensing of certain trademarks and trade names of DJC. The Barron’s 400 Index is determined, composed and calculated by MarketGrader without regarding to DJC. DJC has no obligation to take the needs of the Licensee or the owners of the Product into consideration in connection with its licensing of the Barron’s 400 Index to MarketGrader or the sublicense to the Licensee. DJC and its affiliates are not responsible for and have not participated in the calculation of the Barron’s 400 Index or in the determination of the timing of, prices at, or quantities of the Product to be sold or in the determination or calculation of the equation by which the Product are to be converted into cash. DJC and its affiliates have no obligation or liability in connection with the administration, marketing or trading of the Barron’s 400 Index or the Product.
20 | November 30, 2014
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Barron’s 400SM ETF | ||
Additional Information | November 30, 2014 (Unaudited) |
DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE BARRON’S 400 INDEX OR ANY DATA INCLUDED THEREIN AND DOW JONES, AND ITS AFFILIATES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONES AND ITS AFFILIATES MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE LICENSEE, OWNERS OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE BARRON’S 400 INDEX OR ANY DATA INCLUDED THEREIN. DOW JONES AND ITS AFFILIATES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE BARRON’S 400 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES OR ITS RESPECTIVE AFFILIATES HAVE ANY LIABLITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE POSSIBLITY OF SUCH DAMAGES. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN MARKETGRADER AND THE LICENSEE, OTHER THAN THE LICENSORS OF MARKETGRADER.
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Barron’s 400SM ETF | ||
Board Considerations Regarding Approval of Investment Advisory Agreement | November 30, 2014 (Unaudited) |
At an in-person meeting held on June 9, 2014, 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 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, including (i) the nature, extent and quality of the services to be provided by the Adviser with respect to the Barron’s 400 ETF under the Advisory Agreement; (ii) the advisory fees and other expenses to be paid by the Barron’s 400 ETF compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to the Barron’s 400 ETF by the Adviser and the profits realized by the Adviser and its affiliates from its relationship to the Barron’s 400 ETF; (iv) the extent to which economies of scale would be realized if and as the Barron’s 400 ETF assets increase and whether the fee level in the Advisory Agreement reflects these economies of scale; and (v) any additional benefits and other considerations, as further 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 renew the Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the services to be provided under the Advisory Agreement, the investment parameters of the index for the Barron’s 400 ETF, financial information regarding the Adviser and its parent company, information describing the Adviser’s current organizations and the background and experience of the persons responsible for the day-to-day management of the Barron’s 400 ETF.
The Independent Trustees reviewed information on the performance of the Barron’s 400 ETF and the performance of its benchmark index. The Trustees also evaluated the correlation and tracking error between the underlying index and the Barron’s 400 ETF’s performance. Based upon their review, the Independent Trustees concluded that the nature and extent of services provided to the Barron’s 400 ETF under the Advisory Agreement were appropriate and that the quality was satisfactory.
The Independent Trustees noted the services to be provided by the Adviser for the annual advisory fee of 0.65% of the Barron’s 400 ETF’s average daily net assets. The Independent Trustees noted that the advisory fee for the Barron’s 400 ETF was a unitary fee pursuant to which the Adviser assumes all expenses of the Barron’s 400 ETF (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the 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 the cost and expense structures of the Barron’s 400 ETF with other funds’ cost and expense structures during similar periods of members of a Lipper identified peer expense group. The Independent Trustees also noted that the advisory fee and expenses were high relative to others in the Barron’s 400 ETF’s Lipper peer group. In reviewing this data, the Independent Trustees also took into account, among other things, the unique features of the Index, performance of the Index (including 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. The Independent Trustees also considered information provided by the Adviser about the costs and profitability of the Adviser with respect to the Barron’s 400 ETF. 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 noted the relatively small size of the Barron’s 400 ETF and considered whether there have been economies of scale with respect to management of the Barron’s 400 ETF, whether the Barron’s 400 ETF has appropriately benefited from any economies of scale, and whether the fee is reasonable in relation to the Barron’s 400 ETF’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 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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Barron’s 400SM ETF | ||
November 30, 2014 (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 | 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. | 45 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder and Chief Financial Officer of Green Alpha Advisors, LLC. Mr. Deems is Co-Portfolio Manager of the Shelton Green Alpha Fund. 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 1998 to June 2007. | 45 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 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 Board member, 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, Prosci Inc. (private business services), 2013 – present; Board Member, Citywide Banks (Colorado community bank) 2014 – present; Director, National Western Stock Show (not-for- profit organization); Director, Biennial of the Americas (not-for-profit organization). | 23 | 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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Barron’s 400SM ETF | ||
Trustees & Officers | November 30, 2014 (Unaudited) |
INTERESTED TRUSTEE
Name, Address Birth of 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”), and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”) and ALPS Distributors, Inc. (“ADI”). 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 (9 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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Barron’s 400SM ETF | ||
Trustees & Officers | November 30, 2014 (Unaudited) |
OFFICERS
Name, Address Birth of Officer* | Position(s) with Trust | Length of Time Served** | Principal Occupation(s) During Past 5 Years | |||
Melanie H. Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars is Vice President and 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. 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 Broadview Funds Trust, BLDRS Index Funds Trust and Powershares QQQ Trust. | |||
William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer of AAI (since 2006); President and Chief Executive Officer 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 ALPS Advisors, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson is also Secretary of the Principal Real Estate Income Fund since 2014, 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. Because of her position with ALPS, Ms. Nelson is deemed an affiliate of the Trust as defined under the 1940 Act. | |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Assistant Vice-Principal and Paralegal Manager of ALPS. 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. |
25 | November 30, 2014
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CONTENTS
1 |
3 |
4 |
5 |
8 |
9 |
10 |
11 |
12 |
17 |
Board Considerations Regarding Approval of Investment Advisory Agreement | 18 |
19 |
www.alpsfunds.com
Table of Contents
Global Commodity Equity ETF | ||
November 30, 2014 (Unaudited) |
Investment Objective
The Global Commodity Equity ETF (the “Fund”) (prior to March 31, 2014, known as the Jefferies | TR/J CRB Global Commodity Equity Index Fund), seeks investment results that replicate as closely as possible, before fees and expenses, the price and yield performance of the Thomson Reuters CRB Commodity Producers Index (the “Underlying Index”). The Fund will normally invest at least 80% of its total assets in the equity securities that comprise the Underlying Index and depositary receipts based on the securities in the Underlying Index.
The Underlying Index is a modified capitalization-weighted, float-adjusted, rules-based index designed to track the overall performance of a global universe of listed companies engaged in the production and distribution of commodities and commodity-related products and services in the following sectors: agriculture, base/industrial metals, energy and precious metals.
Performance (as of November 30, 2014)
1 Year | 3 Year | 5 Year | Since Inception^ | |||||
Global Commodity Equity ETF - NAV+ | -5.43% | -1.98% | 0.36% | 1.58% | ||||
Global Commodity Equity ETF - Market Price+* | -5.57% | -2.18% | 0.28% | 1.41% | ||||
Thomson Reuters CRB Commodity Equity TR Index | -4.56% | -1.23% | 1.15% | 2.37% | ||||
S&P GSCI Commodity Index | -21.00% | -9.14% | -3.60% | -2.36% | ||||
S&P 500® Total Return Index | 16.86% | 20.93% | 15.96% | 15.95% |
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 September 18, 2009 with an Inception Date, the first day of trading on the Exchange, of September 21, 2009. |
+ | Prior to March 31, 2014 the Global Commodity Equity ETF was known as the Jefferies | TR/J CRB Global Commodity Equity Index Fund. |
* | 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. |
Thomson Reuters CRB Commodity Producers Index: A modified capitalization-weighted, float-adjusted, rules-based index designed to track the overall performance of a global universe of listed companies engaged in the production and distribution of commodities and commodity-related products and services in the following sectors: agriculture, base/industrial metals, energy and precious metals.
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.
An investor cannot invest directly in an index.
ALPS Portfolio Solutions Distributor, Inc. is the Distributor of the ETF.
S-Network Global Indexes, LLC is the Index Provider. The Index Provider is not affiliated with the Trust, the Investment Adviser or the Distributor. The Investment Adviser has entered into a license agreement with the Index Provider to use each ETF’s underlying index.
Thomson Reuters is not affiliated with the Index Provider, the Trust, the Investment Adviser or the Distributor.
1 | November 30, 2014
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Global Commodity Equity ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
Top 10 Holdings* (as of November 30, 2014)
Monsanto Co. | 8.94% | |||
Exxon Mobil Corp. | 5.17% | |||
Archer-Daniels-Midland Co. | 4.74% | |||
Deere & Co. | 4.43% | |||
Syngenta AG | 4.38% | |||
Potash Corp. of Saskatchewan, Inc. | 4.06% | |||
Chevron Corp. | 2.78% | |||
The Mosaic Co. | 2.07% | |||
Agrium, Inc. | 1.98% | |||
CF Industries Holdings, Inc. | 1.89% | |||
Total % of Top 10 Holdings | 40.44% |
* | % of Total Investments. |
Future holdings are subject to change.
Country Allocation* (as of November 30, 2014)
United States | 47.83% | |||
Canada | 13.42% | |||
United Kingdom | 6.03% | |||
Russia | 5.33% | |||
Switzerland | 5.03% | |||
Australia | 3.28% | |||
Netherlands | 2.31% | |||
Brazil | 1.71% | |||
France | 1.56% | |||
Japan | 1.46% | |||
Other | 12.04% | |||
Total | 100.00% |
Growth of $10,000 (as of November 30, 2014)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
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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Global Commodity Equity ETF | ||
For the Year Ended November 30, 2014 (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, 2014.
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 6/1/14 | Ending Account 11/30/14 | Expense Ratio(a) | Expenses Paid During Period 6/1/14 - 11/30/14(b) | |||||
Global Commodity Equity ETF | ||||||||
Actual | $1,000.00 | $893.30 | 0.65% | $3.09 | ||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.81 | 0.65% | $3.29 |
(a) | The 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), divided by 365. |
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Global Commodity Equity 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 Global Commodity Equity ETF (formerly known as 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, 2014, 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, 2014, 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 Global Commodity Equity ETF of the ALPS ETF Trust as of November 30, 2014, 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 29, 2015
4 | November 30, 2014 |
Table of Contents
Global Commodity Equity ETF | ||
November 30, 2014 |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.52%) | ||||||||
Australia (3.27%) | ||||||||
BHP Billiton PLC | 39,178 | $ | 928,351 | |||||
Fortescue Metals Group, Ltd. | 28,429 | 71,119 | ||||||
GrainCorp, Ltd., Class A | 12,115 | 83,809 | ||||||
Incitec Pivot, Ltd. | 136,035 | 329,893 | ||||||
Newcrest Mining, Ltd.* | 34,470 | 303,276 | ||||||
Woodside Petroleum, Ltd. | 5,529 | 168,190 | ||||||
|
| |||||||
Total Australia | 1,884,638 | |||||||
|
| |||||||
Brazil (1.70%) | ||||||||
Companhia Siderurgica Nacional SA, Sponsored ADR | 26,870 | 62,607 | ||||||
Gerdau SA, Sponsored ADR | 21,300 | 88,821 | ||||||
Petroleo Brasileiro SA, Sponsored ADR | 28,421 | 276,252 | ||||||
Vale SA, Sponsored ADR | 61,566 | 554,710 | ||||||
|
| |||||||
Total Brazil | 982,390 | |||||||
|
| |||||||
Canada (13.38%) | ||||||||
Agnico-Eagle Mines, Ltd. | 9,451 | 220,510 | ||||||
Agrium, Inc. | 11,762 | 1,135,365 | ||||||
Alamos Gold, Inc. | 5,937 | 40,186 | ||||||
B2Gold Corp.* | 29,935 | 48,692 | ||||||
Barrick Gold Corp. | 52,257 | 618,767 | ||||||
Cameco Corp. | 7,767 | 144,404 | ||||||
Canadian Natural Resources, Ltd. | 8,181 | 271,579 | ||||||
Detour Gold Corp.* | 7,315 | 54,247 | ||||||
Eldorado Gold Corp. | 31,996 | 199,503 | ||||||
EnCana Corp. | 5,719 | 90,124 | ||||||
First Quantum Minerals, Ltd. | 11,689 | 190,131 | ||||||
Goldcorp, Inc. | 36,490 | 714,802 | ||||||
IAMGOLD Corp.* | 17,439 | 34,161 | ||||||
Kinross Gold Corp.* | 53,611 | 148,620 | ||||||
New Gold, Inc.* | 22,881 | 91,244 | ||||||
Pan American Silver Corp. | 6,941 | 64,342 | ||||||
Potash Corp. of Saskatchewan, Inc. | 67,746 | 2,328,898 | ||||||
Silver Wheaton Corp. | 16,107 | 318,055 | ||||||
Suncor Energy, Inc. | 11,269 | 355,858 | ||||||
Teck Resources, Ltd., Class B | 9,076 | 140,009 | ||||||
TransCanada Corp. | 5,382 | 256,274 | ||||||
Turquoise Hill Resources, Ltd.* | 34,399 | 111,906 | ||||||
Yamana Gold, Inc. | 39,502 | 142,670 | ||||||
|
| |||||||
Total Canada | 7,720,347 | |||||||
|
| |||||||
Chile (0.37%) | ||||||||
Sociedad Quimica y Minera de Chile SA, Sponsored ADR | 8,524 | 214,805 | ||||||
|
| |||||||
Total Chile | 214,805 | |||||||
|
| |||||||
China (1.39%) | ||||||||
China Agri-Industries Holdings, Ltd. | 158,000 | 61,324 | ||||||
China BlueChemical, Ltd., Class H | 126,000 | 45,654 | ||||||
China Petroleum & Chemical Corp., Class H | 186,137 | 152,409 |
Security Description | Shares | Value | ||||||
China (continued) | ||||||||
China Shenhua Energy Co., Ltd., Class H | 28,216 | $ | 80,225 | |||||
CNOOC, Ltd. | 124,987 | 182,760 | ||||||
Jiangxi Copper Co., Ltd., Class H | 22,000 | 39,488 | ||||||
PetroChina Co., Ltd., Class H | 158,119 | 171,468 | ||||||
Zijin Mining Group Co., Ltd., Class H | 253,000 | 67,530 | ||||||
|
| |||||||
Total China | 800,858 | |||||||
|
| |||||||
France (1.56%) | ||||||||
Total SA | 16,091 | 900,180 | ||||||
|
| |||||||
Total France | 900,180 | |||||||
|
| |||||||
Germany (1.08%) | ||||||||
K+S AG | 13,478 | 404,486 | ||||||
ThyssenKrupp AG* | 8,293 | 219,387 | ||||||
|
| |||||||
Total Germany | 623,873 | |||||||
|
| |||||||
Hong Kong (0.00%)(a) | ||||||||
Chaoda Modern Agriculture Holdings, Ltd.* | 348,000 | 449 | ||||||
|
| |||||||
Total Hong Kong | 449 | |||||||
|
| |||||||
Israel (0.66%) | ||||||||
Israel Chemicals, Ltd. | 35,266 | 240,884 | ||||||
The Israel Corp., Ltd.* | 288 | 141,253 | ||||||
|
| |||||||
Total Israel | 382,137 | |||||||
|
| |||||||
Italy (0.65%) | ||||||||
Eni SpA | 18,648 | 372,631 | ||||||
|
| |||||||
Total Italy | 372,631 | |||||||
|
| |||||||
Japan (1.45%) | ||||||||
JFE Holdings, Inc. | 9,800 | 208,482 | ||||||
Kobe Steel, Ltd. | 58,000 | 92,339 | ||||||
Nippon Steel & Sumitomo Metal Corp. | 155,000 | 399,267 | ||||||
Sumitomo Metal Mining Co., Ltd. | 9,000 | 137,750 | ||||||
|
| |||||||
Total Japan | 837,838 | |||||||
|
| |||||||
Jersey (0.45%) | ||||||||
Randgold Resources, Ltd. | 3,877 | 257,558 | ||||||
|
| |||||||
Total Jersey | 257,558 | |||||||
|
| |||||||
Luxembourg (0.39%) | ||||||||
ArcelorMittal | 18,474 | 226,615 | ||||||
|
| |||||||
Total Luxembourg | 226,615 | |||||||
|
| |||||||
Malaysia (1.18%) | ||||||||
IOI Corp. BHD | 223,500 | 318,483 | ||||||
Kuala Lumpur Kepong BHD | 34,220 | 227,628 | ||||||
PPB Group BHD | 28,800 | 132,144 | ||||||
|
| |||||||
Total Malaysia | 678,255 | |||||||
|
|
5 | November 30, 2014
Table of Contents
Global Commodity Equity ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
Mexico (0.62%) | ||||||||
Grupo Mexico SAB de CV, Series B | 73,184 | $ | 239,064 | |||||
Industrias Penoles SAB de CV | 5,534 | 116,391 | ||||||
|
| |||||||
Total Mexico | 355,455 | |||||||
|
| |||||||
Netherlands (2.31%) | ||||||||
Nutreco Holding NV | 5,439 | 311,004 | ||||||
Royal Dutch Shell PLC, Class A | 30,537 | 1,019,343 | ||||||
|
| |||||||
Total Netherlands | 1,330,347 | |||||||
|
| |||||||
Norway (1.21%) | ||||||||
Norsk Hydro ASA | 21,439 | 125,539 | ||||||
Yara International ASA | 13,483 | 573,303 | ||||||
|
| |||||||
Total Norway | 698,842 | |||||||
|
| |||||||
Peru (0.15%) | ||||||||
Companhia de Minas Buenaventura SA, ADR | 9,630 | 89,077 | ||||||
|
| |||||||
Total Peru | 89,077 | |||||||
|
| |||||||
Poland (0.17%) | ||||||||
KGHM Polska Miedz SA | 2,689 | 98,206 | ||||||
|
| |||||||
Total Poland | 98,206 | |||||||
|
| |||||||
Russia (5.32%) | ||||||||
Gazprom OAO, Sponsored ADR | 91,113 | 532,555 | ||||||
LUKOIL OAO, Sponsored ADR | 6,214 | 289,200 | ||||||
MMC Norilsk Nickel JSC, ADR | 30,223 | 536,760 | ||||||
NovaTek OAO, Sponsored | 2,400 | 226,800 | ||||||
Phosagro OAO, GDR(b) | 31,984 | 355,022 | ||||||
Polymetal International PLC | 7,568 | 70,810 | ||||||
Rosneft Oil Co., GDR(b) | 80,870 | 382,919 | ||||||
Severstal OAO, GDR(b) | 3,219 | 29,583 | ||||||
Uralkali, GDR(b) | 48,276 | 644,002 | ||||||
|
| |||||||
Total Russia | 3,067,651 | |||||||
|
| |||||||
Singapore (1.07%) | ||||||||
Golden Agri-Resources, Ltd. | 529,000 | 186,589 | ||||||
Olam International, Ltd. | 55,000 | 91,094 | ||||||
Wilmar International, Ltd. | 138,000 | 339,669 | ||||||
|
| |||||||
Total Singapore | 617,352 | |||||||
|
| |||||||
South Africa (1.13%) | ||||||||
Anglo American Platinum, Ltd.* | 1,780 | 59,870 | ||||||
AngloGold Ashanti, Ltd., Sponsored ADR* | 14,501 | 124,129 | ||||||
Gold Fields, Ltd. | 27,603 | 118,191 | ||||||
Impala Platinum Holdings, Ltd.* | 19,417 | 141,436 | ||||||
Kumba Iron Ore, Ltd. | 628 | 14,614 | ||||||
Sasol, Ltd. | 3,334 | 139,068 | ||||||
Sibayne Gold, Ltd. | 29,005 | 52,773 | ||||||
|
| |||||||
Total South Africa | 650,081 | |||||||
|
|
Security Description | Shares | Value | ||||||
South Korea (0.73%) | ||||||||
Hyundai Steel Co. | 1,181 | $ | 68,220 | |||||
POSCO | 1,284 | 350,566 | ||||||
|
| |||||||
Total South Korea | 418,786 | |||||||
|
| |||||||
Spain (0.34%) | ||||||||
Repsol YPF SA | 8,722 | 195,760 | ||||||
|
| |||||||
Total Spain | 195,760 | |||||||
|
| |||||||
Switzerland (5.02%) | ||||||||
Glencore International PLC | 76,134 | 381,027 | ||||||
Syngenta AG | 7,627 | 2,512,470 | ||||||
|
| |||||||
Total Switzerland | 2,893,497 | |||||||
|
| |||||||
Taiwan (0.43%) | ||||||||
China Steel Corp. | 195,790 | 165,122 | ||||||
Taiwan Fertilizer Co., Ltd. | 52,400 | 86,184 | ||||||
|
| |||||||
Total Taiwan | 251,306 | |||||||
|
| |||||||
United Kingdom (6.01%) | ||||||||
Anglo American PLC | 22,863 | 471,938 | ||||||
Antofagasta PLC | 6,849 | 78,846 | ||||||
BG Group PLC | 24,708 | 347,425 | ||||||
BP PLC | 140,918 | 924,926 | ||||||
CNH Industrial NV | 78,007 | 607,674 | ||||||
Lonmin PLC* | 18,041 | 49,033 | ||||||
Rio Tinto PLC | 21,130 | 987,684 | ||||||
|
| |||||||
Total United Kingdom | 3,467,526 | |||||||
|
| |||||||
United States (47.48%) | ||||||||
AGCO Corp. | 6,848 | 288,917 | ||||||
Alcoa, Inc. | 22,552 | 389,924 | ||||||
Allegheny Technologies, Inc. | 1,850 | 62,326 | ||||||
American Vanguard Corp. | 2,032 | 22,128 | ||||||
Anadarko Petroleum Corp. | 3,848 | 304,569 | ||||||
The Andersons, Inc. | 2,156 | 116,510 | ||||||
Apache Corp. | 2,951 | 189,130 | ||||||
Archer-Daniels-Midland Co. | 51,769 | 2,727,191 | ||||||
Baker Hughes, Inc. | 3,308 | 188,556 | ||||||
Bunge, Ltd. | 11,605 | 1,053,386 | ||||||
Cabot Oil & Gas Corp. | 3,076 | 101,631 | ||||||
Cameron International Corp.* | 1,525 | 78,202 | ||||||
CF Industries Holdings, Inc. | 4,054 | 1,087,080 | ||||||
Chesapeake Energy Corp. | 4,656 | 94,331 | ||||||
Chevron Corp. | 14,702 | 1,600,607 | ||||||
Cliffs Natural Resources, Inc. | 2,695 | 24,578 | ||||||
ConocoPhillips | 9,458 | 624,890 | ||||||
Continental Resources, Inc.* | 700 | 28,686 | ||||||
Deere & Co. | 29,413 | 2,547,754 | ||||||
Devon Energy Corp. | 2,909 | 171,544 | ||||||
Ensco PLC, Class A | 1,822 | 61,584 | ||||||
EOG Resources, Inc. | 4,213 | 365,351 | ||||||
EQT Corp. | 1,163 | 105,810 | ||||||
Exxon Mobil Corp. | 32,835 | 2,972,881 |
6 | November 30, 2014
Table of Contents
Global Commodity Equity ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||||
United States (continued) | ||||||||||
Freeport-McMoRan, Inc. | 19,571 | $ | 525,481 | |||||||
Halliburton Co. | 6,079 | 256,534 | ||||||||
Hecla Mining Co. | 15,974 | 37,699 | ||||||||
Hess Corp. | 2,077 | 151,476 | ||||||||
Ingredion, Inc. | 6,038 | 502,543 | ||||||||
Intrepid Potash, Inc.* | 4,423 | 63,116 | ||||||||
Kinder Morgan, Inc. | 5,220 | 215,847 | ||||||||
Marathon Oil Corp. | 5,178 | 149,748 | ||||||||
Monsanto Co. | 42,880 | 5,141,741 | ||||||||
The Mosaic Co. | 25,980 | 1,189,105 | ||||||||
National Oilwell Varco, Inc. | 3,282 | 220,025 | ||||||||
Newmont Mining Corp. | 22,112 | 406,861 | ||||||||
Noble Energy, Inc. | 2,701 | 132,835 | ||||||||
Nucor Corp. | 6,079 | 326,017 | ||||||||
Occidental Petroleum Corp. | 5,924 | 472,557 | ||||||||
Pioneer Natural Resources Co. | 1,094 | 156,694 | ||||||||
Reliance Steel & Aluminum Co. | 1,397 | 89,324 | ||||||||
Royal Gold, Inc. | 2,760 | 175,757 | ||||||||
Schlumberger, Ltd. | 9,981 | 857,867 | ||||||||
Seaboard Corp.* | 23 | 79,350 | ||||||||
Southern Copper Corp. | 2,641 | 79,098 | ||||||||
Southwestern Energy Co.* | 2,530 | 81,415 | ||||||||
Spectra Energy Corp. | 5,129 | 194,286 | ||||||||
Stillwater Mining Co.* | 5,109 | 67,081 | ||||||||
Transocean, Ltd. | 2,658 | 55,845 | ||||||||
United States Steel Corp. | 2,624 | 87,510 | ||||||||
Valero Energy Corp. | 4,028 | 195,801 | ||||||||
The Williams Co., Inc. | 5,294 | 273,964 | ||||||||
|
| |||||||||
Total United States | 27,393,143 | |||||||||
|
| |||||||||
TOTAL COMMON STOCKS (Cost $68,285,427) | 57,409,603 | |||||||||
|
| |||||||||
7 Day Yield | Shares | Value | ||||||||
SHORT TERM INVESTMENTS (0.22%) |
| |||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(c) | 127,476 | 127,476 | |||||||
|
| |||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $127,476) |
| 127,476 | ||||||||
|
| |||||||||
TOTAL INVESTMENTS (99.74%) (Cost $68,412,903) |
| $ | 57,537,079 | |||||||
NET OTHER ASSETS AND LIABILITIES (0.26%) | 150,254 | |||||||||
|
| |||||||||
NET ASSETS (100.00%) | $ | 57,687,333 | ||||||||
|
|
* | Non-income producing security. |
(a) | Less than 0.005% of Net Assets. |
(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, 2014, the aggregate market values of these securities were 1,638,326, representing 0.03% of the Fund’s net assets. |
(c) | 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. | ||
SpA | - | Societa Per Azioni is an Italian shared company. |
See Notes to Financial Statements.
7 | November 30, 2014
Table of Contents
Global Commodity Equity ETF | ||
November 30, 2014 |
ASSETS: | ||||
Investments, at value | $ | 57,537,079 | ||
Foreign currency, at value (Cost $12,481) | 12,255 | |||
Foreign tax reclaims | 56,722 | |||
Dividends receivable | 117,742 | |||
| ||||
Total Assets | 57,723,798 | |||
| ||||
LIABILITIES: | ||||
Payable to adviser | 31,606 | |||
Payable to custodian for overdraft | 4,859 | |||
| ||||
Total Liabilities | 36,465 | |||
| ||||
NET ASSETS | $ | 57,687,333 | ||
| ||||
| ||||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 78,894,611 | ||
Undistributed net investment income | 153,398 | |||
Accumulated net realized loss on investments and foreign currency transactions | (10,479,596 | ) | ||
Net unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies | (10,881,080 | ) | ||
| ||||
NET ASSETS | $ | 57,687,333 | ||
| ||||
| ||||
INVESTMENTS, AT COST | $ | 68,412,903 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 57,687,333 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 1,450,020 | |||
Net Asset Value, offering and redemption price per share | $ | 39.78 |
See Notes to Financial Statements.
8 | November 30, 2014
Table of Contents
Global Commodity Equity ETF | ||
For the Year Ended November 30, 2014 |
INVESTMENT INCOME: | ||||
Dividends(a) | $ | 1,719,685 | ||
Total Investment Income | 1,719,685 | |||
EXPENSES: | ||||
Investment adviser fee | 425,960 | |||
Total Expenses | 425,960 | |||
NET INVESTMENT INCOME | 1,293,725 | |||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized loss on investments | (2,523,279) | |||
Net realized loss on foreign currency transactions | (13,529) | |||
Net change in unrealized depreciation on investments | (1,739,795) | |||
Net change in unrealized depreciation on translation of assets and liabilities denominated in foreign currencies | (8,108) | |||
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (4,284,711) | |||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (2,990,986) | ||
|
(a) | Net of foreign tax withholding of $162,871. |
See Notes to Financial Statements. | ||
9 | November 30, 2014 |
Table of Contents
Global Commodity Equity ETF | ||
For the Year Ended | For the Year Ended | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,293,725 | $ | 1,288,627 | ||||
Net realized loss on investments and foreign currency transactions | (2,536,808) | (1,617,031) | ||||||
Net change in unrealized depreciation on investments and translation of assets and liabilities denominated in foreign currencies | (1,747,903) | (53,770) | ||||||
Net decrease in net assets resulting from operations | (2,990,986) | (382,174) | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (1,308,650) | (1,333,070) | ||||||
Total distributions | (1,308,650) | (1,333,070) | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 4,383,293 | – | ||||||
Cost of shares redeemed | (4,612,954) | (13,267,466) | ||||||
Net decrease from share transactions | (229,661) | (13,267,466) | ||||||
Net decrease in net assets | (4,529,297) | (14,982,710) | ||||||
NET ASSETS: | ||||||||
Beginning of year | 62,216,630 | 77,199,340 | ||||||
End of year * | $ | 57,687,333 | $ | 62,216,630 | ||||
*Including accumulated net investment income of:
| $ | 153,398 | $ | 157,616 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 1,450,020 | 1,750,020 | ||||||
Shares sold | 100,000 | – | ||||||
Shares redeemed | (100,000) | (300,000) | ||||||
Shares outstanding, end of year | 1,450,020 | 1,450,020 | ||||||
See Notes to Financial Statements. | ||
10 | November 30, 2014 |
Table of Contents
Global Commodity Equity ETF | ||
For a Share Outstanding Throughout the Periods Presented |
For the Year Ended November 30, 2014(a) | For the Year Ended November 30, 2013 | For the Year Ended November 30, 2012 | For the Period January 1, 2011 to November 30, 2011(b) | For the Year Ended December 31, 2010 | For the Period September 21, 2009 (Inception) to December 31, 2009 | |||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ 42.91 | $ | 44.11 | $ | 44.65 | $ | 49.33 | $ | 42.82 | $ | 39.74 | |||||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||||
Net investment income | 0.86(c) | 0.81 | (c) | 0.71 | (c) | 0.58 | (c) | 0.46 | (c) | 0.12 | ||||||||||||
Net realized and unrealized gain/(loss) | (3.11) | (1.17 | ) | (0.57 | ) | (4.78 | ) | 6.54 | 3.08 | |||||||||||||
Total from investment operations | (2.25) | (0.36 | ) | 0.14 | (4.20 | ) | 7.00 | 3.20 | ||||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||||
From net investment income | (0.88) | (0.84 | ) | (0.68 | ) | (0.48 | ) | (0.49 | ) | (0.12 | ) | |||||||||||
Total distributions | (0.88) | (0.84 | ) | (0.68 | ) | (0.48 | ) | (0.49 | ) | (0.12 | ) | |||||||||||
NET INCREASE/(DECREASE) IN NET ASSET VALUE | (3.13) | (1.20 | ) | (0.54 | ) | (4.68 | ) | 6.51 | 3.08 | |||||||||||||
NET ASSET VALUE, END OF PERIOD | $ 39.78 | $ | 42.91 | $ | 44.11 | $ | 44.65 | $ | 49.33 | $ | 42.82 | |||||||||||
TOTAL RETURN(d) | (5.43)% | (0.78 | )% | 0.35% | (8.56 | )% | 16. 60% | 8.06% | ||||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||||
Net assets, end of period (000s) | $ 57,687 | $ | 62,217 | $ | 77,199 | $ | 91,539 | $ | 111,001 | $ | 70,658 | |||||||||||
Ratio of expenses to average net assets | 0.65% | 0.65% | 0.65% | 0.65% | (e) | 0.65% | 0.65% | (e) | ||||||||||||||
Ratio of net investment income to average net assets | 1.97% | 1.86% | 1.61% | 1.29% | (e) | 1.09% | 1.53% | (e) | ||||||||||||||
Portfolio turnover rate(f) | 12% | 20% | 13% | 10 % | 18% | 7% |
(a) | Prior to May 31, 2014 the Global Commodity Equity ETF was known as the Jefferies | TR/J CRB Global Commodity Equity Index Fund. |
(b) | Effective March 7, 2011, the Board approved changing the fiscal year end of the Fund from December 31 to November 30. |
(c) | Based on average shares outstanding during the period. |
(d) | 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. |
(e) | Annualized. |
(f) | Portfolio turnover is not annualized and does not include securities received or delivered from processing creations or redemptions. |
See Notes to Financial Statements.
11 | November 30, 2014
Table of Contents
Global Commodity Equity ETF | ||
November 30, 2014 |
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, 2014, the Trust consists of sixteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the Global Commodity Equity ETF (the “Fund”) (prior to March 31, 2014, known as the Jefferies | TR/J CRB Global Commodity Equity Index 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 performance of the Thomson Reuters CRB Commodity Producers Index. The investment advisor uses a “passive” or index approach to try to achieve the Fund’s investment objective. The Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
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.
Pursuant to 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.
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. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
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 NASDAQ Stock Market LLC (“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.
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Notes to Financial Statements | November 30, 2014 |
B. 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 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 at November 30, 2014:
Global Commodity Equity ETF
Investments in Securities at Value* | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant | Total | ||||||||||||
Common Stocks | ||||||||||||||||
Hong Kong | $ | – | $ | 449 | $ | – | $ | 449 | ||||||||
Other | 57,409,154 | – | – | 57,409,154 | ||||||||||||
Short Term Investments | 127,476 | – | – | 127,476 | ||||||||||||
TOTAL | $ | 57,536,630 | $ | 449 | $ | – | $ | 57,537,079 | ||||||||
* | For a detailed country breakdown, see the accompanying Schedule of Investments. |
The Fund recognizes transfers between levels as of the end of the period. For the year ended November 30, 2014, 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.
C. 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, 2014 |
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 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.
E. 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 and capital gains distributions, if any, are recorded on the ex-dividend date, net of any foreign taxes withheld. Interest income, if any, is recorded on the accrual basis.
F. 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.
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 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, 2014, 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:
Fund | Undistributed Net Investment Income | Accumulated Net Realized Loss | Paid-in Capital | |||||||||
Global Commodity Equity ETF | $ | 10,707 | $ | (612,883 | ) | $ | 602,176 |
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, 2014, the Fund had available for tax purposes unused pre-enactment capital loss carryforwards as follows:
Expiring in 2018 | ||
Global Commodity Equity ETF | $679,396 |
At November 30, 2014, the Fund had available for tax purposes unused post-enactment capital loss carryforwards as follows:
Fund | Short-Term | Long-Term | ||||||
Global Commodity Equity ETF | $ | 1,551,338 | $ | 7,822,963 |
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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Global Commodity Equity ETF | ||
Notes to Financial Statements | November 30, 2014 |
The tax character of the distributions paid was as follows:
Ordinary Income | ||
November 30, 2014 | ||
Global Commodity Equity ETF | $1,308,650 | |
November 30, 2013 | ||
Global Commodity Equity ETF | $1,333,070 |
As of November 30, 2014, the components of distributable earnings on a tax basis were as follows:
Global Commodity Equity ETF | ||||
Undistributed net investment income | $ | 153,403 | ||
Accumulated net realized loss on investments | (10,053,697) | |||
Other accumulated losses | (5) | |||
Net unrealized depreciation on investments | (11,306,979) | |||
Total | $ | (21,207,278) | ||
As of November 30, 2014, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Global Commodity Equity ETF | ||||
Gross appreciation (excess of value over tax cost) | $ | 5,794,967 | ||
Gross depreciation (excess of tax cost over value) | (17,096,690) | |||
Net unrealized depreciation of foreign currency | (5,256) | |||
Net unrealized appreciation (depreciation) | (11,306,979) | |||
Cost of investments for income tax purposes | $ | 68,838,802 | ||
The differences between book-basis and tax-basis are 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 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, 2014, 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, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “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 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 Adviser may waive all or a portion of its fee.
Out of the unitary management fee, the Adviser pays substantially all expenses of the Fund, including the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses, such as litigation, not incurred in the ordinary course of the Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all of the Fund’s expenses and to compensate the Adviser for providing services for the Fund.
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Global Commodity Equity ETF | ||
Notes to Financial Statements | November 30, 2014 |
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee or $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings.
4. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 2014, 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 | ||||||
Global Commodity Equity ETF | $ | 7,777,691 | $ | 7,765,122 |
For the year ended November 30, 2014, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
Global Commodity Equity ETF | $ | 4,246,566 | $ | 4,479,397 |
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.
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Global Commodity Equity ETF | ||
November 30, 2014 (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 INFORMATION
Pursuant to Section 853(c) of the Internal Revenue Code, the Fund designates the following:
Foreign Taxes Paid | Foreign Source Income | |||
Global Commodity Equity ETF | $ 112,239 | $ 1,303,060 |
The Fund designates the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2013:
Qualified Dividend Income | Dividend Received Deduction | |||
Global Commodity Equity ETF | 100.00% | 48.06% |
In early 2014, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2013 via Form 1099. The Fund will notify shareholders in early 2015 of amounts paid to them by the Funds, if any, during the calendar year 2014.
LISCENSING AGREEMENT
Thomson, Reuters and CRB are service marks of Reuters America LLC, a Thomson Reuters company, or its affiliates (“Thomson Reuters”), and have been licensed through S-Network Global Indexes, Inc. (“SNGI”) for use by ALPS Advisors, Inc. The Global Commodity Equity ETF is not sponsored, endorsed, sold or promoted by Thomson Reuters or SGNI, and none of those parties makes any representation regarding the advisability of investing in the Global Commodity Equity ETF.
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Global Commodity Equity ETF | ||
Board Considerations Regarding Approval of Investment Advisory Agreement | November 30, 2014 (Unaudited) |
At an in-person meeting held on June 9, 2014, 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 Global Commodity Equity ETF (“CRBQ”) (F/K/A Jefferies | TR/J CRB Global Commodity Equity Index Fund). 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, including (i) the nature, extent and quality of the services to be provided by the Adviser with respect to CRBQ under the Advisory Agreement; (ii) the advisory fees and other expenses to be paid by CRBQ compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to CRBQ by the Adviser and the profits realized by the Adviser and its affiliates from its relationship to CRBQ; (iv) the extent to which economies of scale would be realized if and as CRBQ assets increase and whether the fee level in the Advisory Agreement reflects these economies of scale; and (v) any additional benefits and other considerations, as further 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 services to be provided under the Advisory Agreement, the investment parameters of the index of CRBQ, financial information regarding the Adviser and its parent company, information describing the Adviser’s current organizations, and the background and experience of the persons responsible for the day-to-day management of CRBQ.
The Board reviewed information on the performance of CRBQ and the performance of its benchmark index. The Board 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 fee for CRBQ was a unitary fee 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 the 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 Lipper identified peer expense group. 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 with respect to 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.
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Global Commodity Equity ETF | ||
November 30, 2014 (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. | 45 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder and Chief Financial Officer of Green Alpha Advisors, LLC. Mr. Deems is Co-Portfolio Manager of the Shelton Green Alpha Fund. 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 1998 to June 2007. | 45 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 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 Board member, 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, Prosci Inc. (private business services), 2013 – present; Board Member, Citywide Banks (Colorado community bank) 2014 – present; Director, National Western Stock Show (not-for- profit organization); Director, Biennial of the Americas (not-for-profit organization). | 23 | 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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Global Commodity Equity ETF | ||
Trustees & Officers | November 30, 2014 (Unaudited) |
INTERESTED TRUSTEE
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 | |||||
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”), and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”) and ALPS Distributors, Inc. (“ADI”). 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 (9 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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Global Commodity Equity ETF | ||
Trustees & Officers | November 30, 2014 (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 H. Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars is Vice President and 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. 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, Broadview Funds Trust, BLDRS Index Funds Trust and Powershares QQQ Trust. | |||
William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer of AAI (since 2006); President and Chief Executive Officer 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 ALPS Advisors, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson is also Secretary of the Principal Real Estate Income Fund since 2014, 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. Because of her position with ALPS, Ms. Nelson is deemed an affiliate of the Trust as defined under the 1940 Act. | |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Assistant Vice-Principal and Paralegal Manager of ALPS. 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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CONTENTS
1 | ||||
5 | ||||
6 | ||||
Financial Statements | ||||
7 | ||||
8 | ||||
9 | ||||
10 | ||||
12 | ||||
14 | ||||
20 | ||||
Board Considerations Regarding Approval of Investment Advisory Agreement | 22 | |||
24 |
www.alpsfunds.com
Table of Contents
Performance Overview | November 30, 2014 (Unaudited) |
Investment Objective
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.
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”). These are the Consumer Discretionary Select Sector Index, Consumer Staples Select Sector Index, Materials Select Sector Index, Energy Select Sector Index, Technology Select Sector Index, Utilities Select Sector Index, Financial Select Sector Index, Industrial Select Sector Index and Health Care Select Sector Index. 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% if 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.
The Underlying Index is designed to track the equally weighted performance of the Underlying Sector Indexes. Accordingly, each Underlying Index is rebalanced quarterly so that each rebalance will result in each Underlying Sector Index having an Index weight of 11.1% and the Underlying Sector Indexes in aggregate total to 100.0%.
Performance Overview
For the fiscal year ended November 30, 2014 the Fund generated a total return of 15.67% (15.71% NAV). Over the same time period the S&P 500® gained 16.86%. Despite headwinds in Europe, plummeting oil prices and modest economic growth, the U.S. continued to be the equity market of choice for global investors. For the third year in a row sector performance was clustered around the mean, with five of the nine sectors of the S&P 500® posting returns within 4% of the broader market and eight of the nine sectors returning between 11% and 28% for the year. As sectors go, this is a remarkably narrow range of returns, and a phenomenon that has persisted for much of the recovery in U.S. equities since the 4th quarter of 2011.
The notable exception to narrow dispersion in returns was the Energy sector, which was the only sector of the S&P to lose ground. After a strong start to the year, the Energy sector lost 18% of its value in the last fiscal quarter and ended up with a loss 5.12% for the 12 months ended November 30, 2014. This year marked the first time since 2011 that a sector of the S&P 500® declined in value for the fiscal year. By contrast, the 2nd worst performing sector in 2014 was Consumer Discretionary, which still posted a gain of just over 11% (11.16%). Sector outliers to the upside in 2014 were the Healthcare, Technology and Utilities sectors which delivered returns of 28.06%, 27.26% and 25.75% respectively. Healthcare continued to benefit from strong earnings growth and increasing demand for services. The Technology and Utilities sectors, which typically tend to move in opposite directions benefit for different reasons. Utilities received a boost as interest rates declined for the year and investors positioned themselves more defensively, while Technology stocks were some of the most consistent performers of the year, rising in every month except January and September, where broad-market volatility impacted every sector of the market.
Annual Report | 1 |
Table of Contents
ALPS Equal Sector Weight ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
Consumer Staples (+17.89%), Financials (+15.57%), Industrials (+14.63%), and Materials (+12.81%) all delivered returns that were close to the market with relatively low volatility. The lack of divergence in sector returns detracted from the performance of an Equal sector strategy relative to the S&P in 2014, as EQL underperformed the S&P 500® by 1.28%. Equally weighting sectors takes advantage of mean reversion opportunities when sector leadership changes, which typically happens on a much more frequent basis than has been the case since 2011.
Compared to the S&P 500® the fund benefited from being overweight the Utilities and Consumer Staples sectors. The Fund was negatively impacted by its underweight in the Technology and Healthcare sectors. Overall, the Fund’s sector weights relative to the S&P 500® resulted in positive out-performance above the index in 3 of the 9 sectors.
Performance (as of November 30, 2014)
1 Year | 3 Year | 5 Year | Since Inception^ | |||||
ALPS Equal Sector Weight ETF - NAV | 15.71% | 19.33% | 15.35% | 18.57% | ||||
ALPS Equal Sector Weight ETF - Market Price* | 15.67% | 19.32% | 15.35% | 18.61% | ||||
Banc of America Securities Merrill Lynch Equal Sector Weight Index | 13.82% | 17.24% | 13.37% | 16.54% | ||||
S&P 500® Total Return Index | 16.86% | 20.93% | 15.96% | 19.16% |
Total Expense Ratio (per the current Prospectus) 0.51%.
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.
2 | November 30, 2014 |
Table of Contents
ALPS Equal Sector Weight ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
The following table shows the sector weights of both the Fund and the S&P 500® as of November 30, 2014:
Sector Weighting Comparison (as of November 30, 2014)
EQL* | S&P 500® | +/- | ||||
Consumer Discretionary | 11.3% | 12.0% | -0.7% | |||
Consumer Staples | 11.7% | 9.9% | 1.8% | |||
Energy | 9.2% | 8.4% | 0.8% | |||
Financials | 11.2% | 16.3% | -5.1% | |||
Healthcare | 11.6% | 14.3% | -2.7% | |||
Industrials | 11.3% | 10.4% | 0.9% | |||
Materials | 10.6% | 3.2% | 7.4% | |||
Technology | 11.4% | 22.4% | -11.0% | |||
Utilities | 11.7% | 3.1% | 8.6% | |||
Total | 100.0% | 100.0% | 0.0% |
Source: S&P 500®
* | % of Total Investments. |
Future holdings are subject to change.
Annual Report | 3 |
Table of Contents
ALPS Equal Sector Weight ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
Growth of $10,000 (as of November 30, 2014)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
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 | November 30, 2014 |
Table of Contents
Disclosure of Fund Expenses | November 30, 2014 (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, 2014.
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 6/1/14 | Ending Account 11/30/14 | Expense Ratio(a) | Expenses Paid 6/1/14 - 11/30/14(b) | |||||
ALPS Equal Sector Weight ETF | ||||||||
Actual | $ 1,000.00 | $ 1,068.70 | 0.34% | $ 1.76 | ||||
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), divided by 365. |
Annual Report | 5 |
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 ALPS Equal Sector Weight ETF, one of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2014, 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, 2014, 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 ALPS Equal Sector Weight ETF of the ALPS ETF Trust as of November 30, 2014, 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 29, 2015
6 | November 30, 2014 |
Table of Contents
Schedule of Investments | November 30, 2014 |
SECURITY DESCRIPTION | SHARES | VALUE | ||||||||||
| ||||||||||||
EXCHANGE TRADED FUNDS (99.92%) | ||||||||||||
Consumer Discretionary (11.33%) | ||||||||||||
Consumer Discretionary Select Sector SPDR® Fund | 220,484 | $ | 15,832,956 | |||||||||
|
| |||||||||||
Consumer Staples (11.73%) | ||||||||||||
Consumer Staples Select Sector SPDR® Fund | 332,348 | 16,384,756 | ||||||||||
|
| |||||||||||
Energy (9.20%) | ||||||||||||
Energy Select Sector SPDR® Fund | 160,986 | 12,849,902 | ||||||||||
|
| |||||||||||
Financials (11.15%) | ||||||||||||
Financial Select Sector SPDR® Fund | 638,552 | 15,580,669 | ||||||||||
|
| |||||||||||
Healthcare (11.59%) | ||||||||||||
Health Care Select Sector SPDR® Fund | 232,706 | 16,194,011 | ||||||||||
|
| |||||||||||
Industrials (11.30%) | ||||||||||||
Industrial Select Sector SPDR® Fund | 277,327 | 15,782,680 | ||||||||||
|
| |||||||||||
Materials (10.54%) | ||||||||||||
Materials Select Sector SPDR® Fund | 299,409 | 14,718,946 | ||||||||||
|
| |||||||||||
Technology (11.39%) | ||||||||||||
Technology Select Sector SPDR® Fund | 374,383 | 15,907,534 | ||||||||||
|
| |||||||||||
Utilities (11.69%) | ||||||||||||
Utilities Select Sector SPDR® Fund | 354,978 | 16,328,988 | ||||||||||
|
| |||||||||||
TOTAL EXCHANGE TRADED FUNDS (Cost $108,244,043) | 139,580,442 | |||||||||||
|
| |||||||||||
7 DAY YIELD | SHARES | VALUE | ||||||||||
| ||||||||||||
SHORT TERM INVESTMENTS (0.10%) | ||||||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(a) | 144,698 | 144,698 | |||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $144,698) | 144,698 | |||||||||||
|
| |||||||||||
TOTAL INVESTMENTS (100.02%) (Cost $108,388,741) | $ | 139,725,140 | ||||||||||
NET LIABILITIES LESS OTHER ASSETS (-0.02%) | (38,670) | |||||||||||
|
| |||||||||||
NET ASSETS (100.00%) | $ | 139,686,470 | ||||||||||
|
|
(a) | Less than 0.0005% |
Common Abbreviations:
SPDR® - Standard & Poor’s Depositary Receipts
See Notes to Financial Statements.
| ||
Annual Report | 7 |
Table of Contents
Statement of Assets and Liabilities | November 30, 2014 |
ASSETS: | ||||
Investments, at value | $ | 139,725,140 | ||
Total Assets | 139,725,140 | |||
LIABILITIES: | ||||
Payable to adviser | 38,670 | |||
Total Liabilities | 38,670 | |||
NET ASSETS | $ | 139,686,470 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 108,472,349 | ||
Undistributed net investment income | 13,180 | |||
Accumulated net realized loss on investments | (135,458) | |||
Net unrealized appreciation on investments | 31,336,399 | |||
NET ASSETS | $ | 139,686,470 | ||
INVESTMENTS, AT COST | $ | 108,388,741 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 139,686,470 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 2,450,000 | |||
Net Asset Value, offering and redemption price per share | $ | 57.01 |
See Notes to Financial Statements.
| ||
8 | November 30, 2014 |
Table of Contents
Statement of Operations | For the Year Ended November 30, 2014 |
INVESTMENT INCOME: | ||||
Dividends | $ | 2,645,178 | ||
Total investment income | 2,645,178 | |||
EXPENSES: | ||||
Investment adviser fees | 480,864 | |||
Total expenses before reimbursement | 480,864 | |||
Less fees waived/reimbursed by investment adviser | (38,989) | |||
Net Expenses | 441,875 | |||
NET INVESTMENT INCOME | 2,203,303 | |||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized gain on investments | 10,360,476 | |||
Net change in unrealized appreciation on investments | 6,636,619 | |||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 16,997,095 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 19,200,398 | ||
See Notes to Financial Statements.
| ||
Annual Report | 9 |
Table of Contents
Statements of Changes in Net Assets |
For the Year Ended November 30, 2014 | For the Year Ended November 30, 2013 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 2,203,303 | $ | 1,714,705 | ||||
Net realized gain on investments | 10,360,476 | 3,556,274 | ||||||
Net change in unrealized appreciation on investments | 6,636,619 | 17,868,704 | ||||||
Net increase in net assets resulting from operations | 19,200,398 | 23,139,683 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (2,197,152) | (1,707,676) | ||||||
Total distributions | (2,197,152) | (1,707,676) | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 46,558,747 | 31,053,389 | ||||||
Cost of shares redeemed | (34,120,471) | (17,832,225) | ||||||
Net increase from share transactions | 12,438,276 | 13,221,164 | ||||||
Net increase in net assets | 29,441,522 | 34,653,171 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 110,244,948 | 75,591,777 | ||||||
End of year * | $ | 139,686,470 | $ | 110,244,948 | ||||
* Including accumulated net investment income of: | $ | 13,180 | $ | 7,029 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 2,200,000 | 1,900,000 | ||||||
Shares sold | 900,000 | 700,000 | ||||||
Shares redeemed | (650,000) | (400,000) | ||||||
Shares outstanding, end of year | 2,450,000 | 2,200,000 | ||||||
See Notes to Financial Statements.
| ||
10 | November 30, 2014 |
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Page Intentionally Left Blank.
Table of Contents
Financial Highlights |
For the Year | ||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 50.11 | ||
INCOME FROM OPERATIONS: | ||||
Net investment income | 0.90 | (b) | ||
Net realized and unrealized gain | 6.90 | |||
Total from investment operations | 7.80 | |||
DISTRIBUTIONS: | ||||
From net investment income | (0.90) | |||
From net realized gains | – | |||
From tax return of capital | – | |||
Total distributions | (0.90) | |||
NET INCREASE IN NET ASSET VALUE | 6.90 | |||
NET ASSET VALUE, END OF PERIOD | $ | 57.01 | ||
TOTAL RETURN(c) | 15.71 | % | ||
RATIOS/SUPPLEMENTAL DATA: | ||||
Net assets, end of period (in 000s) | $ | 139,686 | ||
Ratio of expenses excluding reimbursement/waiver to average net assets | 0.37 | % | ||
Ratio of expenses including reimbursement/waiver to average net assets | 0.34 | % | ||
Ratio of net investment income excluding reimbursement/waiver to average net assets | 1.67 | % | ||
Ratio of net investment income including reimbursement/waiver to average net assets | 1.70 | % | ||
Portfolio turnover rate(e) | 3 | % |
(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. |
See Notes to Financial Statements.
| ||
12 | November 30, 2014 |
Table of Contents
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 Year Ended December 31, 2010 | For the Period July 7, 2009 (Inception) to December 31, 2009 | ||||||||||||||
$ | 39.79 | $ | 35.48 | $ | 35.34 | $ | 31.13 | $ | 25.04 | |||||||||
0.81 | (b) | 0.69 | (b) | 0.41 | (b) | 0.68 | (b) | 0.31 | ||||||||||
10.35 | 4.35 | 0.18 | 4.14 | 6.10 | ||||||||||||||
11.16 | 5.04 | 0.59 | 4.82 | 6.41 | ||||||||||||||
(0.84) | (0.71) | (0.45) | (0.61) | (0.31) | ||||||||||||||
– | – | – | – | (0.01) | ||||||||||||||
– | (0.02) | – | – | – | ||||||||||||||
(0.84) | (0.73) | (0.45) | (0.61) | (0.32) | ||||||||||||||
10.32 | 4.31 | 0.14 | 4.21 | 6.09 | ||||||||||||||
$ | 50.11 | $ | 39.79 | $ | 35.48 | $ | 35.34 | $ | 31.13 | |||||||||
28.41 | % | 4.35 | % | 1.67 | % | 15.67 | % | 25.60 | % | |||||||||
$ | 110,245 | $ | 75,592 | $ | 62,091 | $ | 53,012 | $ | 14,008 | |||||||||
0.37 | % | 0.37 | % | 0.37 | %(d) | 0.37 | % | 0.37 | %(d) | |||||||||
0.34 | % | 0.34 | % | 0.34 | %(d) | 0.34 | % | 0.34 | %(d) | |||||||||
1.77 | % | 1.76 | % | 1.22 | %(d) | 2.11 | % | 2.57 | %(d) | |||||||||
1.80 | % | 1.79 | % | 1.25 | %(d) | 2.14 | % | 2.60 | %(d) | |||||||||
2 | % | 4 | % | 4 | % | 7 | % | 4 | % |
See Notes to Financial Statements.
| ||
Annual Report | 13 |
Table of Contents
Notes to Financial Statements | November 30, 2014 |
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, 2014, the Trust consists of sixteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains solely to the ALPS Equal Sector Weight ETF (the “Fund”). 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 is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
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.
Pursuant to 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.
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. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
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.
14 | November 30, 2014 |
Table of Contents
ALPS Equal Sector Weight ETF | ||
Notes to Financial Statements | November 30, 2014 |
Portfolio securities listed on any exchange other than the NASDAQ Stock Market LLC (“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. 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
Annual Report | 15 |
Table of Contents
ALPS Equal Sector Weight ETF | ||
Notes to Financial Statements | November 30, 2014 |
are generally categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing 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 inputs used to value the Fund’s investments at November 30, 2014:
Investments in Securities at Value* | Level 1 - Quoted Prices | Level 2 - Significant Inputs | Level 3 - Significant Inputs | Total | ||||||||||||
Exchange Traded Funds | $ | 139,580,442 | $ | – | $ | – | $ | 139,580,442 | ||||||||
Short Term Investments | 144,698 | – | 144,698 | |||||||||||||
TOTAL | $ | 139,725,140 | $ | – | $ | – | $ | 139,725,140 | ||||||||
* | 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 year ended November 30, 2014, 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.
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 and capital gains distributions, if any, are recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
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ALPS Equal Sector Weight ETF | ||
Notes to Financial Statements | November 30, 2014 |
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 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, 2014, the following reclassifications, which had no impact on results of operations or net assets, were recorded to reflect permanent tax differences resulting primarily from in-kind transactions:
Fund | Undistributed Net Investment Income | Accumulated Net Realized Loss on Investments | Paid-in Capital | |||||||||
ALPS Equal Sector Weight ETF | $ | – | $ | (10,296,504) | $ | 10,296,504 |
Net investment income and net realized gain, as disclosed on the Statement of Operations, and net assets were not affected by these reclassifications.
At November 30, 2014, the Fund had available for tax purposes unused capital loss carryforwards as follows:
Fund | Short-Term | Long-Term | ||||||
ALPS Equal Sector Weight ETF | $ | – | $ | 9,114 |
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 | ||
November 30, 2014 | ||
ALPS Equal Sector Weight ETF | $ 2,197,152 | |
November 30, 2013 | ||
ALPS Equal Sector Weight ETF | $ 1,707,676 |
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ALPS Equal Sector Weight ETF | ||
Notes to Financial Statements | November 30, 2014 |
As of November 30, 2014, the components of distributable earnings on a tax basis for the Fund were as follows:
Undistributed net investment income | $ | 13,180 | ||
Accumulated net realized loss on investments | (9,114) | |||
Net unrealized appreciation on investments | 31,210,055 | |||
Total | $ | 31,214,121 | ||
As of November 30, 2014, 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) | $ | 31,414,801 | ||
Gross depreciation (excess of tax cost over value) | (204,746) | |||
Net unrealized appreciation (depreciation) | 31,210,055 | |||
Cost of investments for income tax purposes | $ | 108,515,085 | ||
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales.
F. 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, 2014, 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, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “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 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 Adviser will
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ALPS Equal Sector Weight ETF | ||
Notes to Financial Statements | November 30, 2014 |
reimburse the Fund an amount equal to the distribution fee received by APSD 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 Adviser may waive all or a portion of its fee.
Out of the unitary management fee, the Adviser pays substantially all expenses of the Fund, including the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for acquired fund fees and expenses, interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all of the Fund’s expenses and to compensate the Adviser for providing services for the Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee or $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings.
4. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 2014, 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 Equal Sector Weight ETF | $ 5,269,546 | $ 3,651,042 | ||
For the year ended November 30, 2014 , the cost in-kind purchases and proceeds from in-kind sales were as follows: | ||||
Fund | Purchases | Sales | ||
ALPS Equal Sector Weight ETF | $ 41,435,154 | $ 30,610,395 |
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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Additional Information | November 30, 2014 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
The Trust is required to disclose annually each Fund’s complete proxy voting record on Form N-PX covering the period July 1 through June 30 and file it with the SEC no later than August 31. Form N-PX for each Fund also will be available at no charge upon request by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203. Each Fund’s Form N-PX also is available on the SEC’s website at www.sec.gov.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of each Fund’s portfolio holdings with the SEC on Form N-Q. The Trust will also disclose a complete schedule of each Fund’s portfolio holdings with the SEC on Form N-CSR after its second and fourth quarters. Form N-Q and Form N-CSR for each Fund will be available on the SEC’s website at http://www.sec.gov. Each Fund’s Form N-Q and Form N-CSR may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-202-551-5850. Each Fund’s Form N-Q and Form N-CSR will be available without charge, upon request, by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
TAX INFORMATION
The Fund designates the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2013:
Qualified Dividend Income | Dividend Received Deduction | |||
ALPS Equal Sector Weight ETF | 100.00% | 100.00% |
In early 2014, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2013 via Form 1099. The Fund will notify shareholders in early 2015 of amounts paid to them by the Funds, if any, during the calendar year 2014.
LICENSING AGREEMENT
Merrill Lynch, Pierce, Fenner & Smith Incorporated (the “Licensor”) has entered into an index licensing agreement with ALPS Advisors Inc. (the “Adviser”) to allow the Adviser’s use of the underlying index of the ALPS Equal Sector Weight ETF (the “Product”). The following disclosure relates to the Licensor:
The Product is not issued, sponsored, endorsed, sold or promoted by Licensor or its affiliates. Licensor makes no representation or warranty, express or implied, to the owners of the Product or any member of the public regarding the advisability of investing in securities generally or in the Product particularly or the ability of the Bank of America Securities- Merrill Lynch Equal Sector Weight Index (“Index”) to track general market performance. Licensor’s only relationship to the Licensee is the licensing of the Index which is determined, composed and calculated by Licensor
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Additional Information | November 30, 2014 (Unaudited) |
without regarding to the Licensee or the Product. Licensor has no obligation to take the needs of the Licensee or the owners of the Product into consideration in determining, composing or calculating the Index. Licensor is not responsible for and has not participated in the determination or calculation of the equation by which the Product is to be converted into cash. Licensor has no obligation or liability in connection with the issuance, administration, marketing or trading of the Product.
LICENSOR DOES NOT GUARANTEE THE QUALITY, ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN AND SHALL HAVE NO LIABILITY FOR ERRORS OR OMISSIONS OF ANY KIND RELATED TO THE INDEX OR DATA. LICENSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCT, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED TO LICENSEE OR FOR ANY OTHER USE. LICENSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL LICENSOR HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
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Board Considerations Regarding Approval of Investment Advisory Agreement | November 30, 2014 (Unaudited) |
At an in-person meeting held on June 9, 2014, 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 including (i) the nature, extent and quality of the services to be provided by the Adviser with respect to EQL under the Advisory Agreement; (ii) the advisory fees and other expenses to be paid by EQL compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to EQL by the Adviser and the profits realized by the Adviser and its affiliates from its relationship to EQL; (iv) the extent to which economies of scale would be realized if and as EQL assets increase and whether the fee level in the Advisory Agreement reflects these economies of scale; and (v) any additional benefits and other considerations, as further 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 services to be provided under the Advisory Agreement, the investment parameters of the index of EQL, financial information regarding the Adviser and its parent company, information describing the Adviser’s current organizations, and the background and experience of the persons responsible for the day-to-day management of EQL.
The Board reviewed information on the performance of EQL and the performance of its benchmark index. The Board also 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 fee for EQL was a unitary fee 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 the 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
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Board Considerations Regarding Approval of Investment Advisory Agreement | November 30, 2014 (Unaudited) |
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 a Lipper identified peer expense group. The Independent Trustees noted that the advisory fee rate and expense ratio for EQL were higher than others in its Lipper peer group. They also considered the supplemental comparative expense data provided by the Adviser and accorded the Lipper data and the Adviser supplemental data such weight as they deemed appropriate. 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 with respect to 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 EQL’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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Trustees & Officers | November 30, 2014 (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 | 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 | 45 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). |
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ALPS Equal Sector Weight ETF | ||
Trustees & Officers | November 30, 2014 (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 | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder and Chief Financial Officer of Green Alpha Advisors, LLC. Mr. Deems is Co- Portfolio Manager of the Shelton Green Alpha Fund. 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 1998 to June 2007. | 45 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 funds); and Reaves Utility 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, 2014 (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 | 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 Board member, 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, Prosci Inc. (private business services), 2013 – present; Board Member, Citywide Banks (Colorado community bank) 2014 – present; Director, National Western Stock Show (not-for-profit organization); Director, Biennial of the Americas (not-for-profit organization). | 23 | Mr. Pederson is Trustee of Westcore Trust (12 funds) and Principal Real Estate Income Fund. |
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Trustees & Officers | November 30, 2014 (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 Funds in Fund Complex Overseen by Trustee*** | Other Directorships Held by Trustee | |||||
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”), and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”) and ALPS Distributors, Inc. (“ADI”). 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 (9 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, 2014 (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 H. Zimdars, 1976 | Chief Compliance Officer | Since December 2009 | Ms. Zimdars is Vice President and 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. 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, Broadview Funds Trust, BLDRS Index Funds Trust and Powershares QQQ Trust. | |||
William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer of AAI (since 2006); President and Chief Executive Officer 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. |
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Trustees & Officers | November 30, 2014 (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 | |||
Erin D. Nelson, 1977 | Secretary | Since October 2013 | Ms. Nelson is Vice President and Assistant General Counsel of ALPS Advisors, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson is also Secretary of the Principal Real Estate Income Fund since 2014, 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. Because of her position with ALPS, Ms. Nelson is deemed an affiliate of the Trust as defined under the 1940 Act. | |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Assistant Vice-Principal and Paralegal Manager of ALPS. 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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4 | ||||
5 | ||||
Financial Statements | ||||
6 | ||||
8 | ||||
9 | ||||
10 | ||||
11 | ||||
12 | ||||
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www.alpsfunds.com
Table of Contents
Performance Overview | November 30, 2014 (Unaudited) |
Investment Objective
The Workplace Equality Portfolio (the “Fund”) seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of its underlying index, the Workplace Equality Index™ (ticker symbol LGBTEQLT) (the “Index”).
The Index is designed to provide a means of tracking the performance of companies which support workplace equality for lesbian, gay, bisexual and transgender (“LGBT”) employees. The Index consists of approximately 140 publicly traded stocks of U.S. and foreign companies which support equality for LGBT employees through their workplace practices, including non-discrimination policies regarding sexual orientation and gender identity and providing full benefits to for same-sex spouses, domestic partners and transgender individuals. The Index is compiled by Denver Investment Advisors LLC (“Denver Investments” or the “Index Provider”). The Index Provider uses publicly available lists and screening sources such as the Human Rights Campaign Corporate Equality Index®, National Gay & Lesbian Chamber of Commerce® Diversity Inc. Top 50®, or other screening sources, to identify companies with workplace policies that meet the Index’s criteria for equality for LGBT employees as described above (as well as market capitalization and liquidity requirements). The Index Provider also utilizes its own proprietary database for LGBT screening. The criteria are subject to change in response to changes in law.
Performance Overview
From 2/24/14 through 11/30/2014, the Workplace Equality Index returned 13.83%, outperforming the 13.66% return of the S&P 500 Index. Sector allocation played a large part in the outperformance as the index’s underweighting in two underperforming sectors helped returns as did the significant over-weight in another.
Consumer Discretionary stocks played a large role in the index’s outperformance of the S&P 500 Index. The Workplace Equality Index has over double the weight in Consumer Discretionary compared to the S&P 500 Index. In addition to the sector overweighting, the stocks within the sector outperformed their benchmark peers within Consumer Discretionary.
The Workplace Equality Index has historically been underweight the Energy sector, and this year, the underweight provided positive relative returns. The underweight in the Industrial sector also added to return relative to the benchmark. The stocks in the Workplace Equality Index within the Utilities and Materials sectors (both equal weight with the S&P 500 Index) posted significant outperformance of their sector peers and added to the outperformance.
The Workplace Equality Index fared less well in the Health Care and Information Technology sectors. Both of these sectors were slightly underweight the S&P 500 Index and these underweights combined with lackluster performance were a drag on relative performance of the Workplace Equality Index.
From an individual stock perspective, the best performing stocks year-to-date in the Workplace Equality Index have been Apple (+59.63%), Electronic Arts (+56.63%), Best Buy (+56.62%), SUPERVALU (+52.44%) and L Brands (+52.19%). That these stocks are all leveraged to the U.S. consumer shows how powerful the overweight in consumer focused stocks can be during an economic expansion.
The worst performing stocks in the index so far this year have been Sears Holding (-81.77%), Sprint (-39.02%), Avon Products (-34.8%), Caesar’s Entertainment (-31.44%), and Deutsche Bank AG (-31.06%).
We feel the trends that have led the Workplace Equality Index to outperform in 2014 will stay in place for the foreseeable future. We believe the emphasis on companies that treat all of their employees with respect, dignity and equality leads to better shareholder returns.
Performance (as of November 30, 2014)
Since Inception^ | ||
Workplace Equality Portfolio – NAV | 11.68% | |
Workplace Equality Portfolio – Market Price* | 11.72% | |
Workplace Equality IndexTM | 13.83% | |
S&P 500® Total Return Index | 13.66% |
Total Expense Ratio (per the current prospectus) 0.75%
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 1.866.759.5679 or visit www.eqltfund.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.
1 | November 30, 2014
Table of Contents
Workplace Equality Portfolio | ||
Performance Overview | November 30, 2014 (Unaudited) |
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 Commencement date was February 25, 2014. 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 Fund is new with limited operating history.
The Workplace Equality IndexTM: an equal weighted index of companies that support lesbian, gay, bisexual and transgender (LGBT) equality in their workplace. For inclusion, a company must score 100% on the Human Rights Campaign Equality Index or, if not found in the Corporate Equality Index, have the verifiable characteristics that would earn them such a score.
The S&P 500® Index: an unmanaged capitalization-weighted index of 500 stocks designed to measure performance of the broad domestic economy. Standard & Poor’s is the owner of the S&P Index data shown here and all trademarks and copyrights related thereto.
You cannot invest directly in an index.
The Fund invests in stocks of companies which meet the Index’s criteria for supporting workplace equality for LGBT employees. The trend of companies supporting workplace equality in this fashion is relatively recent, and there may be a limited number of companies which meet the Index’s criteria.
ALPS Portfolio Solutions Distributor, Inc. is the Distributor for the Workplace Equality Portfolio.
ALPS Portfolio Solutions Distributor, Inc. is the not affiliated with Denver Investments.
2 | November 30, 2014
Table of Contents
Workplace Equality Portfolio | ||
Performance Overview | November 30, 2014 (Unaudited) |
Top 10 Holdings* (as of November 30, 2014)
Sears Holdings Corp. | 0.80 | % | ||||
American Airlines Group, Inc. | 0.79 | % | ||||
Yahoo!, Inc. | 0.75 | % | ||||
CareFusion Corp. | 0.75 | % | ||||
Sony Corp., Sponsored ADR | 0.74 | % | ||||
Caesars Entertainment Corp. | 0.72 | % | ||||
L Brands, Inc. | 0.72 | % | ||||
NIKE, Inc., Class B | 0.71 | % | ||||
Whirlpool Corp. | 0.71 | % | ||||
Electronic Arts, Inc. | 0.71 | % | ||||
Total % of Top 10 Holdings | 7.40 | % |
* | % of Total Investments. |
Future holdings are subject to change.
Sector Allocation* (as of November 30, 2014)
Consumer Discretionary | 24.20 | % | ||
Financials | 21.87 | % | ||
Information Technology | 17.30 | % | ||
Health Care | 10.00 | % | ||
Consumer Staples | 9.09 | % | ||
Industrials | 8.70 | % | ||
Utilities | 3.21 | % | ||
Materials | 2.91 | % | ||
Telecommunication Services | 2.20 | % | ||
Energy | 0.52 | % | ||
Total | 100.00 | % |
Growth of $10,000 (as of November 30, 2014)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
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.
3 | November 30, 2014
Table of Contents
Disclosure of Fund Expenses | November 30, 2014 (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, 2014.
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 6/1/14 | Ending Account 11/30/14 | Expense Ratio(a) | Expenses Paid During Period 6/1/14 - 11/30/14(b) | |||||
Workplace Equality Portfolio Fund | ||||||||
Actual | $ 1,000.00 | $ 1,080.50 | 0.75% | $ 3.91 | ||||
Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,021.31 | 0.75% | $ 3.80 |
(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. |
4 | November 30, 2014
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 Workplace Equality Portfolio, one of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2014, and the related statements of operations, changes in net assets, and the financial highlights for the period February 25, 2014 (Commencement of Operations) to November 30, 2014. 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, 2014, 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 Workplace Equality Portfolio of the ALPS ETF Trust as of November 30, 2014, the results of its operations, the changes in its net assets, and the financial highlights for the period February 25, 2014 (Commencement) to November 30, 2014, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 29, 2015
5 | November 30, 2014
Table of Contents
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.67%) | ||||||||
Consumer Discretionary (24.13%) | ||||||||
Abercrombie & Fitch Co., Class A | 1,013 | $ | 29,225 | |||||
American Eagle Outfitters, Inc. | 2,842 | 40,072 | ||||||
Barnes & Noble, Inc.(a) | 1,944 | 45,412 | ||||||
Best Buy Co., Inc. | 1,173 | 46,228 | ||||||
Caesars Entertainment Corp.(a) | 2,972 | 50,405 | ||||||
Choice Hotels International, Inc. | 780 | 43,220 | ||||||
Comcast Corp., Class A | 721 | 41,126 | ||||||
Darden Restaurants, Inc. | 815 | 46,447 | ||||||
Ford Motor Co. | 2,474 | 38,916 | ||||||
GameStop Corp., Class A | 952 | 35,995 | ||||||
Gap, Inc. | 935 | 37,026 | ||||||
General Motors Co. | 1,205 | 40,283 | ||||||
Groupon, Inc.(a) | 5,952 | 44,819 | ||||||
Hyatt Hotels Corp., Class A(a) | 647 | 38,128 | ||||||
Interpublic Group of Cos., Inc. | 2,188 | 44,395 | ||||||
L Brands, Inc. | 616 | 49,834 | ||||||
Marriott International, Inc., Class A | 566 | 44,595 | ||||||
MGM Resorts International(a) | 1,753 | 39,986 | ||||||
NIKE, Inc., Class B | 500 | 49,645 | ||||||
Nordstrom, Inc. | 592 | 45,205 | ||||||
Office Depot, Inc.(a) | 7,365 | 48,830 | ||||||
Orbitz Worldwide, Inc.(a) | 5,094 | 38,918 | ||||||
Pearson PLC, Sponsored ADR | 2,055 | 39,682 | ||||||
Sears Holdings Corp.(a) | 1,550 | 55,954 | ||||||
Sirius XM Holdings, Inc.(a) | 11,582 | 42,043 | ||||||
Sony Corp., Sponsored ADR | 2,333 | 51,302 | ||||||
Staples, Inc. | 3,145 | 44,219 | ||||||
Starwood Hotels & Resorts Worldwide, Inc. | 490 | 38,710 | ||||||
Target Corp. | 641 | 47,434 | ||||||
Thomson Reuters Corp. | 1,102 | 43,639 | ||||||
Time Warner Cable, Inc. | 267 | 39,858 | ||||||
Time Warner, Inc. | 530 | 45,114 | ||||||
Time, Inc. | 1,709 | 40,913 | ||||||
TJX Cos., Inc. | 681 | 45,055 | ||||||
Viacom, Inc., Class B | 510 | 38,571 | ||||||
Walt Disney Co. | 454 | 42,000 | ||||||
Whirlpool Corp. | 266 | 49,521 | ||||||
Wyndham Worldwide Corp. | 500 | 41,680 | ||||||
Wynn Resorts Ltd. | 218 | 38,937 | ||||||
|
| |||||||
Total Consumer Discretionary | 1,683,342 | |||||||
|
| |||||||
Consumer Staples (9.06%) | ||||||||
Avon Products, Inc. | 3,097 | 30,289 | ||||||
Brown-Forman Corp., Class B | 442 | 42,896 | ||||||
Campbell Soup Co. | 945 | 42,790 | ||||||
Clorox Co. | 456 | 46,339 | ||||||
Coca-Cola Co. | 981 | 43,978 | ||||||
Diageo PLC, Sponsored ADR | 339 | 41,765 | ||||||
General Mills, Inc. | 801 | 42,253 | ||||||
Kellogg Co. | 652 | 43,195 | ||||||
Kraft Foods Group, Inc. | 714 | 42,961 | ||||||
Pepsi Co., Inc. | 439 | 43,944 | ||||||
Procter & Gamble Co. | 487 | 44,039 | ||||||
Safeway, Inc. | 1,195 | 41,634 | ||||||
SUPERVALU, Inc.(a) | 4,361 | 40,819 |
Security Description | Shares | Value | ||||||
Consumer Staples (continued) | ||||||||
Unilever NV, NY Shares | 1,013 | $ | 41,168 | |||||
Walgreen Co. | 649 | 44,528 | ||||||
|
| |||||||
Total Consumer Staples | 632,598 | |||||||
|
| |||||||
Energy (0.51%) | ||||||||
Chevron Corp. | 330 | 35,927 | ||||||
|
| |||||||
Total Energy | 35,927 | |||||||
|
| |||||||
Financials (21.80%) | ||||||||
American Express Co. | 455 | 42,051 | ||||||
American International Group, Inc. | 748 | 40,990 | ||||||
Ameriprise Financial, Inc. | 321 | 42,298 | ||||||
Aon PLC | 467 | 43,193 | ||||||
Bank of America Corp. | 2,407 | 41,015 | ||||||
Bank of Montreal | 526 | 38,761 | ||||||
Bank of New York Mellon Corp. | 1,019 | 40,791 | ||||||
Barclays PLC, Sponsored ADR | 2,641 | 40,381 | ||||||
BlackRock, Inc. | 123 | 44,167 | ||||||
Capital One Financial Corp. | 490 | 40,768 | ||||||
CBRE Group, Inc., Class A(a) | 1,355 | 45,717 | ||||||
Charles Schwab Corp. | 1,332 | 37,722 | ||||||
Chubb Corp. | 442 | 45,548 | ||||||
Citigroup, Inc. | 764 | 41,233 | ||||||
Credit Suisse Group AG, Sponsored ADR | 1,477 | 39,392 | ||||||
Deutsche Bank AG | 1,146 | 37,417 | ||||||
Discover Financial Services | 625 | 40,969 | ||||||
Goldman Sachs Group, Inc. | 218 | 41,073 | ||||||
Hartford Financial Services Group, Inc. | 1,085 | 44,811 | ||||||
HSBC Holdings PLC, Sponsored ADR | 757 | 37,661 | ||||||
Huntington Bancshares, Inc. | 4,017 | 40,612 | ||||||
JPMorgan Chase & Co. | 669 | 40,247 | ||||||
KeyCorp | 2,902 | 39,177 | ||||||
Marsh & McLennan Cos., Inc. | 767 | 43,405 | ||||||
MetLife, Inc. | 734 | 40,818 | ||||||
Moody’s Corp. | 431 | 43,535 | ||||||
Morgan Stanley | 1,135 | 39,929 | ||||||
Northern Trust Corp. | 583 | 39,487 | ||||||
PNC Financial Services Group, Inc. | 466 | 40,761 | ||||||
Progressive Corp. | 1,610 | 43,856 | ||||||
Prudential Financial, Inc. | 441 | 37,476 | ||||||
Sun Life Financial, Inc. | 1,069 | 39,916 | ||||||
SunTrust Banks, Inc. | 1,022 | 40,154 | ||||||
Toronto-Dominion Bank | 805 | 40,644 | ||||||
UBS AG | 2,309 | 41,262 | ||||||
US Bancorp | 953 | 42,123 | ||||||
Wells Fargo & Co. | 770 | 41,950 | ||||||
|
| |||||||
Total Financials | 1,521,310 | |||||||
|
| |||||||
Health Care (9.97%) | ||||||||
Aetna, Inc. | 489 | 42,660 | ||||||
Biogen Idec, Inc.(a) | 124 | 38,154 | ||||||
Bristol-Myers Squibb Co. | 802 | 47,358 | ||||||
Cardinal Health, Inc. | 544 | 44,711 | ||||||
CareFusion Corp.(a) | 878 | 51,951 | ||||||
Cigna Corp. | 431 | 44,346 |
6 | November 30, 2014
Table of Contents
Workplace Equality Portfolio | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
Health Care (continued) | ||||||||
Eli Lilly & Co. | 616 | $41,962 | ||||||
GlaxoSmithKline PLC, Sponsored ADR | 867 | 40,272 | ||||||
Humana, Inc. | 308 | 42,495 | ||||||
Johnson & Johnson | 382 | 41,352 | ||||||
McKesson Corp. | 209 | 44,049 | ||||||
Medtronic, Inc. | 616 | 45,504 | ||||||
Merck & Co., Inc. | 680 | 41,072 | ||||||
Novartis AG, Sponsored ADR | 433 | 41,849 | ||||||
Pfizer, Inc. | 1,341 | 41,772 | ||||||
UnitedHealth Group, Inc. | 468 | 46,159 | ||||||
|
| |||||||
Total Health Care | 695,666 | |||||||
|
| |||||||
Industrials (8.67%) | ||||||||
3M Co. | 279 | 44,665 | ||||||
American Airlines Group, Inc. | 1,128 | 54,741 | ||||||
Boeing Co. | 319 | 42,861 | ||||||
Cummins, Inc. | 296 | 43,104 | ||||||
Danaher Corp. | 517 | 43,201 | ||||||
General Electric Co. | 1,565 | 41,457 | ||||||
Herman Miller, Inc. | 1,317 | 40,024 | ||||||
Huron Consulting Group, Inc.(a) | 662 | 45,783 | ||||||
Lockheed Martin Corp. | 228 | 43,676 | ||||||
Navigant Consulting, Inc.(a) | 2,788 | 39,032 | ||||||
Owens Corning | 1,211 | 42,191 | ||||||
Raytheon Co. | 400 | 42,680 | ||||||
Rockwell Automation, Inc. | 348 | 40,163 | ||||||
United Technologies Corp. | 378 | 41,610 | ||||||
|
| |||||||
Total Industrials | 605,188 | |||||||
|
| |||||||
Information Technology (17.24%) | ||||||||
Accenture PLC, Class A | 510 | 44,028 | ||||||
Alcatel-Lucent, Sponsored ADR | 12,353 | 43,853 | ||||||
Apple, Inc. | 403 | 47,928 | ||||||
Automatic Data Processing, Inc. | 487 | 41,707 | ||||||
Booz Allen Hamilton Holding Corp. | 1,698 | 46,203 | ||||||
Broadridge Financial Solutions, Inc. | 961 | 43,524 | ||||||
CA, Inc. | 1,425 | 44,389 | ||||||
CDK Global, Inc. | 162 | 6,167 | ||||||
Cisco Systems, Inc. | 1,626 | 44,943 | ||||||
Corning, Inc. | 2,026 | 42,587 | ||||||
eBay, Inc.(a) | 778 | 42,697 | ||||||
Electronic Arts, Inc.(a) | 1,126 | 49,464 | ||||||
EMC Corp. | 1,380 | 41,883 | ||||||
Google, Inc., Class A(a) | 69 | 37,887 | ||||||
Google, Inc., Class C(a) | 70 | 37,928 | ||||||
Hewlett-Packard Co. | 1,108 | 43,278 | ||||||
International Business Machines Corp. | 212 | 34,380 | ||||||
Intuit, Inc. | 479 | 44,964 | ||||||
Lexmark International, Inc., Class A | 889 | 38,103 | ||||||
MasterCard, Inc., Class A | 527 | 46,002 | ||||||
Microsoft Corp. | 879 | 42,025 | ||||||
Nokia OYJ, Sponsored ADR | 4,752 | 39,156 | ||||||
Oracle Corp. | 1,037 | 43,979 | ||||||
QUALCOMM, Inc. | 537 | 39,147 | ||||||
Salesforce.com, Inc.(a) | 711 | 42,568 |
Security Description | Shares | Value | ||||||
Information Technology (continued) | ||||||||
Symantec Corp. | 1,668 | $43,518 | ||||||
Tech Data Corp.(a) | 605 | 37,710 | ||||||
Xerox Corp. | 2,955 | 41,252 | ||||||
Yahoo!, Inc.(a) | 1,009 | 52,205 | ||||||
|
| |||||||
Total Information Technology | 1,203,475 | |||||||
|
| |||||||
Materials (2.90%) | ||||||||
Alcoa, Inc. | 2,532 | 43,778 | ||||||
Dow Chemical Co. | 765 | 37,233 | ||||||
Ecolab, Inc. | 349 | 38,024 | ||||||
EI du Pont de Nemours & Co. | 576 | 41,126 | ||||||
Monsanto Co. | 355 | 42,568 | ||||||
|
| |||||||
Total Materials | 202,729 | |||||||
|
| |||||||
Telecommunication Services (2.19%) | ||||||||
AT&T, Inc. | 1,166 | 41,253 | ||||||
Sprint Corp.(a) | 5,987 | 30,653 | ||||||
T-Mobile US, Inc.(a) | 1,345 | 39,261 | ||||||
Verizon Communications, Inc. | 825 | 41,737 | ||||||
|
| |||||||
Total Telecommunication Services | 152,904 | |||||||
|
| |||||||
Utilities (3.20%) | ||||||||
Edison International | 711 | 45,191 | ||||||
Exelon Corp. | 1,214 | 43,910 | ||||||
PG&E Corp. | 893 | 45,097 | ||||||
Portland General Electric Co. | 1,242 | 45,793 | ||||||
Sempra Energy | 389 | 43,463 | ||||||
|
| |||||||
Total Utilities | 223,454 | |||||||
|
| |||||||
TOTAL COMMON STOCKS (Cost $6,433,177) | 6,956,593 | |||||||
|
| |||||||
TOTAL INVESTMENTS (99.67%) (Cost $6,433,177) | $ | 6,956,593 | ||||||
NET OTHER ASSETS AND LIABILITIES (0.33%) |
| 22,716 | ||||||
|
| |||||||
NET ASSETS (100.00%) | $ | 6,979,309 | ||||||
|
|
(a) | Non-income producing security. |
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. | |
Ltd. - | Limited. | |
NV - | Naamloze Vennootschap is the Dutch term for a public limited liability corporation. | |
OYJ - | Osakeyhtio is the Finnish equivalent of a public limited company. | |
PLC - | Public Limited Company. |
See Notes to Financial Statements.
7 | November 30, 2014
Table of Contents
Statement of Assets and Liabilities | November 30, 2014 |
ASSETS: | ||||
Investments, at value | $ | 6,956,593 | ||
Cash | 13,528 | |||
Foreign tax reclaims | 214 | |||
Dividends receivable | 13,181 | |||
| ||||
Total Assets | 6,983,516 | |||
| ||||
LIABILITIES: | ||||
Payable to adviser | 4,207 | |||
| ||||
Total Liabilities | 4,207 | |||
| ||||
NET ASSETS | $ | 6,979,309 | ||
| ||||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 6,385,484 | ||
Accumulated net investment income | 61,988 | |||
Accumulated net realized gain on investments and foreign currency transactions | 8,421 | |||
Net unrealized appreciation on investments | 523,416 | |||
| ||||
NET ASSETS | $ | 6,979,309 | ||
| ||||
INVESTMENTS, AT COST | $ | 6,433,177 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 6,979,309 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 250,002 | |||
Net Asset Value, offering and redemption price per share | $ | 27.92 |
See Notes to Financial Statements. | ||
8 | November 30, 2014 |
Table of Contents
Statement of Operations | For the Period February 25, 2014 (Commencement of Operations) to November 30, 2014 |
INVESTMENT INCOME: | ||||
Dividends(a) | $ | 94,733 | ||
| ||||
Total Investment Income | 94,733 | |||
| ||||
EXPENSES: | ||||
Investment adviser fees | 32,745 | |||
| ||||
Total Expense | 32,745 | |||
| ||||
NET INVESTMENT INCOME | 61,988 | |||
| ||||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized gain on investments | 113,674 | |||
| ||||
Net change in unrealized appreciation on investments | 523,416 | |||
| ||||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 637,090 | |||
| ||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 699,078 | ||
|
(a) | Net of foreign tax withholding $2,106. |
See Notes to Financial Statements. | ||
9 | November 30, 2014 |
Table of Contents
Statement of Changes in Net Assets |
For the Period February 25, 2014 (Commencement of Operations) to November 30, 2014 | ||||
OPERATIONS: | ||||
Net investment income | $ | 61,988 | ||
Net realized gain on investments and foreign currency transactions | 113,674 | |||
Net change in unrealized appreciation on investments | 523,416 | |||
Net increase in net assets resulting from operations | 699,078 | |||
CAPITAL SHARE TRANSACTIONS: | ||||
Proceeds from sale of shares | 7,626,269 | |||
Cost of shares redeemed | (1,346,038 | ) | ||
Net increase from capital share transactions | 6,280,231 | |||
Net increase in net assets | 6,979,309 | |||
NET ASSETS: | ||||
Beginning of period | – | |||
End of period * | $ | 6,979,309 | ||
*Including accumulated net investment income of: | $ | 61,988 | ||
OTHER INFORMATION: | ||||
CAPITAL SHARE TRANSACTIONS: | ||||
Beginning shares | – | |||
Shares sold | 300,002 | |||
Shares redeemed | (50,000 | ) | ||
Shares outstanding, end of period | 250,002 | |||
See Notes to Financial Statements. | ||
10 | November 30, 2014 |
Table of Contents
Financial Highlights | For a Share Outstanding Throughout the Period Presented |
For the Period February 25, 2014 (Commencement of Operations) to November 30, 2014 | ||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 25.00 | ||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||
Net investment income (a) | 0.28 | |||
Net realized and unrealized gain | 2.64 | |||
Total from investment operations | 2.92 | |||
Net increase in net asset value | 2.92 | |||
NET ASSET VALUE, END OF PERIOD | $ | 27.92 | ||
TOTAL RETURN(b) | 11.68% | |||
RATIOS/SUPPLEMENTAL DATA: | ||||
Net assets, end of period (000s) | $ | 6,979 | ||
Ratio of expenses to average net assets | 0.75% | (c) | ||
Ratio of net investment income to average net assets | 1.42% | (c) | ||
Portfolio turnover rate(d) | 8% |
(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 for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions. |
See Notes to Financial Statements. | ||
11 | November 30, 2014 |
Table of Contents
Notes to Financial Statements | November 30, 2014 |
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, 2014, the Trust consisted of sixteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains solely to the Workplace Equality Portfolio (the “Fund”). The investment objective of the Fund is to seek investment results that correspond generally, before fees and expenses, to the price and yield of the Workplace Equality IndexTM. The Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund. The Fund commenced operations on February 25, 2014.
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.
Pursuant to 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.
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. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
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 NASDAQ Stock Market LLC (“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.
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Notes to Financial Statements | November 30, 2014 |
B. 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 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, 2014:
Investments in Securities at Value | Level 1 -Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 -Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks* | $ | 6,956,593 | $ | – | $ | – | $ | 6,956,593 | ||||||||
TOTAL | $ | 6,956,593 | $ | – | $ | – | $ | 6,956,593 | ||||||||
* 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, 2014, 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.
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 and capital gains distributions, if any, are 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 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, 2014 |
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 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, 2014, 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:
Fund | Paid-in Capital | Accumulated Net Realized Loss on Investments | ||||||
Workplace Equality Portfolio Fund | $ | 105,253 | $ | (105,253 | ) |
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, 2014, the components of distributable earnings on a tax basis were as follows:
Workplace Equality Portfolio | ||||
Undistributed net investment income | $ | 93,267 | ||
Net unrealized appreciation on investments | 500,558 | |||
Total | $ | 593,825 | ||
As of November 30, 2014, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Workplace Equality Portfolio Fund | ||||
Gross appreciation (excess of value over tax cost) | $ | 663,623 | ||
Gross depreciation (excess of tax cost over value) | (163,065 | ) | ||
Net unrealized appreciation (depreciation) | $ | 500,558 | ||
Cost of investments for income tax purposes | $ | 6,456,035 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales.
F. 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, 2014, 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, but may extend to four years in certain jurisdictions. Being that the Fund commenced operations on February 25, 2014; no tax returns have been filed as of the date of this report.
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Notes to Financial Statements | November 30, 2014 |
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “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 Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.75% of the Fund’s average daily net assets. From time to time, the Adviser may waive all or a portion of its fee.
Out of the unitary management fee, the Adviser pays substantially all expenses of the Fund, including the licensing fees to the Index provider, the cost of transfer agency, custody, fund administration, legal, audit, independent 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. The Adviser’s unitary management fee is designed to pay substantially all the Fund’s expenses and to compensate the Adviser for providing services for the Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee or $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings.
4. PURCHASES AND SALES OF SECURITIES
For the period ended November 30, 2014, the cost of purchases and proceeds from sales of investment securities, excluding in-kind transactions and short-term investments, were as follows:
Fund | Purchases | Sales | ||||||
Workplace Equality Portfolio Fund | $ | 469,448 | $ | 1,018,641 |
For the period ended November 30, 2014, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
Workplace Equality Portfolio Fund | $ | 7,613,102 | $ | 744,364 |
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.
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Additional Information | November 30, 2014 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
The Trust is required to disclose annually each Fund’s complete proxy voting record on Form N-PX covering the period July 1 through June 30 and file it with the SEC no later than August 31. Form N-PX for each Fund also will be available at no charge upon request by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203. Each Fund’s Form N-PX also is available on the SEC’s website at www.sec.gov.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of each Fund’s portfolio holdings with the SEC on Form N-Q. The Trust will also disclose a complete schedule of each Fund’s portfolio holdings with the SEC on Form N-CSR after its second and fourth quarters. Form N-Q and Form N-CSR for each Fund will be available on the SEC’s website at http://www.sec.gov. Each Fund’s Form N-Q and Form N-CSR may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-202-551-5850. Each Fund’s Form N-Q and Form N-CSR will be available without charge, upon request, by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
LICENSING AGREEMENT
Denver Investments has entered into an index licensing agreement with ALPS Advisors Inc. (the “Adviser”) to allow the Adviser’s use of the Workplace Equality Index™, the underlying index of the Workplace Equality Portfolio (the “Fund”). The following disclosure relates to such licensing agreement:
Denver Investments is the designer of the construction and methodology for the Index. “Denver Investments” and “Workplace Equality Index™” are service marks or trademarks of Denver Investments. Denver Investments acts as brand licensor for the Index. Denver Investments is not responsible for the descriptions of the Index or the Fund that appear herein. Denver Investments is not affiliated with the Trust, the Adviser or the Distributor.
The Fund is not sponsored, endorsed or promoted by Denver Investments. Denver Investments makes no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of investing in securities or commodities generally or in the Fund particularly and does not guarantee the quality, accuracy or completeness of the Index or any Index data included herein or derived there from and assume no liability in connection with their use. The Index is determined and composed without regard to the Adviser or the Fund. Denver Investments has no obligation to take the needs of the Adviser, the Fund or the shareholders of the Fund into consideration in connection with the foregoing. Denver Investments is not responsible for and has not participated in the determination of pricing or the timing of the issuance or sale of the Shares of the Fund or in the determination or calculation of the NAV of the Fund. Denver Investments has no obligation or liability in connection with the administration or trading of the Fund.
Denver Investments does not guarantee the accuracy and/or completeness of the Index or any data included therein, and Denver Investments shall have no liability for any errors, omissions, or interruptions therein. Denver Investments makes no warranty, express or implied, as to results to be obtained by the Adviser, the Fund, Fund shareholders or any other person or entity from the use of the Index or any data included therein. Denver Investments makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Index or any data included therein. Without limiting any of the foregoing, in no event shall Denver Investments have any liability for any special, punitive, indirect, or consequential damages (including lost profits) arising out of matters relating to the use of the Index, even if notified of the possibility of such damages.
The Adviser does not guarantee the accuracy and/or the completeness of the Index or any data included therein, and the Adviser shall have no liability for any errors, omissions or interruptions therein. The Adviser makes no warranty, express or implied, as to results to be obtained by the Fund, owners of the Shares of the Fund or any other person or entity from the use of the Index or any data included therein. The Adviser makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Index or any data included therein. Without limiting any of the foregoing, in no event shall the Adviser have any liability for any special, punitive, direct, indirect, or consequential damages (including lost profits) arising out of matters relating to the use of the Index, even if notified of the possibility of such damages.
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Trustees & Officers | November 30, 2014 (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 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. | 45 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder and Chief Financial Officer of Green Alpha Advisors, LLC. Mr. Deems is Co-Portfolio Manager of the Shelton Green Alpha Fund. 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 1998 to June 2007. | 45 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 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 Board member, 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, Prosci Inc. (private business services), 2013 –present; Board Member, Citywide Banks (Colorado community bank) 2014 –present; Director, National Western Stock Show (not-for- profit organization); Director, Biennial of the Americas (not-for-profit organization). | 23 | 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, 2014 (Unaudited) |
INTERESTED TRUSTEE
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 | |||||
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”), and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”) and ALPS Distributors, Inc. (“ADI”). 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 (9 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, 2014 (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 H. Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars is Vice President and 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. 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, Broadview Funds Trust, BLDRS Index Funds and Powershares QQQ Trust. | |||
William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer of AAI (since 2006); President and Chief Executive Officer 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 ALPS Advisors, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson is also Secretary of the Principal Real Estate Income Fund since 2014, 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. Because of her position with ALPS, Ms. Nelson is deemed an affiliate of the Trust as defined under the 1940 Act. | |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Assistant Vice-Principal and Paralegal Manager of ALPS. 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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CONTENTS
1 | ||||
5 | ||||
6 | ||||
Financial Statements | ||||
7 | ||||
11 | ||||
12 | ||||
13 | ||||
14 | ||||
16 | ||||
23 | ||||
Board Considerations Regarding Approval of Investment Advisory Agreement | 24 | |||
26 |
www.alpsfunds.com
Table of Contents
Performance Overview | November 30, 2014 (Unaudited) |
Investment Objective
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 index called the Cohen & Steers Global Realty Majors Index (the “Underlying Index”). The Fund will normally invest at least 90% of its total assets in common stocks and other equity securities (which may include American Depositary Receipts (“ADRs”), American Depositary Shares (“ADSs”) and Global Depositary Receipts (“GDRs”) that comprise the Underlying Index. The Shares of the Fund are listed and trade on the NYSE Arca under the ticker symbol “GRI”.
The Underlying Index consists of the largest and most liquid securities within the global real estate universe that Cohen & Steers Capital Management, Inc. (“Cohen & Steers” or the “Index Provider”) believes are likely to lead the global securitization of real estate. The Underlying Index is free float and modified market-capitalization weighted, with a limit of 4.0% on any security’s weighting. Underlying Index constituents must have a free float adjusted market capitalization of $750 million or greater for initial inclusion in the Underlying Index. Cohen & Steers considers country weights relative to each country’s GDP share representing the real estate securities universe and share of the private market for real estate, with up to 10% being allocated to securities of emerging markets. The Underlying Index is rebalanced quarterly.
Performance Overview
Global real estate securities had strong returns in 2014, widely outperforming broad equity markets against a backdrop of declining bond yields and improving real estate fundamentals. The U.S. economy continued to gain momentum, allowing the Federal Reserve to wind down its massive asset-purchase program and begin to contemplate a return to higher interest rates. By contrast, most other parts of the world continued to increase monetary stimulus amid slowing economic growth, low inflation and heightened geopolitical risks. Plummeting oil prices late in the year added to macroeconomic uncertainty, but also helped consumers through lower gas prices.
Despite increasing economic challenges in Europe and Asia, operating conditions for listed real estate companies remained largely favorable. Strengthening tenant demand, modest levels of new supply and historically low financing costs continued to drive cash-flow growth. Companies also tapped low-cost equity capital to pursue accretive acquisitions, including several landmark transactions in Europe. At the same time, falling bond yields increased the appeal of assets offering attractive income rates.
U.S. REITs led the market, as improving economic growth resulted in stronger fundamentals across all property types, while a decline in Treasury yields from already low levels led to better investor sentiment toward higher-yielding equities. Apartment REITs did particularly well, defying expectations of a slowdown in cash-flow growth amid strong job gains and relatively modest new supply. The regional mall sector also excelled amid increased mergers and acquisitions.
The U.K. continued to see meaningful improvement in real estate fundamentals, with office, storage, retail and logistics companies seeing the strongest rent growth. U.K. equities were briefly upended midway through the year after comments from the Bank of England indicating that interest-rate hikes could come later in the year. However, those fears dissipated as officials backtracked their statements amid the sizeable slack in the labor market and deteriorating economic conditions from its European trading partners.
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Performance Overview | November 30, 2014 (Unaudited) |
On the continent, expectations of quantitative easing from the European Central Bank (ECB) drove sovereign bond yields lower across the region, which was particularly beneficial to real estate companies. German residential owners were viewed favorably in the context of declining bond yields given their stable rent growth and strong fundamentals. France struggled amid tepid real estate demand in a challenging economic climate. In July, Klépierre announced a game-changing acquisition of Corio, forming a combined entity nearly the size of Unibail-Rodamco, with total assets worth €21 billion (US $28 billion) at the time of the announcement.
Australia’s stable property markets were seen as a safe haven compared with the broader Australian stock market amid economic pressure from lower mining commodity prices. Westfield had sizeable gains, completing a restructuring of its mall interests with Westfield Retail Trust (renamed Scentre Group). Now focused solely on U.S. and U.K. malls, Westfield’s offshore assets were viewed favorably against a backdrop of a depreciating Australian dollar and increased acquisitions among U.S. mall peers.
Japan experienced broad declines, as a higher consumption tax undercut the government’s efforts to stimulate growth. The Bank of Japan expanded its quantitative-easing program in October, driving bond yields sharply lower and deflating the yen. While J-REITs performed well in this environment, developers came under pressure amid negative sentiment arising from the lack of tangible economic progress.
Hong Kong began to see a recovery in office demand, whereas retail properties faced headwinds from slowing China growth, Chinese anti-corruption measures and widespread student protests. Singapore real estate companies generally advanced, although Global Logistics Properties retreated amid concerns about the company’s capital allocation and business strategy.
Performance (as of November 30, 2014)
1 Year | 3 Year | 5 Year | Since Inception^ | |||||
Cohen & Steers Global Realty Majors ETF - NAV | 14.90% | 14.74% | 12.20% | 2.27% | ||||
Cohen & Steers Global Realty Majors ETF - Market Price* | 14.52% | 14.05% | 12.21% | 2.24% | ||||
Cohen & Steers Global Realty Majors Portfolio Index | 15.78% | 15.60% | 13.03% | 3.12% | ||||
FTSE EPRA/ NAREIT Developed Real Estate Index | 15.54% | 16.07% | 12.73% | 3.30% | ||||
S&P 500® Total Return Index | 16.86% | 20.93% | 15.96% | 8.57% |
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.
2 | Annual Report |
Table of Contents
Cohen & Steers Global Realty Majors ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
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 May 7, 2008. |
* | 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.
Top 10 Holdings* (as of November 30, 2014)
Simon Property Group, Inc. | 3.95% | |||
Mitsubishi Estate Co., Ltd. | 3.86% | |||
Mitsui Fudosan Co., Ltd. | 3.67% | |||
Public Storage | 3.48% | |||
Unibail-Rodamco SE | 3.33% | |||
Equity Residential | 3.28% |
Health Care REIT, Inc. | 3.05% | |||
Sun Hung Kai Properties, Ltd. | 3.01% | |||
ProLogis, Inc. | 2.70% | |||
AvalonBay Communities, Inc. | 2.70% | |||
Total % of Top 10 Holdings | 33.03% |
Country Allocation* (as of November 30, 2014)
United States | 50.11% | |||
Japan | 12.27% | |||
Hong Kong | 8.61% | |||
Australia | 7.85% | |||
United Kingdom | 6.77% | |||
France | 4.53% | |||
Singapore | 3.07% | |||
Germany | 1.82% |
Canada | 1.56% | |||
China | 1.54% | |||
Netherlands | 0.65% | |||
Switzerland | 0.44% | |||
Brazil | 0.42% | |||
Sweden | 0.36% | |||
Total | 100.00% |
* | % of Total Investments. |
Holdings are subject to change.
November 30, 2014 | 3 |
Table of Contents
Cohen & Steers Global Realty Majors ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
Growth of $10,000 (as of November 30, 2014)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
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 |
Table of Contents
Disclosure of Fund Expenses | November 30, 2014 (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, 2014.
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 6/1/14 | Ending Account 11/30/14 | Expense Ratio(a) | Expenses Paid During Period 6/1/14 - 11/30/14(b) | |||||
Cohen & Steers Global Realty Majors ETF | ||||||||
Actual | $ 1,000.00 | $ 1,042.20 | 0.55% | $ 2.82 | ||||
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. |
November 30, 2014 |
5 |
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, 2014, and the related statement of operations for the year then ended, the statements of changes in net assets statements 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, 2014, 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 Cohen & Steers Global Realty Majors ETF of the ALPS ETF Trust as of November 30, 2014, 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 29, 2015
6 | Annual Report |
Table of Contents
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.71%) | ||||||||
Australia (7.83%) | ||||||||
Dexus Property Group | 112,095 | $ | 678,161 | |||||
Goodman Group | 190,443 | 883,158 | ||||||
The GPT Group | 209,849 | 739,238 | ||||||
Mirvac Group | 452,128 | 675,174 | ||||||
Scentre Group, Ltd.(a) | 659,206 | 1,946,381 | ||||||
Stockland | 285,450 | 1,000,701 | ||||||
Westfield Corp. | 236,637 | 1,669,223 | ||||||
|
| |||||||
Total Australia | 7,592,036 | |||||||
|
| |||||||
Brazil (0.42%) | ||||||||
BR Malls Participacoes SA | 57,000 | 409,041 | ||||||
|
| |||||||
Canada (1.56%) | ||||||||
Boardwalk Real Estate Investment Trust | 4,926 | 282,809 | ||||||
Dream Office Real Estate Investment Trust | 13,237 | 312,085 | ||||||
RioCan Real Estate Investment Trust | 38,297 | 914,305 | ||||||
|
| |||||||
Total Canada | 1,509,199 | |||||||
|
| |||||||
China (1.53%) | ||||||||
China Overseas Land & Investment, Ltd. | 495,000 | 1,487,186 | ||||||
|
| |||||||
France (4.53%) | ||||||||
Gecina SA | 4,495 | 607,840 | ||||||
Klepierre | 12,445 | 558,486 | ||||||
Unibail-Rodamco SE | 12,191 | 3,221,283 | ||||||
|
| |||||||
Total France | 4,387,609 | |||||||
|
| |||||||
Germany (1.82%) | ||||||||
Deutsche Annington Immobilien SE | 20,600 | 663,306 | ||||||
Deutsche EuroShop AG | 5,808 | 257,211 | ||||||
Deutsche Wohnen AG | 35,158 | 843,965 | ||||||
|
| |||||||
Total Germany | 1,764,482 | |||||||
|
|
See Notes to Financial Statements. | ||
November 30, 2014 | 7 |
Table of Contents
Cohen & Steers Global Realty Majors ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
Hong Kong (8.59%) | ||||||||
Hang Lung Properties, Ltd. | 283,000 | $ | 850,250 | |||||
Hongkong Land Holdings, Ltd. | 145,700 | 1,008,244 | ||||||
The Link REIT | 286,164 | 1,822,830 | ||||||
Sun Hung Kai Properties, Ltd. | 199,000 | 2,909,848 | ||||||
Swire Properties, Ltd. | 132,200 | 410,821 | ||||||
The Wharf Holdings, Ltd. | 183,700 | 1,325,298 | ||||||
|
| |||||||
Total Hong Kong | 8,327,291 | |||||||
|
| |||||||
Japan (12.24%) | ||||||||
Japan Real Estate Investment Corp. | 155 | 763,804 | ||||||
Japan Retail Fund Investment Corp. | 294 | 611,700 | ||||||
Mitsubishi Estate Co., Ltd. | 166,000 | 3,735,577 | ||||||
Mitsui Fudosan Co., Ltd. | 123,000 | 3,554,323 | ||||||
Nippon Building Fund, Inc. | 176 | 886,560 | ||||||
Nomura Real Estate Holdings, Inc. | 15,300 | 280,959 | ||||||
Sumitomo Realty & Development Co., Ltd. | 59,000 | 2,036,908 | ||||||
|
| |||||||
Total Japan | 11,869,831 | |||||||
|
| |||||||
Netherlands (0.65%) | ||||||||
Corio N.V. | 12,483 | 631,515 | ||||||
|
| |||||||
Singapore (3.07%) | ||||||||
Ascendas Real Estate Investment Trust | 253,066 | 454,069 | ||||||
CapitaLand, Ltd. | 321,000 | 817,176 | ||||||
CapitaMall Trust | 325,347 | 493,952 | ||||||
City Developments, Ltd. | 57,000 | 439,689 | ||||||
Global Logistic Properties, Ltd. | 383,000 | 769,436 | ||||||
|
| |||||||
Total Singapore | 2,974,322 | |||||||
|
| |||||||
Sweden (0.36%) | ||||||||
Castellum AB | 21,312 | 344,980 | ||||||
|
| |||||||
Switzerland (0.44%) | ||||||||
PSP Swiss Property AG | 4,889 | 425,273 | ||||||
|
|
See Notes to Financial Statements. | ||
8 | Annual Report |
Table of Contents
Cohen & Steers Global Realty Majors ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
United Kingdom (6.76%) | ||||||||
The British Land Co. Plc | 126,718 | $ | 1,520,141 | |||||
Derwent London Plc | 12,598 | 598,021 | ||||||
Great Portland Estates Plc | 43,018 | 482,794 | ||||||
Hammerson Plc | 97,098 | 944,893 | ||||||
Intu Properties Plc | 116,900 | 651,697 | ||||||
Land Securities Group Plc | 96,618 | 1,792,911 | ||||||
Segro Plc | 91,914 | 563,228 | ||||||
|
| |||||||
Total United Kingdom | 6,553,685 | |||||||
|
| |||||||
United States (49.91%) | ||||||||
Alexandria Real Estate Equities, Inc. | 8,959 | 769,757 | ||||||
American Campus Communities, Inc. | 12,943 | 517,720 | ||||||
AvalonBay Communities, Inc. | 16,263 | 2,614,928 | ||||||
Boston Properties, Inc. | 18,980 | 2,460,567 | ||||||
Camden Property Trust | 10,574 | 810,814 | ||||||
Digital Realty Trust, Inc. | 16,822 | 1,182,082 | ||||||
Douglas Emmett, Inc. | 16,711 | 465,234 | ||||||
Equity Residential | 44,836 | 3,176,182 | ||||||
Essex Property Trust, Inc. | 7,841 | 1,587,097 | ||||||
Federal Realty Investment Trust | 8,389 | 1,112,885 | ||||||
General Growth Properties, Inc. | 77,735 | 2,080,189 | ||||||
HCP, Inc. | 56,795 | 2,544,416 | ||||||
Health Care REIT, Inc. | 40,116 | 2,954,945 | ||||||
Highwoods Properties, Inc. | 10,988 | 474,242 | ||||||
Host Hotels & Resorts, Inc. | 93,755 | 2,178,866 | ||||||
Kilroy Realty Corp. | 10,177 | 698,956 | ||||||
Kimco Realty Corp. | 50,858 | 1,294,336 | ||||||
The Macerich Co. | 17,403 | 1,376,229 | ||||||
ProLogis, Inc. | 61,862 | 2,615,525 | ||||||
Public Storage | 17,926 | 3,363,456 | ||||||
Realty Income Corp. | 27,554 | 1,280,159 | ||||||
Regency Centers Corp. | 11,538 | 709,356 | ||||||
Simon Property Group, Inc. | 21,149 | 3,823,739 | ||||||
SL Green Realty Corp. | 11,863 | 1,377,769 | ||||||
Tanger Factory Outlet Centers, Inc. | 11,875 | 434,388 | ||||||
UDR, Inc. | 31,463 | 968,431 | ||||||
Ventas, Inc. | 36,424 | 2,606,137 | ||||||
Vornado Realty Trust | 21,603 | 2,410,031 | ||||||
Weingarten Realty Investors | 13,838 | 503,703 | ||||||
|
| |||||||
Total United States | 48,392,139 | |||||||
|
| |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $81,454,297) | 96,668,589 | |||||||
|
|
See Notes to Financial Statements. | ||
November 30, 2014 | 9 |
Table of Contents
Cohen & Steers Global Realty Majors ETF | ||
Schedule of Investments | November 30, 2014 |
7 Day Yield | Shares | Value | ||||||||
SHORT TERM INVESTMENTS (0.09%) | ||||||||||
Dreyfus Treasury Prime Cash | ||||||||||
Management, Institutional Class | 0.000%(b) | 87,315 | $ | 87,315 | ||||||
|
| |||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||
(Cost $87,315) | 87,315 | |||||||||
|
| |||||||||
TOTAL INVESTMENTS (99.80%) | ||||||||||
(Cost $81,541,612) | $ | 96,755,904 | ||||||||
NET OTHER ASSETS AND LIABILITIES (0.20%) | 196,956 | |||||||||
|
| |||||||||
NET ASSETS (100.00%) | $ | 96,952,860 | ||||||||
|
|
(a) | Non-income producing security. |
(b) | Less than 0.0005% |
Common Abbreviations:
AB - | Aktiebolag is the Swedish equivalent of the term corporation. | |
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 Co. | |
REIT - | Real Estate Investment Trust. | |
SA - | Generally designated corporations in various countries, mostly those employing the civil law. | |
SE - | SE Regulation is a European Company which can operate on a Europe-wide basis and be governed by Community law directly applicable in all Member States. |
See Notes to Financial Statements.
| ||
10 | Annual Report |
Table of Contents
Statement of Assets and Liabilities | November 30, 2014 |
ASSETS: | ||||
Investments, at value | $ | 96,755,904 | ||
Foreign currency, at value (Cost $104,083) | 103,410 | |||
Foreign tax reclaims | 36,966 | |||
Dividends receivable | 99,618 | |||
Total Assets | 96,995,898 | |||
LIABILITIES: | ||||
Payable for investments purchased | 61 | |||
Payable to adviser | 42,977 | |||
Total Liabilities | 43,038 | |||
NET ASSETS | $ | 96,952,860 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 86,779,746 | ||
Accumulated net investment loss | (1,550,915) | |||
Accumulated net realized loss on investments and foreign currency transactions | (3,484,626) | |||
Net unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | 15,208,655 | |||
NET ASSETS | $ | 96,952,860 | ||
INVESTMENTS, AT COST | $ | 81,541,612 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 96,952,860 | ||
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 | $ | 44.07 |
See Notes to Financial Statements. | ||
November 30, 2014 | 11 |
Table of Contents
Statement of Operations | For the Year Ended November 30, 2014 |
INVESTMENT INCOME: | ||||
Dividends(a) | $ | 2,800,151 | ||
Total Investment Income | 2,800,151 | |||
EXPENSES: | ||||
Investment adviser fees | 557,161 | |||
Total Expenses | 557,161 | |||
NET INVESTMENT INCOME | 2,242,990 | |||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized gain on investments | 6,265,100 | |||
Net realized loss on foreign currency transactions | (11,787) | |||
Net change in unrealized appreciation on investments | 5,324,528 | |||
Net change in unrealized depreciation on translation of assets and liabilities denominated in foreign currencies | (4,091) | |||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 11,573,750 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 13,816,740 | ||
(a) | Net of foreign tax withholding $145,798. |
See Notes to Financial Statements.
| ||
12 | Annual Report |
Table of Contents
Statements of Changes in Net Assets |
For the Year Ended November 30, | For the Year Ended November 30, | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 2,242,990 | $ | 2,325,047 | ||||
Net realized gain/(loss) on investments and foreign currency transactions | 6,253,313 | (53,819) | ||||||
Net change in unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | 5,320,437 | 340,701 | ||||||
Net increase in net assets resulting from operations | 13,816,740 | 2,611,929 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (2,519,676) | (4,134,510) | ||||||
From tax return of capital | – | (517,416) | ||||||
Total distributions | (2,519,676) | (4,651,926) | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | – | 45,371,748 | ||||||
Cost of shares redeemed | (22,480,811) | (6,453,407) | ||||||
Net increase/(decrease) from share transactions | (22,480,811) | 38,918,341 | ||||||
Net increase/(decrease) in net assets | (11,183,747) | 36,878,344 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 108,136,607 | 71,258,263 | ||||||
End of year * | $ | 96,952,860 | $ | 108,136,607 | ||||
*Including accumulated net investment loss of: | $ | (1,550,915) | $ | (2,360,139) | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 2,750,000 | 1,800,000 | ||||||
Shares sold | – | 1,100,000 | ||||||
Shares redeemed | (550,000) | (150,000) | ||||||
Shares outstanding, end of year | 2,200,000 | 2,750,000 | ||||||
See Notes to Financial Statements.
| ||
November 30, 2014 | 13 |
Table of Contents
Financial Highlights |
| For the Year Ended November 30, 2014 | |||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 39.32 | ||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||
Net investment income | 0.92 | (b) | ||
Net realized and unrealized gain/(loss) | 4.85 | |||
Total from investment operations | 5.77 | |||
DISTRIBUTIONS: | ||||
From net investment income | (1.02 | ) | ||
From tax return of capital | – | |||
Total distributions | (1.02 | ) | ||
NET INCREASE/(DECREASE) IN NET ASSET VALUE | 4.75 | |||
NET ASSET VALUE, END OF PERIOD | $ | 44.07 | ||
TOTAL RETURN(c) | 14.90 | % | ||
RATIOS/SUPPLEMENTAL DATA: | ||||
Net assets, end of period (000s) | $ | 96,953 | ||
Ratio of expenses to average net assets | 0.55 | % | ||
Ratio of net investment income to average net assets | 2.21 | % | ||
Portfolio turnover rate(e) | | 11 | % |
(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. |
See Notes to Financial Statements.
| ||
14 | Annual Report |
Table of Contents
For a Share Outstanding Throughout the Periods Presented |
For the Year Ended 2013 | For the Year Ended November 30, 2012 | For the Period November 30, | For the Year Ended December 31, 2010 | For the Year Ended December 31, 2009 | ||||||||||||||
$ | 39.59 | $ | 32.53 | $ | 35.52 | $ | 31.35 | $ | 25.06 | |||||||||
0.94 | (b) | 0.91 | (b) | 0.97 | (b) | 1.43 | (b) | 0.98 | ||||||||||
1.25 | 6.97 | (2.87 | ) | 4.68 | 7.00 | |||||||||||||
2.19 | 7.88 | (1.90 | ) | 6.11 | 7.98 | |||||||||||||
(2.27) | (0.82 | ) | (1.09 | ) | (1.94 | ) | (1.69 | ) | ||||||||||
(0.19) | – | – | – | – | ||||||||||||||
(2.46) | (0.82 | ) | (1.09 | ) | (1.94 | ) | (1.69 | ) | ||||||||||
(0.27) | 7.06 | (2.99 | ) | 4.17 | 6.29 | |||||||||||||
$ | 39.32 | $ | 39.59 | $ | 32.53 | $ | 35.52 | $ | 31.35 | |||||||||
5.60 | % | 24.50 | % | (5.53 | )% | 19.91 | % | 32.51 | % | |||||||||
$ | 108,137 | $ | 71,258 | $ | 50,418 | $ | 42,626 | $ | 12,603 | |||||||||
0.55 | % | 0.55 | % | 0.55 | %(d) | 0.55 | % | 0.55 | % | |||||||||
2.31 | % | 2.47 | % | 3.02 | %(d) | 4.33 | % | 3.24 | % | |||||||||
10 | % | 4 | % | 15 | % | 14 | % | 18 | % |
November 30, 2014 | 15 |
Table of Contents
Notes to Financial Statements | November 30, 2014 |
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, 2014, the Trust consists of sixteen 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 investment advisor uses a “passive” or index approach to try to achieve the Fund’s investment objective. The Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
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.
Pursuant to 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.
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. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
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.
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Portfolio securities listed on any exchange other than the NASDAQ Stock Market LLC (“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. 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
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Notes to Financial Statements | November 30, 2014 |
day and are generally categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their 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 November 30, 2014:
Investments in Securities at Value* | Level 1- Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3- Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 96,668,589 | $ | – | $ | – | $ | 96,668,589 | ||||||||
Short Term Investments | 87,315 | – | – | 87,315 | ||||||||||||
TOTAL | $ | 96,755,904 | $ | – | $ | – | $ | 96,755,904 | ||||||||
* | For a detailed geographical breakdown, see the accompanying Schedule of Investments. |
The Fund recognizes transfers between levels as of the end of the period. For the year ended November 30, 2014, 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.
C. 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 revaluation 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, 2014 |
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 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.
E. 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 and capital gains distributions, if any, are recorded on the ex-dividend date, net of any foreign taxes withheld. Interest income, if any, is recorded on the accrual basis.
F. 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.
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 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, 2014, 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:
Fund | Paid-in Capital | Accumulated Net Investment Income | Accumulated Net Realized Loss on Investments | |||||||||
Cohen & Steers Global Realty Majors ETF | $ | 4,962,032 | $ | 1,085,910 | $ | (6,047,942 | ) |
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
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Notes to Financial Statements | November 30, 2014 |
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, 2014, the Fund had available for tax purposes unused pre-enactment capital loss carryforwards as follows:
Expiring in 2016 | Expiring in 2017 | Expiring in 2018 | ||||||||||
Cohen & Steers Global Realty Majors ETF | $ | 176,692 | $ | 809,982 | $ | 187,815 |
At November 30, 2014, the Fund had available for tax purposes unused post-enactment capital loss carryforwards as follows:
Fund | Short-Term | Long-Term | ||||||
Cohen & Steers Global Realty Majors ETF | $ | 722,292 | $ | 745,945 |
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 | Return of Capital | Total | ||||||||||
November 30, 2014 | ||||||||||||
Cohen & Steers Global Realty Majors ETF | $ | 2,519,676 | $ | – | $ | 2,519,676 | ||||||
November 30, 2013 | ||||||||||||
Cohen & Steers Global Realty Majors ETF | $ | 4,134,510 | $ | 517,416 | $ | 4,651,926 |
As of November 30, 2014, the components of distributable earnings on a tax basis were as follows:
Undistributed net investment income | $ | 444,788 | ||
Accumulated net realized loss on investments | (2,642,726 | ) | ||
Other accumulated losses | (4 | ) | ||
Net unrealized appreciation on investments | 12,371,056 | |||
Total | $ | 10,173,114 | ||
|
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Notes to Financial Statements | November 30, 2014 |
As of November 30, 2014, 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) | $ | 14,365,096 | ||
Gross Depreciation (excess of tax cost over value) | (1,988,403 | ) | ||
Net Depreciation on Foreign Currency Transactions | (5,637 | ) | ||
Net unrealized appreciation (depreciation) | 12,371,056 | |||
| ||||
Cost of investments for income tax purposes | $ | 84,379,211 | ||
|
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.
H. 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, 2014, 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, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “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 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 Adviser may waive all or a portion of its fee.
Out of the unitary management fee, the Adviser pays substantially all expenses of the Fund, including the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for interest expenses, 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. The Adviser’s unitary management fee is designed to pay substantially all the Fund’s expenses and to compensate the Adviser for providing services for the Fund.
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Notes to Financial Statements | November 30, 2014 |
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee or $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings.
4. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 2014, the cost of purchases and proceeds from sales of investment securities, excluding in-kind transactions and short-term investments, were as follows:
Purchases | Sales | |
$ 11,247,059 | $ 11,109,941 |
For the year ended November 30, 2014, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Purchases | Sales | |
$ – | $ 22,273,182 |
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.
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Additional Information | November 30, 2014 (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 INFORMATION
The Fund designate the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2013:
Qualified Dividend Income | Dividend Received Deduction | |||
Cohen and Steers Global Realty Majors ETF | 100.00% | 0.00% |
In early 2014, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2013 via Form 1099. The Fund will notify shareholders in early 2015 of amounts paid to them by the Funds, if any, during the calendar year 2014.
LISCENSING AGREEMENT
Cohen & Steers Global Realty Majors Index is a trademark of Cohen & Steers Capital Management, Inc. (“Cohen & Steers”) and has been licensed for use by ALPS Fund Services, Inc. The performance of the Cohen & Steers Global Realty Majors ETF is in no way guaranteed by Cohen & Steers, and past performance of any Cohen & Steers index upon which the Cohen & Steers Global Majors ETF is based is not an indication of potential future performance. Cohen & Steers makes no representation or warranties regarding the advisability of investing in the Cohen & Steers Global Majors ETF or any product or fund.
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Board Considerations Regarding Approval of Investment Advisory Agreement | November 30, 2014 (Unaudited) |
At an in-person meeting held on June 9, 2014, 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 including (i) the nature, extent and quality of the services to be provided by the Adviser with respect to GRI under the Advisory Agreement; (ii) the advisory fees and other expenses to be paid by GRI compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to GRI by the Adviser and the profits realized by the Adviser and its affiliates from its relationship to GRI; (iv) the extent to which economies of scale would be realized if and as GRI assets increase and whether the fee level in the Advisory Agreement reflects these economies of scale; and (v) any additional benefits and other considerations, as further 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 services to be provided under the Advisory Agreement, the investment parameters of the index of GRI, the financial information regarding the Adviser and its parent company, information describing the Adviser’s current organizations, and the background and experience of the persons responsible for the day-to-day management of GRI.
The Board reviewed information on the performance of GRI and the performance of its benchmark index. The Board also 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 fee for GRI was a unitary fee 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 the 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 Lipper identified peer expense
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Board Considerations Regarding Approval of Investment Advisory Agreement | November 30, 2014 (Unaudited) |
group. The Independent Trustees also noted that the advisory fee rate for GRI was higher than the median of its Lipper peer group but that GRI’s total expense ratio was slightly below the median of its peer group. The Independent Trustees also considered information provided by the Adviser about the costs and profitability of the Adviser with respect to 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.
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 & Officers | November 30, 2014 (Unaudited) |
INDEPENDENT TRUSTEES
Name, Address and | 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 | 45 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). |
* | 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, 2014 (Unaudited) |
INDEPENDENT TRUSTEES
Name, Address and | 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 | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder and Chief Financial Officer of Green Alpha Advisors, LLC. Mr. Deems is Co-Portfolio Manager of the Shelton Green Alpha Fund. 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 1998 to June 2007. | 45 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 funds); and Reaves Utility 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, 2014 (Unaudited) |
INDEPENDENT TRUSTEES
Name, Address and | 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 Board member, 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, Prosci Inc. (private business services), 2013 – present; Board Member, Citywide Banks (Colorado community bank) 2014 – present; Director, National Western Stock Show (not-for-profit organization); Director, Biennial of the Americas (not-for-profit organization). | 23 | Mr. Pederson is Trustee of Westcore Trust (12 funds) and Principal Real Estate Income Fund. |
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Trustees & Officers | November 30, 2014 (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 Funds in Fund Complex Trustee*** | Other Directorships Held by Trustee | |||||
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”), and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”) and ALPS Distributors, Inc. (“ADI”). 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 (9 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, 2014 (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 H. Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars is Vice President and 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. 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, Broadview Funds Trust, BLDRS Index Funds Trust and Powershares QQQ Trust. | |||
William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer of AAI (since 2006); President and Chief Executive Officer 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. |
* | 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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Trustees & Officers | November 30, 2014 (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 | |||
Erin D. Nelson, 1977 | Secretary | Since October 2013 | Ms. Nelson is Vice President and Assistant General Counsel of ALPS Advisors, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson is also Secretary of the Principal Real Estate Income Fund since 2014, 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. Because of her position with ALPS, Ms. Nelson is deemed an affiliate of the Trust as defined under the 1940 Act. | |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Assistant Vice-Principal and Paralegal Manager of ALPS. 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. |
November 30, 2014 | 31 |
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Performance Overview |
November 30, 2014 (Unaudited) |
Investment Objective
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 highly volatile stocks.
The Index measures the return of a hypothetical portfolio consisting of exchange traded put options which have been sold on each of 20 stocks and a cash position calculated. The 20 stocks on which options are sold (“written”) are those 20 stocks from a selection of the largest capitalized (over $5 billion in market capitalization) stocks which also have listed options and which have the highest volatility, as determined by the NYSE Arca, Inc. (the “NYSE Arca”), the Fund’s index provider (the “Index Provider”).
Performance Overview
The twelve month period ending November 30, 2014 marked the first full year for the US Equity High Volatility Put Write Index Fund (HVPW) which listed on the NYSE Arca on Feb 28, 2013. The Fund gained 0.84% on a total return basis from December 01, 2013 through November 30, 2014, while distributing approximately 9% or $2.24 per share in each of the Fund’s six bi-monthly distributions during this same period.
The Fund’s return was consistent with the Fund’s Underlying Index which returned 3.61%, 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 and the offer, whereas the Fund sells options closer to the bid.
Of the 120 two-month options sold by the Fund which expired prior to November 30, 2014 the average premium generated was approximately 3%. Of those 120 options, 31 expired “in-the-money”, and were subsequently closed, while 89 options expired worthless.
Because the Fund collateralizes its short put position by purchasing 3-month T-bills, part of the Fund’s return is generated by interest income. During the 12-month period ending November 30, 2013 interest rates broadly speaking 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 Dec 01, 2013 through Nov 30, 2014) the S&P 500® TR index had a return of 16.9%. The Fund had an annualized historical volatility of 8.45% over this period versus the S&P 500® TR’s annualized historical volatility of 10.96%. The Fund’s correlation and beta for the period were 49.77% and 0.39 respectively as compared to the S&P 500® TR index.
Looking forward we believe the Fund’s strategy of selling high implied volatility put options on a diversified selection of 20 large-capitalization stocks with strike prices that are 15% out-of-the money will continue to provide income potential to investors while at the same time allowing the Fund to experience lower volatility than the broad market.
Definitions:
Beta: A measure of the volatility, or systematic risk, of a security or a portfolio in comparison to the market as a whole. A beta of 1 indicates that the security’s price will move with the market. A beta of less than 1 means that the security will be less volatile than the market. A beta of greater than 1 indicates that the security’s price will be more volatile than the market.
Bid: the price a buyer is willing to pay for a security.
Correlation: measures the extent of linear association between the investment performance and the benchmark performance. A high correlation (positive or negative) means that some of the investment’s performance can be explained by the performance of the benchmark. Positive correlation means that the investment is generally up when the market is up and down when the market is down. It measures only direction of movement over time and not whether the returns are similar. Negative correlation means the investment performance is generally opposite the performance of the benchmark.
“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.
Offer: the price at which publicly issued securities are made available for purchase by the investment bank underwriting the issue.
“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.
Premium: the total cost of an option.
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.
1 | November 30, 2014
Table of Contents
U.S. Equity High Volatility Put Write Index Fund | ||
Performance Overview |
November 30, 2014 (Unaudited) |
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.
Strike Price: the specified price at which an option contract may be exercised.
Volatility: is a measure for variation of price of a financial instrument over time.. A higher volatility means that a security’s value can potentially be spread out over a larger range of values. This means that the price of the security can change dramatically over a short time period in either direction. A lower volatility means that a security’s value does not fluctuate dramatically, but changes in value at a steady pace over a period of time.
Performance (as of November 30, 2014)
1 Year | Since Inception^ | |||
U.S. Equity High Volatility Put Write Index Fund - NAV | 0.84% | 5.81% | ||
U.S. Equity High Volatility Put Write Index Fund - Market Price* | 1.00% | 6.12% | ||
U.S. Equity High Volatility Put Write Index TR | 3.61% | 8.51% |
Total Expense Ratio (per the current prospectus) 0.95%.
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.
^ | 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. |
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.
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.
S&P 500® TR Index: The Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.
An investor cannot directly invest in an index.
2 | November 30, 2014
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U.S. Equity High Volatility Put Write Index Fund | ||
Performance Overview |
November 30, 2014 (Unaudited) |
Growth of $10,000 (as of November 30, 2014)
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.
3 | November 30, 2014
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Disclosure of Fund Expenses |
November 30, 2014 (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, 2014.
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.
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 6/1/14 | Ending Account 11/30/14 | Expense Ratio(a) | Expenses Paid During Period 6/1/14 - 11/30/14(b) | |||||||
U.S. Equity High Volatility Put Write Index Fund | ||||||||||
Actual | $1,000.00 | $1,031.30 | 0.95% | $4.84 | ||||||
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), divided by 365. |
4 | November 30, 2014
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U.S. Equity High Volatility Put Write Index Fund
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, 2014, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the year then ended and 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 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, 2014, 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 U.S. Equity High Volatility Put Write Index Fund of the ALPS ETF Trust as of November 30, 2014, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year then ended and 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 29, 2015
5 | November 30, 2014
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Schedule of Investments |
November 30, 2014 |
Security Description | Principal Amount | Value | ||||||
| ||||||||
SHORT TERM INVESTMENTS (101.55%) | ||||||||
U.S. Treasury Bills Discount Notes | ||||||||
0.010%, 01/15/2015(a)(b) | $ | 6,000,000 | $ | 5,999,964 | ||||
0.029%, 03/26/2015(b) | 2,500,000 | 2,499,780 | ||||||
0.035%, 04/09/2015(a)(b) | 10,000,000 | 9,998,660 | ||||||
0.044%, 04/23/2015(b) | 34,600,000 | 34,593,115 | ||||||
|
| |||||||
TOTAL SHORT TERM INVESTMENTS (Cost $53,091,953) | 53,091,519 | |||||||
|
| |||||||
TOTAL INVESTMENTS (101.55%) (Cost $53,091,953) | $ | 53,091,519 | ||||||
NET LIABILITIES LESS OTHER ASSETS (-1.55%) | (810,401) | |||||||
|
| |||||||
NET ASSETS (100.00%) | $ | 52,281,118 | ||||||
|
|
(a) | All or portion of this security is being held as collateral for written options. |
(b) | Rate shown represents the bond equivalent yield to maturity at date of purchase. |
SCHEDULE OF WRITTEN OPTIONS
Expiration Date | Exercise Price | Contracts | Value | |||||||||||
| ||||||||||||||
WRITTEN PUT OPTIONS | ||||||||||||||
American Airlines | 12/20/2014 | $ | 29.00 | (895) | $ | (2,685) | ||||||||
Cheniere Energy, Inc. | 12/20/2014 | 60.00 | (432) | (34,560) | ||||||||||
Chesapeake Energy Co. | 12/20/2014 | 18.00 | (1,443) | (28,139) | ||||||||||
Delta Air Lines, Inc. | 12/20/2014 | 30.00 | (865) | (2,162) | ||||||||||
Expedia, Inc. | 12/20/2014 | 65.00 | (399) | (998) | ||||||||||
Hertz Global Holding | 12/20/2014 | 18.00 | (1,443) | (3,607) | ||||||||||
Micron Technology | 12/20/2014 | 25.00 | (1,039) | (1,559) | ||||||||||
Palo Alto Networks | 12/20/2014 | 85.00 | (305) | (1,525) | ||||||||||
Pharmacyclics, Inc. | 12/20/2014 | 95.00 | (273) | (6,825) | ||||||||||
Salix Pharmaceutical | 12/20/2014 | 120.00 | (216) | (387,720) | ||||||||||
ServiceNow, Inc. | 12/20/2014 | 50.00 | (519) | (3,893) | ||||||||||
Skyworks Solutions | 12/20/2014 | 45.00 | (577) | (1,442) | ||||||||||
Splunk, Inc. | 12/20/2014 | 47.50 | (546) | (13,650) | ||||||||||
Tesla Motors, Inc. | 12/20/2014 | 195.00 | (133) | (5,453) | ||||||||||
T-Mobile US, Inc. | 12/20/2014 | 23.00 | (1,129) | (19,193) | ||||||||||
Trinity Industries | 12/20/2014 | 30.00 | (865) | (47,575) | ||||||||||
TripAdvisor, Inc. | 12/20/2014 | 70.00 | (371) | (34,317) | ||||||||||
Twitter, Inc. | 12/20/2014 | 43.00 | (604) | (144,356) | ||||||||||
United Continental | 12/20/2014 | 40.00 | (649) | (1,623) | ||||||||||
Whiting Petroleum Co. | 12/20/2014 | 50.00 | (519) | (446,340) | ||||||||||
TOTAL WRITTEN PUT OPTIONS | ||||||||||||||
|
| |||||||||||||
(Premiums received $1,557,855) | $ | (1,187,622) | ||||||||||||
|
|
See Notes to Financial Statements.
6 | November 30, 2014
Table of Contents
Statement of Assets and Liabilities |
November 30, 2014 |
ASSETS: | ||||
Investments, at value | $ | 53,091,519 | ||
Cash | 35,012,034 | |||
| ||||
Total Assets | 88,103,553 | |||
| ||||
LIABILITIES: | ||||
Written options, at value (Proceeds $1,557,855) | 1,187,622 | |||
Payable for investments purchased | 34,593,815 | |||
Payable to adviser | 40,998 | |||
| ||||
Total Liabilities | 35,822,435 | |||
| ||||
NET ASSETS | $ | 52,281,118 | ||
| ||||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 52,400,114 | ||
Accumulated net investment loss | (488,795) | |||
Net unrealized appreciation on investments and written option contracts | 369,799 | |||
| ||||
NET ASSETS | $ | 52,281,118 | ||
| ||||
INVESTMENTS, AT COST | $ | 53,091,953 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 52,281,118 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 2,200,002 | |||
Net Asset Value, offering and redemption price per share | $ | 23.76 |
See Notes to Financial Statements.
7 | November 30, 2014
Table of Contents
Statement of Operations |
For the Year Ended November 30, 2014 |
INVESTMENT INCOME: | ||||
Interest | $ | 18,515 | ||
| ||||
Total investment income | 18,515 | |||
| ||||
EXPENSES: | ||||
Investment adviser fees | 531,656 | |||
| ||||
Total Expenses | 531,656 | |||
| ||||
NET INVESTMENT LOSS | (513,141) | |||
| ||||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized loss on investments | (8,008,887) | |||
Net realized gain on written option contracts | 8,034,521 | |||
Net change in unrealized depreciation on investments | (1,297) | |||
Net change in unrealized appreciation on written option contracts | 89,969 | |||
| ||||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS AND WRITTEN OPTION CONTRACTS | 114,306 | |||
| ||||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (398,835) | ||
|
See Notes to Financial Statements.
8 | November 30, 2014
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U.S. Equity High Volatility Put Write Index Fund
Statements of Changes in Net Assets
For the Year Ended November 30, 2014 | For the Period to November 30, | |||||||
| ||||||||
OPERATIONS: | ||||||||
Net investment loss | $ | (513,141) | $ | (72,217) | ||||
Net realized gain on investments and written option contracts | 25,634 | 602,509 | ||||||
Net change in unrealized appreciation on investments and written option contracts | 88,672 | 281,127 | ||||||
| ||||||||
Net increase/(decrease) in net assets resulting from operations | (398,835) | 811,419 | ||||||
| ||||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | – | (573,349) | ||||||
Tax return of capital | (5,111,591) | – | ||||||
| ||||||||
Total distributions | (5,111,591) | (573,349) | ||||||
| ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 70,217,237 | 28,140,938 | ||||||
Cost of shares redeemed | (40,804,701) | – | ||||||
| ||||||||
Net increase from share transactions | 29,412,536 | 28,140,938 | ||||||
| ||||||||
Net increase in net assets | 23,902,110 | 28,379,008 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 28,379,008 | – | ||||||
| ||||||||
End of period* | $ | 52,281,118 | $ | 28,379,008 | ||||
| ||||||||
*Including accumulated net investment loss of: | $ | (488,795) | $ | (43,057) | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 1,100,002 | – | ||||||
Shares sold | 2,800,000 | 1,100,002 | ||||||
Shares redeemed | (1,700,000) | – | ||||||
| ||||||||
Shares outstanding, end of period | 2,200,002 | 1,100,002 | ||||||
|
See Notes to Financial Statements.
9 | November 30, 2014
Table of Contents
Financial Highlights |
For a Share Outstanding Throughout the Periods Presented |
For the Year Ended November 30, 2014 | For the Period February 28, 2013 (Commencement of Operations) 2013 | |||||||
| ||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 25.80 | $ | 25.00 | ||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||
Net investment loss (a) | (0.22) | (0.18) | ||||||
Net realized and unrealized gain | 0.42 | 2.50 | ||||||
| ||||||||
Total from investment operations | 0.20 | 2.32 | ||||||
| ||||||||
DISTRIBUTIONS: | ||||||||
From net investment income | – | (1.52) | ||||||
Tax return of capital | (2.24) | – | ||||||
| ||||||||
Total distributions | (2.24) | (1.52) | ||||||
| ||||||||
NET INCREASE/(DECREASE) IN NET ASSET VALUE | (2.04) | 0.80 | ||||||
| ||||||||
NET ASSET VALUE, END OF PERIOD | $ | 23.76 | $ | 25.80 | ||||
| ||||||||
TOTAL RETURN(b) | 0.84% | 9.51% | ||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||
Net assets, end of period (000s) | $ | 52,281 | $ | 28,379 | ||||
Ratio of expenses to average net assets | 0.95% | 0.95%(c) | ||||||
Ratio of net investment loss to average net assets | (0.92%) | (0.92%)(c) | ||||||
Portfolio turnover rate(d) | 0% | 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 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.
10 | November 30, 2014
Table of Contents
U.S. Equity High Volatility Put Write Index Fund
Notes to Financial Statements | November 30, 2014 |
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, 2014, the Trust consists of sixteen 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”). 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 “Underlying Index”). The Underlying Index reflects the performance of a portfolio of exchange-traded put options on highly volatile stocks. The Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
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 for cash. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
Pursuant to 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.
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. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
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 NASDAQ Stock Market LLC (“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
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Notes to Financial Statements | November 30, 2014 |
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. 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 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 hierarchy, due to their active trading, short term maturity and liquidity. Listed put options are 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 hierarchy, due to their active trading and short-term expiration.
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 at November 30, 2014:
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
| ||||||||||||||||
Short Term Investments | $ | – | $ | 53,091,519 | $ | – | $ | 53,091,519 | ||||||||
| ||||||||||||||||
TOTAL | $ | – | $ | 53,091,519 | $ | – | $ | 53,091,519 | ||||||||
| ||||||||||||||||
| ||||||||||||||||
| ||||||||||||||||
Other Financial Instruments* | ||||||||||||||||
| ||||||||||||||||
Liabilities | ||||||||||||||||
Written Option Contracts | $ | (1,187,622) | $ | – | $ | – | $ | (1,187,622) | ||||||||
| ||||||||||||||||
Total | $ | (1,187,622) | $ | – | $ | – | $ | (1,187,622) | ||||||||
| ||||||||||||||||
* | Other financial instruments are instruments not reflected in the Schedule of Investments, such as written options. |
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U.S. Equity High Volatility Put Write Index Fund
Notes to Financial Statements | November 30, 2014 |
The Fund recognizes transfers between levels as of the end of the period. For the year ended November 30, 2014, 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.
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 and capital gains distributions, if any, are 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, 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.
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 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, 2014, 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:
Fund | Paid-in Capital | Accumulated Net Investment Income | Accumulated Net Realized Loss on Investments | |||
| ||||||
U.S. Equity High Volatility Put Write Index Fund | $(41,769) | $67,403 | $(25,634) |
Included in the amounts reclassified was a net operating loss offset to Paid-in Capital of $41,769.
Net investment income and net realized (loss), as disclosed on the Statement of Operations and net assets were not affected by this reclassification.
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 | Tax Return of Capital | |||||||
| ||||||||
November 30, 2014 | ||||||||
U.S. Equity High Volatility Put Write Index Fund | $ | – | $ | 5,111,591 | ||||
November 30, 2013 | ||||||||
U.S. Equity High Volatility Put Write Index Fund | $ | 573,349 | $ | – | ||||
As of November 30, 2014, the components of distributable earnings on a tax basis for the Fund were as follows:
|
| |||||||
Other accumulated losses | $ | (488,795) | ||||||
Net unrealized appreciation on investments | 369,799 | |||||||
| ||||||||
Total | $ | (118,996) | ||||||
|
13 | November 30, 2014
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U.S. Equity High Volatility Put Write Index Fund
Notes to Financial Statements | November 30, 2014 |
As of November 30 2014, 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) | $ | 735,995 | ||
Gross depreciation (excess of tax cost over value) | (736,429) | |||
Net appreciation of foreign currency and derivatives | 370,233 | |||
| ||||
Net unrealized appreciation (depreciation) | 369,799 | |||
| ||||
Cost of investments for income tax purposes | $ | 53,091,953 | ||
|
The Fund elects to defer to the period ending November 30, 2015, late year ordinary losses in the amount of $488,795.
F. 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 year ended November 30, 2014, 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, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
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 Underlying Index by selling listed 60-day put options in proportion to their weightings in the Underlying 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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U.S. Equity High Volatility Put Write Index Fund | ||
Notes to Financial Statements |
November 30, 2014 |
Each put option sold by the Fund will be covered through investments in three month U.S. 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 Underlying 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”) 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 year ended November 30, 2014, were as follows:
Written Put Options | ||||||||
Number of Contracts | Premiums | |||||||
| ||||||||
Options outstanding at November 30, 2013 | (7,430) | $ | 1,039,328 | |||||
Options written | (98,300) | 11,945,539 | ||||||
Options exercised | 13,841 | (1,394,650) | ||||||
Options expired | 66,649 | (8,167,573) | ||||||
Options closed | 12,018 | (1,864,789) | ||||||
|
| |||||||
Options outstanding at November 30, 2014 | (13,222) | $ | 1,557,855 | |||||
|
| |||||||
Market Value at November 30, 2014 | $ | (1,187,622) | ||||||
|
|
The effect of derivatives instruments on the Statement of Assets and Liabilities as of November 30, 2014:
Liability Derivatives | ||||||
Risk Exposure | Statement of Assets and Liabilities Location | Fair Value | ||||
| ||||||
U.S. Equity High Volatility Put Write Index Fund | ||||||
Equity Contracts (Written Options) | Options written, at value | $ | 1,187,622 | |||
| ||||||
$ | 1,187,622 | |||||
|
15 | November 30, 2014
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U.S. Equity High Volatility Put Write Index Fund
Notes to Financial Statements | November 30, 2014 |
The effect of derivatives instruments on the Statement of Operations for the year ended November 30, 2014:
Risk Exposure | Statement of Operations Location | Realized Gain/(Loss) in Income | Change in in Income | |||||||
| ||||||||||
U.S. Equity High Volatility Put Write Index Fund | ||||||||||
Equity Contracts (Written Options) | Net realized gain on written option contracts/Net change in unrealized appreciation on written option contracts | $ | 8,034,521 | $ | 89,969 | |||||
| ||||||||||
Total | $ | 8,034,521 | $ | 89,969 | ||||||
|
The average written option contracts volume was 14,086 during the year ended November 30, 2014.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “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 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 fees of the Sub-Adviser and the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for interest expenses, 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. The Adviser’s unitary management fee is designed pay substantially all the Fund’s expenses and to compensate the 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 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., an affiliate of the Adviser, is the administrator of the Fund. Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee or $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings.
4. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 2014, the cost of purchases and proceeds from sales of common stock related to exercised written put options were as follows:
Fund | Purchases | Sales | ||||||
| ||||||||
U.S. Equity High Volatility Put Write Index Fund | $ | 77,338,277 | $ | 69,329,369 |
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.
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U.S. Equity High Volatility Put Write Index Fund
Additional Information | November 30, 2014 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
The Trust is required to disclose annually each Fund’s complete proxy voting record on Form N-PX covering the period July 1 through June 30 and file it with the SEC no later than August 31. Form N-PX for each Fund also will be available at no charge upon request by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203. Each Fund’s Form N-PX also is available on the SEC’s website at www.sec.gov.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of each Fund’s portfolio holdings with the SEC on Form N-Q. The Trust will also disclose a complete schedule of each Fund’s portfolio holdings with the SEC on Form N-CSR after its second and fourth quarters. Form N-Q and Form N-CSR for each Fund will be available on the SEC’s website at http://www.sec.gov. Each Fund’s Form N-Q and Form N-CSR may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-202-551-5850. Each Fund’s Form N-Q and Form N-CSR will be available without charge, upon request, by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
LICENSING AGREEMENT
The U.S. Equity High Volatility Put Write Index Fund is not sponsored, endorsed, sold or promoted by NYSE Euronext or its affiliates (“NYSE Euronext”). NYSE Euronext makes no representation or warranty regarding the advisability of investing in securities generally, in The U.S. Equity High Volatility Put Write Index Fund particularly, or the ability of the NYSE Arca U.S. Equity High Volatility Put Write IndexSM to track general stock market performance.
NYSE EURONEXT MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE NYSE ARCA U.S. EQUITY HIGH VOLATILITY PUT WRITE INDEXSM OR ANY DATA INCLUDED THEREIN. IN NO EVENT SHALL NYSE EURONEXT HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOSS OF PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
17 | November 30, 2014
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U.S. Equity High Volatility Put Write Index Fund
Board Considerations Regarding Approval of Investment Advisory Agreement | November 30, 2014 (Unaudited) |
At an in-person meeting held on June 9, 2014, 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”) and the Sub-Advisory Agreement with Rich Investment Solutions, LLC (the “Sub-Adviser”) with respect to the U.S. High Volatility Put Write Index Fund (“HVPW”). The Independent Trustees also met separately to consider the Advisory and Sub-Advisory Agreements.
In evaluating whether to approve the Advisory and Sub-Advisory Agreements for HVPW, the Board considered numerous factors, including (i) the nature, extent and quality of the services to be provided by the Adviser and Sub-Adviser with respect to HVPW under the Advisory Agreement and Sub-Advisory Agreement; (ii) the advisory and sub-advisory fees and other expenses to be paid by HVPW compared to those of similar funds managed and serviced by other investment advisers and sub-advisers; (iii) the profitability to the Adviser and Sub-Adviser of its proposed advisory and sub-advisory relationships with HVPW and reasonableness of compensation to the Adviser and Sub-Adviser; (iv) the extent to which economies of scale would be realized if and as HVPW assets increase and whether the fee levels in the Advisory Agreement and Sub-Advisory Agreement reflects these economies of scale; and (v) any additional benefits and other considerations, as further 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 presented the Adviser’s material regarding consideration of renewal of the Advisory Agreement and representatives from the Sub-Adviser presented the Sub-Adviser’s material regarding consideration of renewal of the Sub-Advisory Agreement. The Independent Trustees noted that included in the Board materials were responses by the Adviser and the Sub-Adviser to a questionnaire drafted by legal counsel to the Trust to assist the Board in evaluating whether to renew the Advisory Agreement and the Sub-Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the services to be provided under the Advisory Agreement and the Sub-Advisory Agreement, the proposed investment parameters of the index for HVPW, financial information regarding the Adviser, its parent company and the Sub-Adviser, information describing the Adviser’s and the Sub-Adviser’s current organizations and the background and experience of the persons responsible for the day-to-day management of HVPW.
The Independent Trustees reviewed information on the performance of HVPW and the performance of its benchmark index. The Trustees also evaluated the correlation and tracking error between the underlying index and HVPW’s performance. Based upon their review, the Independent Trustees concluded that the nature and extent of services provided to HVPW under the Advisory Agreement and the Sub-Advisory Agreement were appropriate and that the quality was satisfactory.
The Board noted the services to be provided by the Adviser for the annual advisory fee of 0.95% of HVPW’s average daily net assets. The Board also noted that the Sub-Adviser would receive an annual fee of 0.80% of HVPW’s average daily net assets out of the advisory fee. The Adviser considered the reasonableness of the fee split between the Adviser and Sub-Adviser, taking into account the services provided and expenses assumed by the Sub-Adviser. The Board also considered that the advisory fee was a unitary fee pursuant to which the Adviser will assume all expenses of HVPW (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the 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 the cost and expense structures of HVPW with other funds’ cost and expense structures during similar periods of members of a Lipper identified peer expense group. The Independent Trustees also noted that the advisory fee was higher than the median of its Lipper peer group, however its total expenses were equal to the peer group median. The Independent Trustees further noted that Lipper intentionally omitted the performance group and performance universe due to the limited performance history of HVPW. The Independent Trustees reviewed the supplemental comparative expense data provided by Sub-Adviser. The Independent Trustees considered information provided by the Adviser and Sub-Adviser about the costs and profitability of the Adviser and Sub-Adviser with respect to HVPW. Based on the foregoing and the other information available to them, the Independent Trustees concluded that the advisory and sub-advisory fees for HVPW 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 and Sub-Adviser from their respective relationships with HVPW and concluded that the advisory and sub-advisory fees were reasonable taking into account such benefits. The Independent Trustees noted the relatively small size of HVPW and considered whether there have been economies of scale with respect to management of HVPW, whether HVPW has appropriately benefited from any economies of scale, and whether the fee is reasonable in relation to HVPW’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 and Sub-Advisory Agreements was in the best interests of HVPW. 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 and Sub-Advisory Agreements, the 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 Trustees considered relevant in the exercise of their reasonable business judgment.
18 | November 30, 2014
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U.S. Equity High Volatility Put Write Index Fund
Trustees & Officers | November 30, 2014 (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 | |||||
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|
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| |||||
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.
|
45 |
Ms. Anstine is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
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Jeremy W. Deems, 1976 |
Trustee |
Since March 2008 |
Mr. Deems is the Co-Founder and Chief Financial Officer of Green Alpha Advisors, LLC. Mr. Deems is Co-Portfolio Manager of the Shelton Green Alpha Fund. 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 1998 to June 2007.
|
45 |
Mr. Deems is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 funds); and Reaves Utility Income Fund. | |||||
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Rick A. Pederson, 1952 |
Trustee |
Since March 2008 |
Mr. Pederson is President, Foundation Properties, Inc. (a real estate investment management company), 1994 – present; Advisory Board member, 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, Prosci Inc. (private business services), 2013 – present; Board Member, Citywide Banks (Colorado community bank) 2014 – present; Director, National Western Stock Show (not-for- profit organization); Director, Biennial of the Americas (not-for-profit organization).
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23 |
Mr. Pederson is Trustee of Westcore Trust (12 funds) and Principal Real Estate Income Fund. | |||||
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* | 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. |
19 | November 30, 2014
Table of Contents
U.S. Equity High Volatility Put Write Index Fund
Trustees & Officers | November 30, 2014 (Unaudited) |
INTERESTED TRUSTEE
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 | |||||
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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”), and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”) and ALPS Distributors, Inc. (“ADI”). 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.
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29 |
Mr. Carter is a Trustee of ALPS Variable Investment Trust (9 funds) and Principal Real Estate Income Fund. | |||||
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* | 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 | November 30, 2014
Table of Contents
U.S. Equity High Volatility Put Write Index Fund
Trustees & Officers | November 30, 2014 (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 | |||
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| |||
Melanie Zimdars, 1976 |
Chief Compliance Officer (“CCO”) |
Since December 2009 |
Ms. Zimdars is Vice President and 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. 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, Broadview Funds Trust, BLDRS Index Funds Trust and Powershares QQQ Trust.
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William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer of AAI (since 2006); President and Chief Executive Officer 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 ALPS Advisors, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson is also Secretary of the Principal Real Estate Income Fund since 2014, 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. Because of her position with ALPS, Ms. Nelson is deemed an affiliate of the Trust as defined under the 1940 Act.
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Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Assistant Vice-Principal and Paralegal Manager of ALPS. 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. |
21 | November 30, 2014
Table of Contents
Table of Contents
Table of Contents
CONTENTS
1 | ||||
3 | ||||
4 | ||||
5 | ||||
7 | ||||
8 | ||||
9 | ||||
10 | ||||
11 | ||||
16 | ||||
17 |
www.alpsfunds.com
Table of Contents
RiverFront Strategic Income Fund | ||
| ||
Performance Overview | November 30, 2014 (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. The Fund intends to utilize various investment strategies in a broad array of fixed income sectors.
Performance Overview
RIGS underperformed the Barclays Capital U.S. Aggregate Bond Index over the twelve month period from 12/1/13 through 11/30/14 in what was a challenging environment for shorter duration and high yield fixed income portfolios. Over the twelve months, RIGS returned 3.30% (3.80% NAV) vs. 5.27% for the Barclays Capital U.S. Aggregate Bond Index. RIGS was comprised entirely of shorter maturity high yield bonds during this period, and its performance was negatively impacted by its shorter duration and widening risk premiums during the second half of the year. Shorter maturity bonds generally underperformed longer maturity bonds during this time period, as yields on shorter-term (2-5 year) U.S. Treasuries rose about 10-30 basis points (“Bps”), while longer-term (10 years) yields actually fell over 50 basis points. In addition, lower rated bonds generally underperformed higher quality bonds, as risk premiums on shorter-term high yield bonds widened about 100 bps. However RIGS did perform relatively well when compared to the Bank of America Merrill Lynch 1-5 Year US Cash Pay High Yield Index which was up 2.43%. Factors that contributed to RIGS outperformance versus the short-term high yield index included the higher credit quality of its holdings and its underweighting to the high yield energy sector, as oil prices fell precipitously. We continue to believe that short-term high yield bonds offer an attractive risk/reward profile, especially after the recent sell-off in the sector pushed yields back above 6%. We believe that the high yield default rate is likely to remain below its historical average (excluding the energy sector) over the next couple of years, as the U.S. economy continues to improve and corporate balance sheets remain strong. In addition, even as monetary policy in the U.S. becomes less accommodative in 2015, quantitative easing programs by the Bank of Japan and the European Central Bank should help keep global liquidity strong and global yields at historically low levels. This will likely make higher yielding assets relatively attractive, although volatility is likely to remain high.
Performance (as of November 30, 2014)
1 Year | Since Inception^ | |||
RiverFront Strategic Income Fund – NAV | 3.80% | 5.18% | ||
RiverFront Strategic Income Fund – Market Price* | 3.30% | 5.18% | ||
Barclays Capital U.S. Aggregate Bond Index | 5.27% | 4.96% |
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. |
* | 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 |
Basis Points, or BPS, are units that are equal to 1/100th of 1% and are used to denote the change in a financial instrument.
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.
The BofA Merrill Lynch 1-5 Year US Cash Pay High Yield Index is a subset of the BofA Merrill Lynch US Cash Pay High Yield Index including all securities with a remaining term to final maturity less than 5 years.
An investor cannot invest directly in an index.
1 | November 30, 2014
Table of Contents
RiverFront Strategic Income Fund | ||
| ||
Performance Overview | November 30, 2014 (Unaudited) | |
|
Top 10 Holdings* (as of November 30, 2014)
AES Corp., Sr. Unsec. | 3.97 | % | ||
Frontier Communications Corp., Sr. Unsec. | 3.77 | % | ||
ArcelorMittal, Sr. Unsec. | 3.64 | % | ||
HCA, Inc., First Lien | 3.60 | % | ||
DISH DBS Corp., Sr. Unsec. | 3.59 | % | ||
Lamar Media Corp., Sr. Sub. | 3.48 | % | ||
MGM Resorts International, Sr. Unsec. | 3.48 | % | ||
United Rentals North America, Inc., Sr. Unsec. | 3.43 | % | ||
Windstream Corp., Sr. Unsec. | 3.36 | % | ||
NRG Energy, Inc., Sr. Unsec. | 3.34 | % | ||
Total % of Top 10 Holdings | 35.66 | % |
* | % of Total Investments. |
Future holdings are subject to change.
Asset Allocation* (as of November 30, 2014)
Growth of $10,000 (as of November 30, 2014)
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.
2 | November 30, 2014
Table of Contents
RiverFront Strategic Income Fund | ||
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Disclosure of Fund Expenses | November 30, 2014 (Unaudited) | |
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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, 2014.
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 6/1/14 | Ending Account Value 11/30/14 | Expense Ratio(a) | Expenses Paid During Period 6/1/14 - 11/30/14(b) | |||||||||||||
Actual | $ 1,000.00 | $ 1,001.90 | 0.22% | $ 1.10 | ||||||||||||
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. |
3 | November 30, 2014
Table of Contents
RiverFront Strategic Income Fund | ||
| ||
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 Riverfront Strategic Income Fund, one of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2014, and the related statement of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the year then ended and 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 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, 2014, 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 Riverfront Strategic Income Fund of the ALPS ETF Trust as of November 30, 2014, the results of its operations for the year then ended, and the changes in its net assets and the financial highlights for the year then ended and 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 29, 2015
4 | November 30, 2014
Table of Contents
RiverFront Strategic Income Fund | ||
| ||
Schedule of Investments | November 30, 2014 | |
|
Security Description | Principal Amount | Value | ||||||
| ||||||||
CORPORATE BONDS (95.77%) |
| |||||||
Consumer Discretionary (20.90%) | ||||||||
Autonation, Inc., Sr. Unsec. | ||||||||
6.75%, 04/15/2018 | $ | 6,250,000 | $ | 7,094,394 | ||||
Avis Budget Car Rental LLC/Avis Budget Finance, Inc., Sr. Unsec. | ||||||||
4.88%, 11/15/2017 | 10,357,000 | 10,719,495 | ||||||
Cablevision Systems Corp., Sr. Unsec. | ||||||||
8.63%, 09/15/2017 | 7,116,000 | 8,076,660 | ||||||
Constellation Brands Inc., Sr. Unsec. | ||||||||
3.88%, 11/15/2019 | 6,000,000 | 6,126,600 | ||||||
CSC Holdings LLC, Sr. Unsec. | ||||||||
7.88%, 02/15/2018 | 4,000,000 | 4,550,000 | ||||||
DISH DBS Corp., Sr. Unsec. | ||||||||
4.25%, 04/01/2018 | 10,558,000 | 10,769,159 | ||||||
7.88%, 09/01/2019 | 2,000,000 | 2,290,000 | ||||||
General Motors Financial Co., Inc., Sr. Unsec. | ||||||||
4.75%, 08/15/2017 | 1,830,000 | 1,941,630 | ||||||
Lamar Media Corp., Sr. Sub. | ||||||||
5.88%, 02/01/2022 | 12,067,000 | 12,670,350 | ||||||
Lear Corp., Sr. Unsec. | ||||||||
4.75%, 01/15/2023 | 250,000 | 250,000 | ||||||
MGM Resorts International, Sr. Unsec. | ||||||||
7.63%, 01/15/2017 | 11,703,000 | 12,668,498 | ||||||
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| |||||||
Total Consumer Discretionary | 77,156,786 | |||||||
|
| |||||||
Consumer Staples (2.52%) |
| |||||||
Smithfield Foods, Inc., Sr. Unsec. | ||||||||
7.75%, 07/01/2017 | 8,308,000 | 9,304,960 | ||||||
|
| |||||||
Total Consumer Staples | 9,304,960 | |||||||
|
| |||||||
Energy (5.73%) |
| |||||||
Access Midstream Partners LP/ACMP Finance Corp., Sr. Unsec. | ||||||||
6.13%, 07/15/2022 | 11,035,000 | 11,752,275 | ||||||
Continental Resources, Inc., Sr. Unsec. | ||||||||
5.00%, 09/15/2022 | 7,995,000 | 8,244,604 | ||||||
El Paso LLC, Sr. Unsec. | ||||||||
6.50%, 09/15/2020 | 1,000,000 | 1,144,375 | ||||||
|
| |||||||
Total Energy | 21,141,254 | |||||||
|
| |||||||
Financials (5.71%) |
| |||||||
Ally Financial, Inc., Sr. Unsec. | ||||||||
5.50%, 02/15/2017 | 8,447,000 | 8,901,026 | ||||||
CIT Group, Inc., Sr. Unsec. | ||||||||
4.25%, 08/15/2017 | 11,603,000 | 11,893,075 |
Security Description | Principal Amount | Value | ||||||
| ||||||||
Financials (continued) | ||||||||
E*Trade Financial Corp., Sr. Unsec. | ||||||||
6.38%, 11/15/2019 | $ | 250,000 | $ | 268,750 | ||||
|
| |||||||
Total Financials | 21,062,851 | |||||||
|
| |||||||
Health Care (16.22%) |
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Biomet, Inc., Sr. Unsec. | ||||||||
6.50%, 08/01/2020 | 10,021,000 | 10,753,736 | ||||||
CHS/Community Health Systems, Inc., First Lien | ||||||||
5.13%, 08/15/2018 | 10,330,000 | 10,652,813 | ||||||
DaVita HealthCare Partners, Inc., Sr. Unsec. | ||||||||
6.63%, 11/01/2020 | 3,500,000 | 3,677,188 | ||||||
5.75%, 08/15/2022 | 1,000,000 | 1,060,000 | ||||||
Fresenius Medical Care US Finance II, Inc., Sr. Unsec. | ||||||||
5.63%, 07/31/2019(a) | 8,000,000 | 8,640,000 | ||||||
HCA, Inc., First Lien | ||||||||
6.50%, 02/15/2020 | 11,803,000 | 13,086,575 | ||||||
Tenet Healthcare Corp., First Lien | ||||||||
6.25%, 11/01/2018 | 11,046,000 | 11,998,717 | ||||||
|
| |||||||
Total Health Care | 59,869,029 | |||||||
|
| |||||||
Industrials (14.44%) |
| |||||||
ADT Corp., Sr. Unsec. | ||||||||
2.25%, 07/15/2017 | 10,300,000 | 9,958,813 | ||||||
Aircastle, Ltd., Sr. Unsec. | ||||||||
6.75%, 04/15/2017 | 10,566,000 | 11,384,865 | ||||||
Case New Holland Industrial, Inc., Sr. Unsec. | ||||||||
7.88%, 12/01/2017 | 8,075,000 | 9,084,375 | ||||||
United Rentals North America, Inc., Sr. Unsec. | ||||||||
7.38%, 05/15/2020 | 11,500,000 | 12,477,499 | ||||||
WESCO Distribution, Inc., Sr. Unsec. | ||||||||
5.38%, 12/15/2021 | 10,150,000 | 10,391,063 | ||||||
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| |||||||
Total Industrials | 53,296,615 | |||||||
|
| |||||||
Information Technology (2.87%) |
| |||||||
Flextronics International, Ltd., Sr. Unsec. | ||||||||
4.63%, 02/15/2020 | 10,392,000 | 10,601,918 | ||||||
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| |||||||
Total Information Technology | 10,601,918 | |||||||
|
| |||||||
Materials (9.98%) |
| |||||||
ArcelorMittal, Sr. Unsec. | ||||||||
6.13%, 06/01/2018 | 2,900,000 | 3,081,250 | ||||||
5.75%, 08/05/2020(b) | 9,671,000 | 10,154,550 | ||||||
Ball Corp., Sr. Unsec. | ||||||||
5.00%, 03/15/2022 | 10,063,000 | 10,465,520 |
See Notes to Financial Statements.
5 | November 30, 2014 |
Table of Contents
RiverFront Strategic Income Fund | ||
| ||
Schedule of Investments | November 30, 2014 | |
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Security Description | Principal Amount | Value | ||||||
| ||||||||
Materials (continued) |
| |||||||
Huntsman Intl LLC, Sr. Unsec. | ||||||||
4.88%, 11/15/2020 | $ | 2,095,000 | $ | 2,142,138 | ||||
United States Steel Corp., Sr. Unsec. | ||||||||
6.05%, 06/01/2017 | 8,026,000 | 8,668,080 | ||||||
7.00%, 02/01/2018 | 2,114,000 | 2,309,545 | ||||||
|
| |||||||
Total Materials | 36,821,083 | |||||||
|
| |||||||
Telecommunication Services (10.19%) |
| |||||||
CenturyLink, Inc., Sr. Unsec., Series V | ||||||||
5.63%, 04/01/2020 | 11,000,000 | 11,646,250 | ||||||
Frontier Communications Corp., Sr. Unsec. | ||||||||
8.25%, 04/15/2017 | 12,185,000 | 13,708,125 | ||||||
Windstream Corp., Sr. Unsec. | ||||||||
7.88%, 11/01/2017 | 11,055,000 | 12,236,503 | ||||||
|
| |||||||
Total Telecommunication Services |
| 37,590,878 | ||||||
|
| |||||||
Utilities (7.21%) |
| |||||||
AES Corp., Sr. Unsec. | ||||||||
8.00%, 10/15/2017 | 1,344,000 | 1,528,800 | ||||||
8.00%, 06/01/2020 | 11,065,000 | 12,918,388 | ||||||
NRG Energy, Inc., Sr. Unsec. | ||||||||
7.63%, 01/15/2018 | 10,950,000 | 12,154,500 | ||||||
|
| |||||||
Total Utilities | 26,601,688 | |||||||
|
| |||||||
TOTAL CORPORATE BONDS (Cost $353,424,635) |
| 353,447,062 | ||||||
|
|
Security Description | 7 Day Yield | Shares | Value | |||||||
| ||||||||||
SHORT TERM INVESTMENTS (2.77%) |
| |||||||||
Dreyfus Treasury Prime Cash Management, Institutional Shares | 0.000% (c) | 10,230,147 | $ | 10,230,147 | ||||||
|
| |||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $10,230,147) |
| 10,230,147 | ||||||||
|
| |||||||||
TOTAL INVESTMENTS (98.54%) (Cost $363,654,782) |
| $ | 363,677,209 | |||||||
NET OTHER ASSETS AND LIABILITIES (1.46%) |
| $ | 5,387,946 | |||||||
|
| |||||||||
NET ASSETS (100.00%) |
| $ | 369,065,155 | |||||||
|
|
(a) | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate market value of those securities was $8,640,000, representing 2.34% of net assets. |
(b) | Represents a step bond. Rate disclosed is as of November 30, 2014. |
(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.
6 | November 30, 2014 |
Table of Contents
RiverFront Strategic Income Fund | ||
| ||
Statement of Assets and Liabilities | November 30, 2014 | |
|
ASSETS: | ||||
Investments, at value | $ | 363,677,209 | ||
Cash | 1,480 | |||
Interest receivable | 5,453,301 | |||
| ||||
Total Assets | 369,131,990 | |||
| ||||
LIABILITIES: | ||||
Payable to adviser | 66,835 | |||
| ||||
Total Liabilities | 66,835 | |||
| ||||
NET ASSETS | $ | 369,065,155 | ||
| ||||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 368,783,335 | ||
Accumulated net investment income | 31,264 | |||
Accumulated net realized gain on investments | 228,129 | |||
Net unrealized appreciation on investments | 22,427 | |||
| ||||
NET ASSETS | $ | 369,065,155 | ||
| ||||
INVESTMENTS, AT COST | $ | 363,654,782 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 369,065,155 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 14,750,002 | |||
Net Asset Value, offering and redemption price per share | $ | 25.02 |
See Notes to Financial Statements.
7 | November 30, 2014
Table of Contents
RiverFront Strategic Income Fund | ||
| ||
Statement of Operations | For the Year Ended November 30, 2014 | |
|
INVESTMENT INCOME: | ||||
Interest | $ | 9,644,329 | ||
| ||||
Total Investment Income | 9,644,329 | |||
| ||||
EXPENSES: | ||||
Investment adviser and sub-adviser fees (note 3) | 1,260,657 | |||
| ||||
Total Expenses | 1,260,657 | |||
Less fees waived/reimbursed by sub-adviser (note 3) | (657,734) | |||
| ||||
Net Expenses | 602,923 | |||
| ||||
NET INVESTMENT INCOME | 9,041,406 | |||
| ||||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized gain on investments | 396,073 | |||
Net change in unrealized depreciation on investments | (454,991) | |||
| ||||
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (58,918) | |||
| ||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 8,982,488 | ||
|
See Notes to Financial Statements.
8 | November 30, 2014
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Statements of Changes in Net Assets | ||
|
For the Year Ended November 30, 2014 | For the Period October 8, 2013 (Commencement) to November 30, 2013 | |||||||
| ||||||||
OPERATIONS: | ||||||||
Net investment income | $ | 9,041,406 | $ | 246,930 | ||||
Net realized gain on investments | 396,073 | – | ||||||
Net change in unrealized appreciation/(depreciation) on investments | (454,991) | 477,418 | ||||||
| ||||||||
Net increase in net assets resulting from operations | 8,982,488 | 724,348 | ||||||
| ||||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (9,145,080) | (111,992) | ||||||
| ||||||||
Total distributions | (9,145,080) | (111,992) | ||||||
| ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 294,599,065 | 96,489,989 | ||||||
Shares redeemed | (22,473,663) | – | ||||||
| ||||||||
Net increase from share transactions | 272,125,402 | 96,489,989 | ||||||
| ||||||||
Net increase in net assets | 271,962,810 | 97,102,345 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 97,102,345 | – | ||||||
| ||||||||
End of period* | $ | 369,065,155 | $ | 97,102,345 | ||||
| ||||||||
*Including accumulated net investment income of: | $ | 31,264 | $ | 134,938 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 3,900,002 | – | ||||||
Shares sold | 11,750,000 | 3,900,002 | ||||||
Shares redeemed | (900,000) | – | ||||||
| ||||||||
Shares outstanding, end of period | 14,750,002 | 3,900,002 | ||||||
|
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, 2014 | For the Period October 8, 2013 (Commencement) to November 30, 2013 | |||
| ||||
NET ASSET VALUE, BEGINNING OF PERIOD | $24.90 | $24.42 | ||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||
Net investment income(a) | 0.83 | 0.11 | ||
Net realized and unrealized gain | 0.11 | 0.40 | ||
| ||||
Total from investment operations | 0.94 | 0.51 | ||
| ||||
DISTRIBUTIONS: | ||||
From net investment income | (0.82) | (0.03) | ||
| ||||
Total distributions | (0.82) | (0.03) | ||
| ||||
NET INCREASE IN NET ASSET VALUE | 0.12 | 0.48 | ||
| ||||
NET ASSET VALUE, END OF PERIOD | $25.02 | $24.90 | ||
| ||||
TOTAL RETURN(b) | 3.80% | 2.08% | ||
RATIOS/SUPPLEMENTAL DATA: | ||||
Net assets, end of period (000s) | $369,065 | $97,102 | ||
Ratio of expenses excluding waiver/reimbursement to average net assets | 0.46% | 0.46%(c) | ||
Ratio of expenses including waiver/reimbursement to average net assets | 0.22% | 0.22%(c) | ||
Ratio of net investment income including expenses waiver/reimbursement to average net assets | 3.30% | 3.28%(c) | ||
Portfolio turnover rate(d) | 27% | 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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RiverFront Strategic Income Fund | ||
| ||
Notes to Financial Statements | November 30, 2014 | |
|
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, 2014, the Trust consists of sixteen 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’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.
Pursuant to 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.
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. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
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 NASDAQ Stock Market LLC (“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.
Fixed-income obligations 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.
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.
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| ||
Notes to Financial Statements | November 30, 2014 | |
|
B. 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 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 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, 2014:
Investments in Securities at Value* | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
| ||||||||||||||||
Corporate Bonds | $ | – | $ | 353,447,062 | $ | – | $ | 353,447,062 | ||||||||
Short Term Investments | 10,230,147 | – | – | 10,230,147 | ||||||||||||
| ||||||||||||||||
TOTAL | $ | 10,230,147 | $ | 353,447,062 | $ | – | $ | 363,677,209 | ||||||||
|
*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 year ended November 30, 2014, 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, 2014 | |
|
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 and capital gains distributions, if any, are 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 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.
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 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, 2014, 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:
Accumulated Net Realized | ||||||||
Fund | Paid-in Capital | Loss on Investments | ||||||
| ||||||||
RiverFront Strategic Income Fund | $ | 167,944 | $ | (167,944) |
Net investment income and net realized gain, as disclosed on the Statement of Operations, and net assets were not affected by these reclassifications.
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 | ||||
| ||||
November 30, 2014 | ||||
RiverFront Strategic Income Fund | $ | 9,145,080 | ||
November 30, 2013 | ||||
RiverFront Strategic Income Fund | $ | 111,992 |
As of November 30, 2014, the components of distributable earnings on a tax basis were as follows:
RiverFront Strategic | ||||
Income Fund | ||||
Undistributed net investment income | $ | 234,667 | ||
Accumulated net realized gain on investments | 24,726 | |||
Net unrealized appreciation on investments | 22,427 | |||
| ||||
Total | $ | 281,820 | ||
|
As of November 30, 2014, 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 Unrealized Appreciation | Cost of Investments for Income Tax Purposes | |||||||||||||
| ||||||||||||||||
RiverFront Strategic Income Fund | $ | 1,392,875 | $ | (1,370,448) | $ | 22,427 | $ | 363,654,782 |
13 | November 30, 2014
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| ||
Notes to Financial Statements | November 30, 2014 | |
|
F. 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, 2014, 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, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “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 Adviser an annual management fee for the services and facilities it provides equal to 0.22% of the Fund’s average daily net assets.
Out of the advisory fee, the Adviser pays substantially all expenses of the Fund, including the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for interest expenses, 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. The Adviser’s unitary management fee is designed to pay substantially all of the Fund’s expenses and to compensate the Adviser for providing services for the Fund.
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 it provides, payable on a monthly 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 March 31, 2015. This waiver may only be terminated by the Fund’s Board (and not by the Fund’s Sub-Adviser) prior to such date.
The Fund’s total annual management fees of 0.46% consists of 0.22% paid to the Fund’s adviser and a fee of 0.24% paid to the Fund’s sub-adviser.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee of $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings.
4. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 2014, the cost of purchases and proceeds from sales of investment securities, excluding in-kind transactions and short-term investments, were as follows:
Fund | Purchases | Sales | ||||||
| ||||||||
RiverFront Strategic Income Fund | $ | 126,002,323 | $ | 68,601,048 |
For the year ended November 30, 2014, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
| ||||||||
RiverFront Strategic Income Fund | $ | 229,434,348 | $ | 22,026,939 |
Gains on in-kind transactions are not considered taxable for federal income tax purposes.
14 | November 30, 2014
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Notes to Financial Statements | November 30, 2014 | |
|
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.
15 | November 30, 2014
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| ||
Additional Information | November 30, 2014 (Unaudited) | |
|
PROXY VOTING POLICIES AND PROCEDURES
The Trust is required to disclose annually each Fund’s complete proxy voting record on Form N-PX covering the period July 1 through June 30 and file it with the SEC no later than August 31. Form N-PX for each Fund also will be available at no charge upon request by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203. Each Fund’s Form N-PX also is available on the SEC’s website at www.sec.gov.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of each Fund’s portfolio holdings with the SEC on Form N-Q. The Trust will also disclose a complete schedule of each Fund’s portfolio holdings with the SEC on Form N-CSR after its second and fourth quarters. Form N-Q and Form N-CSR for each Fund will be available on the SEC’s website at http://www.sec.gov. Each Fund’s Form N-Q and Form N-CSR may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-202-551-5850. Each Fund’s Form N-Q and Form N-CSR will be available without charge, upon request, by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
16 | November 30, 2014
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RiverFront Strategic Income Fund | ||
| ||
Trustees & Officers | November 30, 2014 (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 | 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. | 45 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder and Chief Financial Officer of Green Alpha Advisors, LLC. Mr. Deems is Co-Portfolio Manager of the Shelton Green Alpha Fund. 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 1998 to June 2007. | 45 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 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 Board member, 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, Prosci Inc. (private business services), 2013 – present; Board Member, Citywide Banks (Colorado community bank) 2014 – present; Director, National Western Stock Show (not-for- profit organization); Director, Biennial of the Americas (not-for-profit organization). | 23 | 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. |
17 | November 30, 2014
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| ||
Trustees & Officers | November 30, 2014 (Unaudited) | |
|
INTERESTED TRUSTEE
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 | |||||
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”), and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”) and ALPS Distributors, Inc. (“ADI”). 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 (9 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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RiverFront Strategic Income Fund | ||
| ||
Trustees & Officers | November 30, 2014 (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 H. Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars is Vice President and 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. 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, Broadview Funds Trust, BLDRS Index Funds Trust and Powershares QQQ Trust. | |||
William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer of AAI (since 2006); President and Chief Executive Officer 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 ALPS Advisors, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson is also Secretary of the Principal Real Estate Income Fund since 2014, 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. Because of her position with ALPS, Ms. Nelson is deemed an affiliate of the Trust as defined under the 1940 Act. | |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Assistant Vice-Principal and Paralegal Manager of ALPS. 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. |
19 | November 30, 2014
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Table of Contents
Table of Contents
CONTENTS
1 | ||||
7 | ||||
8 | ||||
Financial Statements | ||||
Schedule of Investments | ||||
9 | ||||
11 | ||||
13 | ||||
15 | ||||
16 | ||||
Statements of Changes of Net Assets | ||||
17 | ||||
18 | ||||
19 | ||||
20 | ||||
23 | ||||
29 | ||||
Board Considerations Regarding Approval of Investment Advisory Agreement | 31 | |||
32 |
www.alpsfunds.com
Table of Contents
Performance Overview | November 30, 2014 (Unaudited) |
Investment Objective
The ALPS Sector Dividend Dogs ETF (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 “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 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® (“SPX”) on a sector-by-sector basis. “Dividend Dogs” refers to the five stocks in each of the ten Global Industry Classification 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 twelve month period ended November 30, 2014, generated a total return of 18.99% (18.96% NAV) in-line with the Fund’s Underlying Index, net of fees, which returned 19.59% and outperformed the S&P 500® which returned 16.86% for the same period.
The trailing twelve month yield for the fund’s constituents as of 11/30/2014 was 3.77% vs. 2.21% on the S&P 500®.
Compared to the S&P 500®, the Fund had a moderate negative impact (-1.34%) from sector allocation which was largely driven by the modest underweights resulting from the equal sector weight strategy in Information Technology (10.03% vs. 18.94% in SPX) and Health Care (10.01% vs. 13.42% in SPX), as well as the overweight in Telecommunication Services relative to SPX (10.16% vs. 2.36%). The Fund’s overweight allocation to Utilities (10.13% vs. 3.03% in SPX) helped the fund’s performance. The fund also saw a significant positive impact (3.85%) from security selection.
The best performing stocks for the period were Frontier Communications Group (Ticker: FTR), which increased 62.51%; Intel Corp (Ticker: INTC), which saw a gain of 61.26%; and Pepco Holdings (Ticker: POM), which rose 51.10%. The largest detractors were Diamond Offshore Drilling (Ticker: DO), which decreased 47.09%; Freeport- McMoran Inc (Ticker: FCX), which fell 23.29%; and Newmont Mining Corp (Ticker: NEM), which lost 19.86%.
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.
Performance (as of November 30, 2014)
1 Year | Since Inception^ | |||
ALPS Sector Dividend Dogs ETF – NAV | 18.96% | 24.23% | ||
ALPS Sector Dividend Dogs ETF – Market Price* | 18.99% | 24.26% | ||
S-Network® Sector Dividend Dogs TR Index | 19.59% | 24.85% | ||
S&P 500® Total Return Index | 16.86% | 21.38% |
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.
^ | The Fund Commencement Date was June 29, 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. |
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 Index is a portfolio of fifty stocks derived from the S&P 500® Index.
The S&P 500® Total Return Index is an index of 500 stocks chosen for market size, liquidity and industry grouping among other factors.
An investor cannot invest directly in an index.
1 | November 30, 2014
Table of Contents
ALPS Sector Dividend Dogs ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
Top 10 Holdings* (as of November 30, 2014)
Leggett & Platt, Inc. | 2.32% | |
Darden Restaurants, Inc. | 2.32% | |
AbbVie, Inc. | 2.32% | |
Altria Group, Inc. | 2.26% | |
Reynolds American, Inc. | 2.22% | |
TECO Energy, Inc. | 2.20% | |
Paychex, Inc. | 2.19% | |
Entergy Corp. | 2.15% | |
EI du Pont de Nemours & Co. | 2.13% | |
Frontier Communications Corp. | 2.13% | |
Total % of Top 10 Holdings | 22.24% |
* | % of Total Investments. |
Future holdings are subject to change.
Sector Allocation* (as of November 30, 2014)
Financials | 11.87% | |
Consumer Discretionary | 10.78% | |
Consumer Staples | 10.57% | |
Utilities | 10.54% | |
Information Technology | 10.32% | |
Health Care | 10.24% | |
Telecommunication Services | 9.91% | |
Energy | 8.81% | |
Materials | 8.75% | |
Industrials | 7.93% | |
Money Market Funds | 0.28% | |
Total | 100.00% |
Growth of $10,000 (as of November 30, 2014)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
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.
2 | November 30, 2014
Table of Contents
ALPS International Sector Dividend Dogs ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
Investment Objective
The ALPS International Sector Dividend Dogs ETF (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 “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 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-Net International Developed Markets (ex-Americas) Index, a universe of mainly large capitalization stocks in international developed markets not located in the Americas (the “S-Net Developed Markets”) on a sector-by-sector basis. “Dividend Dogs” refers to the five stocks in each of the ten Global Industry Classification Standard (“GICS”) sectors that make up the S-Net Developed Markets which offer the highest dividend yields.
Performance Overview
ALPS International Sector Dividend Dogs ETF (IDOG), for the twelve month period ended November 30, 2014, generated a total return of -2.85% (-2.53% NAV) in-line with the Fund’s Net Total Return Index, net of fees, which returned -2.18%, and underperformed the MSCI EAFE® Index (MXEA) which returned -0.01% for the same period.
The trailing twelve month yield for the fund’s constituents as of 11/30/2014 was 4.98% vs. 3.37% on the MSCI EAFE®.
Compared to the MSCI EAFE®, the fund saw a slight positive impact (0.80%) from sector allocation which was largely driven by the modest overweight resulting from the equal sector weight strategy in Utilities (10.05% vs. 3.75% in MXEA) and Information Technology (10.00% vs. 4.51% in MXEA). Adversely affecting the Fund’s performance was a modest overweight in Energy relative to the MSCI EAFE (9.93% vs. 6.89%). The fund also saw relative underperformance (-2.06%) attributed to security selection.
The best performing stocks for the period were Belgacom SA (Ticker: BELG BB), which increased 46.90%; Spark New Zealand Ltd (Ticker: SPK NZ), which increased 36.52%; and Hoya Corp (Ticker: 7741 JP), which increased 34.09%. The worst performing stocks were Seadrill Ltd (Ticker: SDRL NO), which decreased 60.51%; Portugal Telecom SGPS SA- Reg (Ticker: PTC PL), which fell 56.72%; and Tesco PLC (Ticker: TSCO LN), which decreased 46.95%.
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.
Performance (as of November 30, 2014)
1 Year | Since Inception^ | |||
ALPS International Sector Dividend Dogs ETF – NAV | -2.53% | 10.11% | ||
ALPS International Sector Dividend Dogs ETF – Market Price* | -2.85% | 10.20% | ||
S-Network® Int’l Sector Dividend Dogs TR Index | -1.31% | 11.52% | ||
S-Network® Int’l Sector Dividend Dogs NTR Index | -2.18% | 10.48% | ||
MSCI EAFE NR | -0.01% | 11.16% |
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.
^ | The Fund Commencement Date was June 28, 2013. |
* | 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. |
3 | November 30, 2014
Table of Contents
ALPS International Sector Dividend Dogs ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
The S-Network® International Sector Dividend Dogs NTR 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. The Index is a portfolio of fifty stocks derived from the S-Net International Developed Markets Index (ex-Americas) Index.
MSCI EAFE Index is a stock market index that is designed to measure the equity market performance of developed markets outside of the U.S. & Canada.
An investor cannot invest directly in an index.
Top 10 Holdings* (as of November 30, 2014)
Belgacom SA | 2.41% | |
UPM-Kymmene OYJ | 2.40% | |
Hoya Corp. | 2.36% | |
Japan Airlines Co., Ltd. | 2.33% | |
Swedbank AB, Class A | 2.32% | |
SSE Plc | 2.28% | |
Stora Enso OYJ, Class R | 2.26% | |
Zurich Insurance Group AG | 2.26% | |
Fortum OYJ | 2.22% | |
Imperial Tobacco Group Plc | 2.22% | |
Total % of Top 10 Holdings | 23.06% |
* | % of Total Investments. |
Future holdings are subject to change.
Sector Allocation* (as of November 30, 2014)
Utilities | 10.70% | |
Information Technology | 10.56% | |
Materials | 10.43% | |
Telecommunication Services | 10.42% | |
Financials | 10.40% | |
Health Care | 10.11% | |
Consumer Discretionary | 10.07% | |
Industrials | 10.03% | |
Consumer Staples | 9.36% | |
Energy | 7.92% | |
Total | 100.00% |
Growth of $10,000 (as of November 30, 2014)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
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 | November 30, 2014
Table of Contents
ALPS Emerging Sector Dividend Dogs ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
Investment Objective
The ALPS Emerging Sector Dividend Dogs ETF (the “Fund”) seeks investment results that replicate as closely as possible, before fees and expenses, the performance of the S-Network® Emerging Sector Dividend Dogs Index (the “Index”). The Shares of the Fund are listed and trade on the New York Stock Exchange (“NYSE”) Arca under the ticker symbol EDOG. 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 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-Network® Emerging Markets Index, a universe of mainly large capitalization stocks domiciled in emerging markets (the “S-Network Emerging Markets”) on a sector-by-sector basis. “Dividend Dogs” refers to the five stocks in each of the ten Global Industry Classification Standard (“GICS”) sectors that make up the S-Network® Emerging Markets which offer the highest dividend yields. Emerging market countries are countries that major international financial institutions, such as the World Bank, generally consider to be less economically mature than developed nations.
Performance Overview
ALPS Emerging Sector Dividend Dogs ETF (EDOG), since the Fund’s inception on 3/28/14, and for the period ended November 30, 2014, generated a total return of 9.01% (8.93% NAV), in-line with the Fund’s Net Total Return Index, net of fees, which returned 9.46%, and outperformed the MSCI Emerging Markets Index® which returned 5.04% for the same period.
The trailing twelve month yield for the fund’s constituents as of 11/30/2014 was 4.84% vs. 2.69% on the MSCI EM®.
Compared to the MSCI EM®, the fund saw a modest positive impact (0.45%) from sector allocation which was largely driven by the moderate over-weights resulting from the equal sector weight strategy in Health Care (10.09% vs. 1.91% in MSCI EM) and Utilities (10.10% vs. 3.53% in MSCI EM). Conversely, the fund’s performance was hurt by the underweight in Financials relative to the MSCI EM Index (9.95% vs. 27.30% respectively). The fund also saw strong relative outperformance (3.57%) due to security selection.
The best performing stocks for the period were China Molybdenum Co (Ticker: 3993 HK), which increased 73.19%; Dogus Otomotiv Servis (Ticker: DOAS TI), which returned 65.41%; and Bumrungrad Hospital Pub Co (Ticker: BH TB), which rose 51.61%. The worst performing stocks were Ecopetrol SA- Sponsored ADR (Ticker: EC), which lost 46.22%; African Bank Investments Ltd (Ticker: ABL SJ), which fell 35.36%; and Kumba Iron Ore Ltd (Ticker: KIO SJ), which decreased 32.19%.
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 Emerging Markets Index will provide high yield relative to the MSCI Emerging Markets Index®, 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.
Performance (as of November 30, 2014)
Since Inception^ | ||
ALPS Emerging Sector Dividend Dogs ETF – NAV | 8.93% | |
ALPS Emerging Sector Dividend Dogs ETF – Market Price* | 9.01% | |
S-Network® Emerging Sector Dividend Dogs TR Index | 9.98% | |
S-Network® Emerging Sector Dividend Dogs NTR Index | 9.46% | |
MSCI EM TR Net Index | 5.04% |
Total Expense Ratio (per the current prospectus) 0.60%.
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 Commencement Date was March 28, 2014. 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. |
5 | November 30, 2014
Table of Contents
ALPS Emerging Sector Dividend Dogs ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
The S-Network® Emerging Sector Dividend Dogs Index (Ticker: EDOGX) is a portfolio of stocks derived from a universe of mainly large capitalization stocks domiciled in emerging markets (the “S-Network Emerging Markets Index” “SNEMX”). The EDOGX methodology selects the five stocks in each of the ten GICS sectors that make up the universe which offer the highest dividend yields as of the last trading day of November. The fifty stocks that are selected for inclusion in the portfolio are equally weighted. The universe includes stocks whose domicile and primary exchange listings are in countries identified by the World Bank as Upper Middle Income (certain lower middle income countries are also included, as well as stocks traded on the Taiwan Stock Exchange despite non-recognition by the World Bank). The selection criteria for the universe, in addition to the aforementioned country qualifications, also include requirements for sector inclusion, primary exchange listing, minimum market capitalization, share price, average daily trading volume and other factors.
The MSCI Emerging Markets Index is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.
An investor cannot invest directly in an index.
Top 10 Holdings* (as of November 30, 2014)
Dogus Otomotiv Servis ve Ticaret AS | 2.77% | |
Tofas Turk Otomobil Fabrikasi AS | 2.60% | |
Foschini Group, Ltd. | 2.60% | |
Asseco Poland SA | 2.50% | |
Infosys Ltd., Sponsored ADR | 2.47% | |
Tekfen Holding AS | 2.44% | |
AVI, Ltd. | 2.43% | |
Turk Telekomunikasyon AS | 2.42% | |
Delta Electronics Thailand Pcl | 2.40% | |
Zhejiang Expressway Co., Ltd., Class H | 2.31% | |
Total % of Top 10 Holdings | 24.94% |
* | % of Total Investments. |
Future holdings are subject to change.
Sector Allocation* (as of November 30, 2014)
Consumer Discretionary | 11.58% | |
Information Technology | 11.17% | |
Industrials | 10.59% | |
Utilities | 10.15% | |
Consumer Staples | 10.04% | |
Telecommunication Services | 10.01% | |
Financials | 9.70% | |
Materials | 9.46% | |
Energy | 8.53% | |
Health Care | 8.07% | |
Money Market Funds | 0.70% | |
Total | 100.00% |
Growth of $10,000 (as of November 30, 2014)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
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 | November 30, 2014
Table of Contents
Disclosure of Fund Expenses | November 30, 2014 (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, 2014.
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 6/1/14 | Ending Account 11/30/14 | Expense Ratio(a) | Expenses Paid During Period 6/1/14 - 11/30/14(b) | |||||||||||||||||
ALPS Sector Dividend Dogs ETF | ||||||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,072.20 | 0.40 | % | $ | 2.08 | ||||||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,023.06 | 0.40 | % | $ | 2.03 | ||||||||||||
ALPS International Sector Dividend Dogs ETF | ||||||||||||||||||||
Actual | �� | $ | 1,000.00 | $ | 894.60 | 0.50 | % | $ | 2.37 | |||||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.56 | 0.50 | % | $ | 2.54 | ||||||||||||
ALPS Emerging Sector Dividend Dogs ETF | ||||||||||||||||||||
Actual | $ | 1,000.00 | $ | 1,015.00 | 0.60 | % | $ | 3.03 | ||||||||||||
Hypothetical (5% return before expenses) | $ | 1,000.00 | $ | 1,022.06 | 0.60 | % | $ | 3.04 |
(a) | Annualized based on the Fund’s most recent 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. |
7 | November 30, 2014
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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 statements of assets and liabilities, including the schedules of investments, of ALPS Sector Dividend Dogs ETF, ALPS International Sector Dividend Dogs ETF and ALPS Emerging Sector Dividend Dogs ETF, three of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2014, and the related statements of operations, changes in net assets, 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, 2014, 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 ALPS Sector Dividend Dogs ETF, ALPS International Sector Dividend Dogs ETF and ALPS Emerging Sector Dividend Dogs ETF of the ALPS ETF Trust as of November 30, 2014, 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 29, 2015
8 | November 30, 2014
Table of Contents
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||||
COMMON STOCKS (99.38%) |
| |||||||||
Consumer Discretionary (10.74%) |
| |||||||||
Cablevision Systems Corp., Class A | 1,032,627 | $ | 20,982,981 | |||||||
Darden Restaurants, Inc. | 415,605 | 23,685,329 | ||||||||
Garmin, Ltd. | 369,421 | 21,167,823 | ||||||||
Leggett & Platt, Inc. | 563,547 | 23,719,693 | ||||||||
McDonald’s Corp. | 211,861 | 20,510,263 | ||||||||
|
| |||||||||
Total Consumer Discretionary | 110,066,089 | |||||||||
|
| |||||||||
Consumer Staples (10.54%) | ||||||||||
Altria Group, Inc. | 458,211 | 23,029,685 | ||||||||
Kraft Foods Group, Inc. | 342,626 | 20,615,806 | ||||||||
Lorillard, Inc. | 334,739 | 21,135,421 | ||||||||
Philip Morris International, Inc. | 235,403 | 20,463,583 | ||||||||
Reynolds American, Inc. | 344,565 | 22,710,279 | ||||||||
|
| |||||||||
Total Consumer Staples | 107,954,774 | |||||||||
|
| |||||||||
Energy (8.77%) | ||||||||||
ConocoPhillips | 252,109 | 16,656,842 | ||||||||
Diamond Offshore Drilling, Inc. | 496,478 | 14,581,559 | ||||||||
Kinder Morgan, Inc. | 523,720 | 21,655,822 | ||||||||
Spectra Energy Corp. | 496,416 | 18,804,238 | ||||||||
The Williams Cos., Inc. | 351,856 | 18,208,548 | ||||||||
|
| |||||||||
Total Energy | 89,907,009 | |||||||||
|
| |||||||||
Financials (11.83%) | ||||||||||
BB&T Corp. | 518,232 | 19,480,341 | ||||||||
Cincinnati Financial Corp. | 411,627 | 20,972,396 | ||||||||
Invesco, Ltd. | 484,739 | 19,564,066 | ||||||||
Iron Mountain, Inc., REIT | 548,762 | 20,858,443 | ||||||||
People’s United Financial, Inc. | 1,316,621 | 19,459,658 | ||||||||
Wells Fargo & Co. | 382,514 | 20,839,363 | ||||||||
|
| |||||||||
Total Financials | 121,174,267 | |||||||||
|
| |||||||||
Health Care (10.21%) | ||||||||||
AbbVie, Inc. | 341,689 | 23,644,878 | ||||||||
Baxter International, Inc. | 264,698 | 19,322,954 | ||||||||
Eli Lilly & Co. | 302,969 | 20,638,248 | ||||||||
Merck & Co., Inc. | 332,094 | 20,058,478 | ||||||||
Pfizer, Inc. | 671,948 | 20,931,180 | ||||||||
|
| |||||||||
Total Health Care | 104,595,738 | |||||||||
|
| |||||||||
Industrials (7.90%) | ||||||||||
General Electric Co. | 764,465 | 20,250,678 | ||||||||
Lockheed Martin Corp. | 113,376 | 21,718,307 | ||||||||
Pitney Bowes, Inc. | 745,381 | 18,351,280 | ||||||||
Waste Management, Inc. | 422,544 | 20,590,569 | ||||||||
|
| |||||||||
Total Industrials | 80,910,834 | |||||||||
|
| |||||||||
Information Technology (10.29%) | ||||||||||
CA, Inc. | 693,910 | 21,615,297 | ||||||||
Intel Corp. | 571,257 | 21,279,323 | ||||||||
Microchip Technology, Inc. | 414,837 | 18,729,891 |
Security Description | Shares | Value | ||||||||
Information Technology (continued) | ||||||||||
Paychex, Inc. | 471,217 | $ | 22,340,398 | |||||||
Seagate Technology Plc | 324,121 | 21,427,639 | ||||||||
|
| |||||||||
Total Information Technology | 105,392,548 | |||||||||
|
| |||||||||
Materials (8.72%) | ||||||||||
EI du Pont de Nemours & Co. | 305,235 | 21,793,779 | ||||||||
Freeport-McMoRan, Inc. | 577,590 | 15,508,291 | ||||||||
Newmont Mining Corp. | 785,728 | 14,457,395 | ||||||||
Nucor Corp. | 359,820 | 19,297,147 | ||||||||
The Dow Chemical Co. | 375,437 | 18,272,519 | ||||||||
|
| |||||||||
Total Materials | 89,329,131 | |||||||||
|
| |||||||||
Telecommunication Services (9.87%) | ||||||||||
AT&T, Inc. | 573,243 | 20,281,337 | ||||||||
CenturyLink, Inc. | 500,094 | 20,388,833 | ||||||||
Frontier Communications Corp. | 3,089,984 | 21,784,387 | ||||||||
Verizon Communications, Inc. | 408,602 | 20,671,175 | ||||||||
Windstream Holdings, Inc. | 1,786,379 | 18,060,292 | ||||||||
|
| |||||||||
Total Telecommunication Services | 101,186,024 | |||||||||
|
| |||||||||
Utilities (10.51%) | ||||||||||
Entergy Corp. | 262,015 | 21,983,058 | ||||||||
Exelon Corp. | 601,760 | 21,765,659 | ||||||||
FirstEnergy Corp. | 578,557 | 21,337,182 | ||||||||
Pepco Holdings, Inc. | 729,699 | 20,066,723 | ||||||||
TECO Energy, Inc. | 1,134,582 | 22,498,761 | ||||||||
|
| |||||||||
Total Utilities | 107,651,383 | |||||||||
|
| |||||||||
TOTAL COMMON STOCKS (Cost $911,064,954) |
| 1,018,167,797 | ||||||||
|
|
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (0.28%) | ||||||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000 | %(a) | 2,830,367 | 2,830,367 | ||||||||
|
| |||||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $2,830,367) |
| 2,830,367 | ||||||||||
|
| |||||||||||
TOTAL INVESTMENTS (99.66%) (Cost $913,895,321) |
| $ | 1,020,998,164 | |||||||||
NET OTHER ASSETS AND LIABILITIES (0.34%) |
| 3,474,487 | ||||||||||
|
| |||||||||||
NET ASSETS (100.00%) | $ | 1,024,472,651 | ||||||||||
|
|
9 | November 30, 2014
Table of Contents
ALPS Sector Dividend Dogs ETF | ||
Schedule of Investments | November 30, 2014 |
(a) | Less than 0.0005%. |
Common Abbreviations:
Ltd.- Limited.
Plc- Public Limited Company.
REIT - Real Estate Investment Trust
See Notes to Financial Statements.
10 | November 30, 2014
Table of Contents
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.52%) |
| |||||||
Australia (11.47%) | ||||||||
National Australia Bank, Ltd. | 99,496 | $ | 2,759,944 | |||||
Orica, Ltd. | 174,264 | 2,698,710 | ||||||
Telstra Corp., Ltd. | 615,236 | 2,978,730 | ||||||
Wesfarmers, Ltd. | 76,605 | 2,699,879 | ||||||
Westpac Banking Corp. | 99,471 | 2,755,019 | ||||||
Woolworths, Ltd. | 96,740 | 2,561,668 | ||||||
|
| |||||||
Total Australia | 16,453,950 | |||||||
|
| |||||||
Belgium (2.40%) | ||||||||
Belgacom SA | 87,260 | 3,444,459 | ||||||
|
| |||||||
Finland (10.38%) | ||||||||
Fortum OYJ | 126,385 | 3,171,372 | ||||||
Metso OYJ | 77,197 | 2,393,058 | ||||||
Nokian Renkaat OYJ | 94,823 | 2,677,697 | ||||||
Stora Enso OYJ, Class R | 364,781 | 3,231,823 | ||||||
UPM-Kymmene OYJ | 206,132 | 3,421,821 | ||||||
|
| |||||||
Total Finland | 14,895,771 | |||||||
|
| |||||||
France (5.80%) | ||||||||
GDF Suez | 122,608 | 3,020,949 | ||||||
Sanofi | 27,346 | 2,647,517 | ||||||
Total SA | 47,423 | 2,652,990 | ||||||
|
| |||||||
Total France | 8,321,456 | |||||||
|
| |||||||
Germany (2.04%) | ||||||||
E.ON SE | 164,890 | 2,922,753 | ||||||
|
| |||||||
Greece (1.77%) | ||||||||
OPAP SA | 202,939 | 2,543,646 | ||||||
|
| |||||||
Israel (3.96%) | ||||||||
Bezeq The Israeli Telecommunication Corp., Ltd. | 1,612,440 | 2,852,813 | ||||||
Israel Chemicals, Ltd. | 414,263 | 2,829,622 | ||||||
|
| |||||||
Total Israel | 5,682,435 | |||||||
|
| |||||||
Italy (3.78%) | ||||||||
Eni SpA | 126,434 | 2,526,447 | ||||||
Terna Rete Elettrica Nazionale SpA | 599,747 | 2,896,529 | ||||||
|
| |||||||
Total Italy | 5,422,976 | |||||||
|
| |||||||
Japan (16.53%) | ||||||||
Asahi Glass Co., Ltd. | 571,100 | 2,756,520 | ||||||
Canon, Inc. | 93,986 | 3,009,626 | ||||||
Eisai Co., Ltd. | 75,859 | 2,718,949 | ||||||
Hoya Corp. | 94,802 | 3,369,957 | ||||||
Japan Airlines Co., Ltd. | 113,002 | 3,322,048 |
Security Description | Shares | Value | ||||||
Japan (continued) | ||||||||
Nippon Electric Glass Co., Ltd. | 587,562 | $ | 2,687,497 | |||||
Ricoh Co., Ltd. | 273,700 | 2,963,748 | ||||||
Takeda Pharmaceutical Co., Ltd. | 68,812 | 2,881,972 | ||||||
|
| |||||||
Total Japan | 23,710,317 | |||||||
|
| |||||||
Netherlands (1.84%) | ||||||||
Royal Dutch Shell Plc, Class A | 79,207 | 2,643,976 | ||||||
|
| |||||||
New Zealand (6.37%) | ||||||||
Sky Network Television, Ltd. | 589,822 | 2,998,389 | ||||||
SKYCITY Entertainment Group, Ltd. | 1,014,697 | 3,128,390 | ||||||
Spark New Zealand Ltd. | 1,254,059 | 3,010,450 | ||||||
|
| |||||||
Total New Zealand | 9,137,229 | |||||||
|
| |||||||
Norway (6.09%) | ||||||||
Orkla ASA | 339,670 | 2,527,390 | ||||||
Seadrill, Ltd. | 97,261 | 1,393,315 | ||||||
Statoil ASA | 110,999 | 2,096,425 | ||||||
Yara International ASA | 63,877 | 2,716,078 | ||||||
|
| |||||||
Total Norway | 8,733,208 | |||||||
|
| |||||||
Portugal (1.80%) | ||||||||
Portugal Telecom SGPS SA | 1,376,693 | 2,583,193 | ||||||
|
| |||||||
Singapore (2.12%) | ||||||||
Singapore Press Holdings, Ltd. | 922,204 | 3,033,589 | ||||||
|
| |||||||
Spain (1.94%) | ||||||||
Banco Santander SA | 309,043 | 2,785,656 | ||||||
|
| |||||||
Sweden (6.36%) | ||||||||
Sandvik AB | 263,842 | 2,763,485 | ||||||
Swedbank AB, Class A | 126,272 | 3,312,363 | ||||||
Telefonaktiebolaget LM Ericsson, Class B | 241,397 | 3,039,902 | ||||||
|
| |||||||
Total Sweden | 9,115,750 | |||||||
|
| |||||||
Switzerland (2.25%) | ||||||||
Zurich Insurance Group AG | 10,312 | 3,231,538 | ||||||
|
| |||||||
United Kingdom (12.62%) | ||||||||
AstraZeneca Plc | 41,949 | 3,132,087 | ||||||
BAE Systems Plc | 410,596 | 3,085,563 | ||||||
GlaxoSmithKline Plc | 131,569 | 3,051,858 | ||||||
Imperial Tobacco Group Plc | 68,460 | 3,165,286 | ||||||
SSE Plc | 127,188 | 3,258,175 |
11 | November 30, 2014
Table of Contents
ALPS International Sector Dividend Dogs ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
United Kingdom (continued) | ||||||||
Tesco Plc | 829,143 | $ | 2,414,772 | |||||
|
| |||||||
Total United Kingdom | 18,107,741 | |||||||
|
| |||||||
TOTAL COMMON STOCKS (Cost $154,324,566) | 142,769,643 | |||||||
|
| |||||||
TOTAL INVESTMENTS (99.52%) (Cost $154,324,566) |
| $ | 142,769,643 | |||||
NET OTHER ASSETS AND LIABILITIES (0.48%) | 691,741 | |||||||
|
| |||||||
NET ASSETS (100.00%) | $ | 143,461,384 | ||||||
|
|
Common Abbreviations:
AB - Aktiebolag is the Swedish term for corporation.
AG - Aktiengesellschaft is a German term that refers to a corporation that is limited b shares, i.e., owned by shareholders.
ASA - Allmennaksjeselskap is the Norwegian term for public limited company.
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 applicable in all Member States.
SpA - Societa per Azioni is an Italian shared company.
See Notes to Financial Statements.
12 | November 30, 2014
Table of Contents
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.12%) |
| |||||||
Brazil (9.36%) |
| |||||||
Cielo SA, Sponsored ADR | 12,763 | $ | 214,674 | |||||
EcoRodovias Infraestrutura e Logistica SA | 41,416 | 175,557 | ||||||
Natura Cosmeticos SA | 13,474 | 185,845 | ||||||
Souza Cruz SA | 27,230 | 219,211 | ||||||
Tractebel Energia SA | 14,720 | 199,084 | ||||||
|
| |||||||
Total Brazil |
| 994,371 | ||||||
|
| |||||||
Chile (2.04%) | ||||||||
Inversiones La Construccion SA | 16,630 | 217,286 | ||||||
|
| |||||||
China (8.19%) | ||||||||
China Molybdenum Co., Ltd., Class H | 326,786 | 210,265 | ||||||
Jiangsu Expressway Co., Ltd., Class H | 195,252 | 221,304 | ||||||
Lenovo Group, Ltd. | 139,317 | 195,451 | ||||||
Zhejiang Expressway Co., Ltd., Class H | 217,548 | 243,489 | ||||||
|
| |||||||
Total China |
| 870,509 | ||||||
|
| |||||||
Colombia (1.25%) | ||||||||
Ecopetrol SA, Sponsored ADR | 6,569 | 133,285 | ||||||
|
| |||||||
Czech Republic (1.92%) | ||||||||
CEZ AS | 7,341 | 204,452 | ||||||
|
| |||||||
Egypt (2.05%) | ||||||||
Telecom Egypt Co. | 108,222 | 218,259 | ||||||
|
| |||||||
India (2.45%) | ||||||||
Infosys Ltd., Sponsored ADR | 3,723 | 260,014 | ||||||
|
| |||||||
Indonesia (9.53%) | ||||||||
Astra International Tbk PT | 360,944 | 210,728 | ||||||
Indo Tambangraya Megah Tbk PT | 97,598 | 152,147 | ||||||
Kalbe Farma Tbk PT | 1,564,404 | 224,329 | ||||||
Perusahaan Gas Negara Persero Tbk PT | 438,431 | 213,755 | ||||||
Tambang Batubara Bukit Asam Persero Tbk PT | 196,743 | 211,993 | ||||||
|
| |||||||
Total Indonesia |
| 1,012,952 | ||||||
|
| |||||||
Malaysia (9.41%) | ||||||||
British American Tobacco Malaysia Bhd | 9,627 | 200,936 | ||||||
Malayan Banking Bhd | 70,698 | 197,724 | ||||||
Maxis Bhd | 111,264 | 227,956 | ||||||
Media Prima Bhd | 316,210 | 180,424 | ||||||
Top Glove Corp. Bhd | 141,326 | 192,613 | ||||||
|
| |||||||
Total Malaysia |
| 999,653 | ||||||
|
|
Security Description | Shares | Value | ||||||
Mexico (3.62%) |
| |||||||
Grupo Financiero Santander Mexico SAB de CV, Class B | 78,879 | $ | 180,509 | |||||
Kimberly-Clark de Mexico SAB de CV, Class A | 89,360 | 204,493 | ||||||
|
| |||||||
Total Mexico |
| 385,002 | ||||||
|
| |||||||
Morocco (2.07%) | ||||||||
Maroc Telecom | 16,956 | 219,981 | ||||||
|
| |||||||
Philippines (2.21%) | ||||||||
Aboitiz Power Corp. | 249,815 | 234,767 | ||||||
|
| |||||||
Poland (8.11%) | ||||||||
Asseco Poland SA | 16,389 | 262,017 | ||||||
KGHM Polska Miedz SA | 5,641 | 206,017 | ||||||
Powszechny Zaklad Ubezpieczen SA | 1,420 | 202,547 | ||||||
Synthos SA | 154,563 | 191,071 | ||||||
|
| |||||||
Total Poland |
| 861,652 | ||||||
|
| |||||||
Russia (4.94%) | ||||||||
Gazprom Neft JSC, Sponsored ADR | 11,156 | 181,397 | ||||||
MMC Norilsk Nickel OJSC, ADR | 11,341 | 201,416 | ||||||
Mobile Telesystems OJSC, Sponsored ADR | 11,624 | 142,045 | ||||||
|
| |||||||
Total Russia |
| 524,858 | ||||||
|
| |||||||
South Africa (8.67%) | ||||||||
AVI, Ltd. | 36,736 | 254,786 | ||||||
Foschini Group, Ltd. | 20,791 | 273,340 | ||||||
Kumba Iron Ore, Ltd. | 8,367 | 194,700 | ||||||
Life Healthcare Group Holdings, Ltd. | 52,549 | 198,339 | ||||||
|
| |||||||
Total South Africa |
| 921,165 | ||||||
|
| |||||||
Thailand (11.06%) | ||||||||
BTS Group Holdings Pcl | 744,372 | 226,701 | ||||||
Bumrungrad Hospital Pcl | 53,940 | 240,664 | ||||||
Delta Electronics Thailand Pcl | 111,124 | 252,977 | ||||||
Electricity Generating Pcl | 43,195 | 224,296 | ||||||
Sansiri Pcl | 3,930,554 | 231,033 | ||||||
|
| |||||||
Total Thailand |
| 1,175,671 | ||||||
|
| |||||||
Turkey (12.24%) | ||||||||
Dogus Otomotiv Servis ve Ticaret AS | 55,007 | 290,957 | ||||||
Tekfen Holding AS* | 94,351 | 256,116 | ||||||
Tofas Turk Otomobil Fabrikasi AS | 38,445 | 273,445 | ||||||
Tupras Turkiye Petrol Rafinerileri AS | 10,019 | 225,962 | ||||||
Turk Telekomunikasyon AS | 79,550 | 254,257 | ||||||
|
| |||||||
Total Turkey |
| 1,300,737 | ||||||
|
|
13 | November 30, 2014
Table of Contents
ALPS Emerging Sector Dividend Dogs ETF | ||
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||||
TOTAL COMMON STOCKS (Cost $10,482,651) | 10,534,614 | |||||||||
|
| |||||||||
WARRANTS (0.00%) | ||||||||||
Thailand (0.00%) | ||||||||||
Sansiri Public Co.,Ltd., Strike Price: 2.5 THB, Expires 11/24/2017 | 859,663 | $ | 0 | |||||||
|
| |||||||||
TOTAL WARRANTS (Cost $0) |
| 0 | ||||||||
|
| |||||||||
7 Day Yield | Shares | Value | ||||||||
SHORT TERM INVESTMENTS (0.69%) |
| |||||||||
Dreyfus Treasury Prime Cash Management, Institutional Class | 0.000%(a) | 73,737 | 73,737 | |||||||
|
| |||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $73,737) |
| 73,737 | ||||||||
|
| |||||||||
TOTAL INVESTMENTS (99.81%) (Cost $10,556,388) |
| $ | 10,608,351 | |||||||
NET OTHER ASSETS AND LIABILITIES (0.19%) |
| 20,309 | ||||||||
|
| |||||||||
NET ASSETS (100.00%) | $ | 10,628,660 | ||||||||
|
|
* | Non-income producing security. |
(a) | Less than 0.0005%. |
Common Abbreviations:
ADR - American Depositary Receipt.
AS - Andonim Sirketi is a joint stock company in Turkey.
Bhd - Berhad is a public limited company in Malaysia.
JSC - Joint Stock Company
Ltd. - Limited.
OJSC - Open Joint Stock Company.
Pcl - A rearrangement of the letters for public limited company, used
in Thailand.
SA - Generally designated corporations in various countries, mostly
those employing civil law.
SAB de CV - A variable capital company.
Tbk PT - Terbuka is the Indonesian term for limited liability
company.
See Notes to Financial Statements.
14 | November 30, 2014
Table of Contents
Statements of Assets and Liabilities | November 30, 2014 |
ALPS Sector Dividend Dogs ETF | ALPS International Sector Dividend Dogs ETF | ALPS Emerging Sector Dividend Dogs ETF | ||||||||||
ASSETS: | ||||||||||||
Investments, at value | $ | 1,020,998,164 | $ | 142,769,643 | $ | 10,608,351 | ||||||
Cash | – | – | 4 | |||||||||
Foreign currency, at value (Cost $–, $124,931 and $6,829) | – | 124,683 | 6,721 | |||||||||
Receivable for investments sold | – | 472 | 82 | |||||||||
Receivable for shares sold | 14,367 | – | – | |||||||||
Foreign tax reclaims | – | 228,545 | 110 | |||||||||
Dividends receivable | 3,785,783 | 445,244 | 18,217 | |||||||||
Total Assets | 1,024,798,314 | 143,568,587 | 10,633,485 | |||||||||
LIABILITIES: | ||||||||||||
Payable to adviser | 319,274 | 59,166 | 4,825 | |||||||||
Payable to custodian for overdraft | 6,389 | 48,037 | – | |||||||||
Total Liabilities | 325,663 | 107,203 | 4,825 | |||||||||
NET ASSETS | $ | 1,024,472,651 | $ | 143,461,384 | $ | 10,628,660 | ||||||
NET ASSETS CONSIST OF: | ||||||||||||
Paid-in capital | $ | 920,559,803 | $ | 155,937,605 | $ | 10,591,522 | ||||||
Accumulated net investment income/(loss) | 3,635,302 | (288) | (78) | |||||||||
Accumulated net realized loss on investments and foreign currency transactions | (6,825,297) | (884,434) | (14,245) | |||||||||
Net unrealized appreciation/(depreciation) on investments and translation of assets and liabilities denominated in foreign currencies | 107,102,843 | (11,591,499) | 51,461 | |||||||||
NET ASSETS | $ | 1,024,472,651 | $ | 143,461,384 | $ | 10,628,660 | ||||||
INVESTMENTS, AT COST | $ | 913,895,321 | $ | 154,324,566 | $ | 10,556,388 | ||||||
PRICING OF SHARES: | ||||||||||||
Net Assets | $ | 1,024,472,651 | $ | 143,461,384 | $ | 10,628,660 | ||||||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 26,405,255 | 5,250,002 | 400,002 | |||||||||
Net Asset Value, offering and redemption price per share | $ | 38.80 | $ | 27.33 | $ | 26.57 |
See Notes to Financial Statements. | ||
15 | November 30, 2014 |
Table of Contents
Statements of Operations | For the Year Ended November 30, 2014 |
ALPS Sector Dividend Dogs ETF | ALPS International Sector Dividend Dogs ETF | ALPS Emerging Sector Dividend Dogs ETF(a) | ||||||||||
INVESTMENT INCOME: | ||||||||||||
Dividends* | $ | 28,419,103 | $ | 5,778,953 | $ | 167,239 | ||||||
Total Investment Income | 28,419,103 | 5,778,953 | 167,239 | |||||||||
EXPENSES: | ||||||||||||
Investment adviser fees | 2,747,301 | 634,874 | 24,214 | |||||||||
Total Expense | 2,747,301 | 634,874 | 24,214 | |||||||||
NET INVESTMENT INCOME | 25,671,802 | 5,144,079 | 143,025 | |||||||||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||||||||||
Net realized gain/(loss) on investments | 30,591,250 | 1,980,581 | (13,212) | |||||||||
Net realized loss on foreign currency transactions | – | (158,391) | (22,503) | |||||||||
Net change in unrealized appreciation/(depreciation) on investments | 65,547,456 | (14,412,353) | 51,963 | |||||||||
Net change in unrealized depreciation on translation of assets and liabilities denominated in foreign currencies | – | (33,160) | (502) | |||||||||
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS | 96,138,706 | (12,623,323) | 15,746 | |||||||||
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | 121,810,508 | $ | (7,479,244) | $ | 158,771 | ||||||
*Net of foreign tax withholding. | $ | – | $ | 629,555 | $ | 19,666 |
(a) | The ALPS Emerging Sector Dividend Dogs ETF commenced operations on March 28, 2014. |
See Notes to Financial Statements. | ||
16 | November 30, 2014 |
Table of Contents
Statements of Changes in Net Assets |
For the Year Ended November 30, 2014 | For the Year Ended November 30, 2013 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 25,671,802 | $ | 8,958,302 | ||||
Net realized gain on investments | 30,591,250 | 8,873,580 | ||||||
Net change in unrealized appreciation on investments | 65,547,456 | 41,587,324 | ||||||
Net increase in net assets resulting from operations | 121,810,508 | 59,419,206 | ||||||
Net Equalization Credits | 1,695,015 | 1,073,302 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (22,702,657) | (8,610,531) | ||||||
Total distributions | (22,702,657) | (8,610,531) | ||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 633,539,564 | 401,422,165 | ||||||
Dividends reinvested | 177,537 | 11,589 | ||||||
Cost of shares redeemed | (172,629,123) | (50,733,792) | ||||||
Net income equalization (Note 2) | (1,695,015) | (1,073,302) | ||||||
Net Increase from Share Transactions | 459,392,963 | 349,626,660 | ||||||
Net increase in net assets | 560,195,829 | 401,508,637 | ||||||
NET ASSETS: | ||||||||
Beginning of year | 464,276,822 | 62,768,185 | ||||||
End of year * | $ | 1,024,472,651 | $ | 464,276,822 | ||||
* Including accumulated net investment income of: | $ | 3,635,302 | $ | 666,157 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 13,750,361 | 2,350,002 | ||||||
Shares sold | 17,650,000 | 13,100,000 | ||||||
Shares reinvested | 4,894 | 359 | ||||||
Shares redeemed | (5,000,000) | (1,700,000) | ||||||
Shares outstanding, end of year | 26,405,255 | 13,750,361 | ||||||
See Notes to Financial Statements. | ||
17 | November 30, 2014 |
Table of Contents
Statements of Changes in Net Assets |
For the Year Ended | For the Period June 28, 2013 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 5,144,079 | $ | 377,612 | ||||
Net realized gain on investments and foreign currency transactions | 1,822,190 | 128,835 | ||||||
Net change in unrealized appreciation/(depreciation) on investments and translation of assets and liabilities denominated in foreign currencies | (14,445,513 | ) | 2,854,014 | |||||
Net increase/(decrease) in net assets resulting from operations | (7,479,244 | ) | 3,360,461 | |||||
Net Equalization Credits | 406,964 | 155,512 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (5,101,215 | ) | (264,835 | ) | ||||
From tax return of capital | (311,911 | ) | – | |||||
Total distributions | (5,413,126 | ) | (264,835 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 111,986,285 | 75,749,861 | ||||||
Cost of shares redeemed | (33,043,796 | ) | (1,434,222 | ) | ||||
Net income equalization (Note 2) | (406,964 | ) | (155,512 | ) | ||||
Net Increase from Share Transactions | 78,535,525 | 74,160,127 | ||||||
Net increase in net assets | 66,050,119 | 77,411,265 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 77,411,265 | – | ||||||
End of period * | $ | 143,461,384 | $ | 77,411,265 | ||||
* Including accumulated net investment income/(loss) of: | $ | (288 | ) | $ | 111,295 | |||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 2,650,002 | – | ||||||
Shares sold | 3,750,000 | 2,700,002 | ||||||
Shares redeemed | (1,150,000 | ) | (50,000 | ) | ||||
Shares outstanding, end of period | 5,250,002 | 2,650,002 | ||||||
See Notes to Financial Statements. | ||
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Statement of Changes in Net Assets |
For the Period March 28, 2014 (Commencement) to November 30, 2014 | ||||
OPERATIONS: | ||||
Net investment income | $ | 143,025 | ||
Net realized loss on investments and foreign currency transactions | (35,715 | ) | ||
Net change in unrealized appreciation on investments and translation of assets and liabilities denominated in foreign currencies | 51,461 | |||
Net Increase in net assets resulting from operations | 158,771 | |||
Net Equalization Credits | 36,260 | |||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||
From net investment income | (121,633 | ) | ||
Dividends to shareholders from tax return of capital | (27,627 | ) | ||
Total distributions | (149,260 | ) | ||
CAPITAL SHARE TRANSACTIONS: | ||||
Proceeds from sale of Shares | 10,619,149 | |||
Net income equalization (Note 2) | (36,260 | ) | ||
Net Increase from Share Transactions | 10,582,889 | |||
Net Increase in Net Assets | 10,628,660 | |||
NET ASSETS: | ||||
Beginning of period | – | |||
End of period * | $ | 10,628,660 | ||
* Including accumulated net investment loss of: | $ | (78 | ) | |
OTHER INFORMATION: | ||||
CAPITAL SHARE TRANSACTIONS: | ||||
Beginning shares | – | |||
Shares sold | 400,002 | |||
Shares redeemed | – | |||
Shares outstanding, end of period | 400,002 |
See Notes to Financial Statements. | ||
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Table of Contents
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Year Ended November 30, 2014 | For the Year Ended November 30, 2013 | For the Period November 30, | ||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 33.76 | $ | 26.71 | $ | 25.00 | ||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||
Net investment income (a) | 1.35 | 1.12 | 0.59 | |||||||||
Net realized and unrealized gain | 4.94 | 7.14 | 1.41 | |||||||||
Total from investment operations | 6.29 | 8.26 | 2.00 | |||||||||
DISTRIBUTIONS: | ||||||||||||
From net investment income | (1.25) | (1.21) | (0.29) | |||||||||
Total distributions | (1.25) | (1.21) | (0.29) | |||||||||
Net increase in net asset value | 5.04 | 7.05 | 1.71 | |||||||||
NET ASSET VALUE, END OF PERIOD | $ | 38.80 | $ | 33.76 | $ | 26.71 | ||||||
| ||||||||||||
TOTAL RETURN(b) | 18.96 | % | 31.66 | % | 7.99 | % | ||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||
Net assets, end of period (000s) | $ | 1,024,473 | $ | 464,277 | $ | 62,768 | ||||||
Ratio of expenses to average net assets | 0.40 | % | 0.40 | % | 0.40% | (c) | ||||||
Ratio of net investment income to average net assets | 3.74 | % | 3.58 | % | 5.31% | (c) | ||||||
Portfolio turnover rate(d) | 12 | % | 8 | % | 0 | % | ||||||
Undistributed net investment income included in price of units issued and redeemed(a)(e) | $ | 0.09 | $ | 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 Periods Presented |
For the Year Ended November 30, 2014 | For the Period November 30, 2013 | |||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 29.21 | $ | 25.00 | ||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||
Net investment income(a) | 1.19 | 0.34 | ||||||
Net realized and unrealized gain/(loss) | (1.83) | 4.08 | ||||||
Total from investment operations | (0.64) | 4.42 | ||||||
DISTRIBUTIONS: | ||||||||
From net investment income | (1.17) | (0.21) | ||||||
Tax return of capital | (0.07) | 0.00 | ||||||
Total distributions | (1.24) | (0.21) | ||||||
Net increase/(decrease) in net asset value | (1.88) | 4.21 | ||||||
NET ASSET VALUE, END OF PERIOD | $ | 27.33 | $ | 29.21 | ||||
| ||||||||
TOTAL RETURN(b) | (2.53) | % | 17.72 | % | ||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||
Net assets, end of period (000s) | $ | 143,461 | $ | 77,411 | ||||
Ratio of expenses to average net assets | 0.50 | % | 0.50% | (c) | ||||
Ratio of net investment income to average net assets | 4.05 | % | 2.87% | (c) | ||||
Portfolio turnover rate(d) | 19 | % | 2 | % | ||||
Undistributed net investment income included in price of units issued and redeemed(a)(e) | $ | 0.09 | $ | 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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ALPS Emerging Sector Dividend Dogs ETF | ||
Financial Highlights | For a Share Outstanding Throughout the Period Presented |
For the Period March 28, 2014 (Commencement) to November 30, 2014 | ||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 25.00 | ||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||
Net investment income(a) | 0.64 | |||
Net realized and unrealized gain | 1.59 | |||
Total from investment operations | 2.23 | |||
DISTRIBUTIONS: | ||||
From net investment income | (0.54) | |||
Tax return of capital | (0.12) | |||
Total distributions | (0.66) | |||
Net increase in net asset value | 1.57 | |||
Net asset value, end of period | $ | 26.57 | ||
| ||||
TOTAL RETURN(b) | 8.93 | % | ||
RATIOS/SUPPLEMENTAL DATA: | ||||
Net assets, end of period (000s) | $ | 10,629 | ||
Ratio of expenses to average net assets | 0.60% | (c) | ||
Ratio of net investment income to average net assets | 3.54% | (c) | ||
Portfolio turnover rate(d) | 19 | % | ||
Undistributed net investment income included in price of units issued and redeemed(a)(e) | $ | 0.16 |
(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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Notes to Financial Statements | November 30, 2014 |
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, 2014, the Trust consists of sixteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the ALPS Sector Dividend Dogs ETF, the ALPS International Sector Dividend Dogs ETF, and the ALPS Emerging Sector Dividend Dogs ETF (each a “Fund” and collectively, the “Funds”). Each Fund has elected to qualify as a diversified series of the Trust under the 1940 Act.
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 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 investment objective of the ALPS Emerging 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 Emerging Sector Dividend Dogs Index. The Emerging Sector Dividend Dogs ETF commenced operations on March 28, 2014.
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.
Pursuant to 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.
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. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
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 NASDAQ Stock Exchange LLC (“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 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
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ALPS Sector Dividend Dogs Series | ||
Notes to Financial Statements | November 30, 2014 |
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. 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 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 | |
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, 2014:
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 | Total | ||||||||||||
Common Stocks | $ | 1,018,167,797 | $ | – | $ | – | $ | 1,018,167,797 | ||||||||
Short Term Investments | 2,830,367 | – | – | 2,830,367 | ||||||||||||
TOTAL | $ | 1,020,998,164 | $ | – | $ | – | $ | 1,020,998,164 | ||||||||
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ALPS Sector Dividend Dogs Series | ||
Notes to Financial Statements | November 30, 2014 |
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 | $ | 142,769,643 | $ | – | $ | – | $ | 142,769,643 | ||||||||
TOTAL | $ | 142,769,643 | $ | – | $ | – | $ | 142,769,643 | ||||||||
ALPS Emerging 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 | $ | 10,534,614 | $ | – | $ | – | $ | 10,534,614 | ||||||||
Warrants | – | 0 | – | 0 | ||||||||||||
Short Term Investments | 73,737 | – | – | 73,737 | ||||||||||||
TOTAL | $ | 10,608,351 | $ | 0 | $ | – | $ | 10,608,351 | ||||||||
* | For a detailed sector/country breakdown, see the accompanying Schedule of Investments. |
The Funds recognize transfers between levels as of the end of the period. For the period ended November 30, 2014, 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.
C. Foreign Securities
The ALPS International Sector Dividend Dogs ETF and the ALPS Emerging Sector Dividend 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.
E. 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 and capital gains distributions, if any, are recorded on the ex-dividend date, net of any foreign taxes withheld. Interest income, if any, is recorded on the accrual basis.
F. 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.
G. 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.
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ALPS Sector Dividend Dogs Series | ||
Notes to Financial Statements | November 30, 2014 |
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 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/period ended November 30, 2014, 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:
Fund | Paid-in Capital | Accumulated Net Investment Loss | Accumulated Net Realized Gain/(Loss) on Investments | |||||||||
ALPS Sector Dividend Dogs ETF | $ | 35,864,417 | $ | – | $ | (35,864,417) | ||||||
ALPS International Sector Dividend Dogs ETF | $ | 2,853,911 | $ | (154,447) | $ | (2,699,464) | ||||||
ALPS Emerging Sector Dividend Dogs ETF | $ | – | $ | (21,470) | $ | 21,470 |
Net investment income and net realized gain/(loss), as disclosed on the Statement of Operations and net assets were not affected by this reclassification.
At November 30, 2014, the Funds had available for tax purposes unused capital loss carryforwards as follows:
Short-Term | Long-Term | |||||||
ALPS Sector Dividend Dogs ETF | $ | 1,147,672 | $ | 3,718,418 | ||||
ALPS International Sector Dividend Dogs ETF | 377,813 | 14,171 |
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.
The tax character of the distributions paid was as follows:
Ordinary Income | Long-Term Capital Gain | Return of Capital | ||||||||||
November 30, 2014 | ||||||||||||
ALPS Sector Dividend Dogs ETF | $ | 22,702,657 | $ | – | $ | – | ||||||
ALPS International Sector Dividend Dogs ETF | 5,101,215 | – | 311,911 | |||||||||
ALPS Emerging Sector Dividend Dogs ETF | 121,633 | – | 27,627 | |||||||||
November 30, 2013 | ||||||||||||
ALPS Sector Dividend Dogs ETF | $ | 8,609,806 | 725 | $ | – | |||||||
ALPS International Sector Dividend Dogs ETF | 264,835 | – | – |
As of November 30, 2014, the components of distributable earnings on a tax basis for the Funds were as follows:
ALPS Sector Dividend Dogs ETF | ALPS International Sector Dividend Dogs ETF | ALPS Emerging Sector Dividend Dogs ETF | ||||||||||
Undistributed net investment income | $ | 3,635,302 | $ | – | $ | – | ||||||
Accumulated net realized loss on investments | (4,866,090) | (391,984) | – | |||||||||
Other accumulated losses | – | (288) | (78) | |||||||||
Net unrealized appreciation/(depreciation) on investments | 105,143,636 | (12,083,949) | 37,216 | |||||||||
Total | $ | 103,912,848 | $ | (12,476,221) | $ | 37,138 | ||||||
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ALPS Sector Dividend Dogs Series | ||
Notes to Financial Statements | November 30, 2014 |
As of November 30, 2014, 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 Sector Dividend Dogs ETF | ALPS Emerging Sector Dividend Dogs ETF | ||||||||||
Gross appreciation (excess of value over tax cost) | $ | 124,820,566 | $ | 4,628,964 | $ | 654,651 | ||||||
Gross depreciation (excess of tax cost over value) | (19,676,930) | (16,676,337) | (616,933) | |||||||||
Other cumulative effect of timing differences | – | (36,576) | (502) | |||||||||
Net unrealized appreciation (depreciation) | 105,143,636 | (12,083,949) | 37,216 | |||||||||
Cost of investments for income tax purposes | $ | 915,854,528 | $ | 154,817,016 | $ | 10,570,633 | ||||||
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 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, 2014, 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, but may extend to four years in certain jurisdictions. For ALPS Sector Dividend Dogs ETF and ALPS International Sector Dividend Dogs ETF, tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes. Being that the ALPS Emerging Sector Dividend Dogs ETF commenced operations on March 28, 2014, no tax returns have been filed as of the date of this report.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “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 Adviser a unitary fee for the services and facilities it provides payable on a monthly basis as a percentage of the relevant Fund’s average daily net assets as set out below. From time to time, the 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% | |||
ALPS Emerging Sector Dividend Dogs ETF | 0.60% |
Out of the unitary management fee, the Investment Adviser pays substantially all expenses of each Fund, including the cost of transfer agency, custody, fund administration, legal, audit, independent 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 each Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all of each Fund’s expenses and to compensate the Adviser for providing services for each Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator for the Funds.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee of $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings.
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ALPS Sector Dividend Dogs Series | ||
Notes to Financial Statements | November 30, 2014 |
4. PURCHASES AND SALES OF SECURITIES
For the period or year ended November 30, 2014, 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 Sector Dividend Dogs ETF | $ | 219,480,835 | $ | 83,841,527 | ||||
ALPS International Sector Dividend Dogs ETF | 42,063,853 | 24,246,019 | ||||||
ALPS Emerging Sector Dividend Dogs ETF | 5,638,614 | 1,109,347 |
For the period or year ended November 30, 2014, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
ALPS Sector Dividend Dogs ETF | $ | 495,761,844 | $ | 169,892,659 | ||||
ALPS International Sector Dividend Dogs ETF | 90,946,452 | 30,565,770 | ||||||
ALPS Emerging Sector Dividend Dogs ETF | 5,966,596 | – |
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.
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Additional Information | November 30, 2014 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
The Trust is required to disclose annually each Fund’s complete proxy voting record on Form N-PX covering the period July 1 through June 30 and file it with the SEC no later than August 31. Form N-PX for each Fund also will be available at no charge upon request by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203. Each Fund’s Form N-PX also is available on the SEC’s website at www.sec.gov.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of each Fund’s portfolio holdings with the SEC on Form N-Q. The Trust will also disclose a complete schedule of each Fund’s portfolio holdings with the SEC on Form N-CSR after its second and fourth quarters. Form N-Q and Form N-CSR for each Fund will be available on the SEC’s website at http://www.sec.gov. Each Fund’s Form N-Q and Form N-CSR may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-202-551-5850. Each Fund’s Form N-Q and Form N-CSR will be available without charge, upon request, by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
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 | $ | 584,193 | $ | 6,118,222 | ||||
ALPS Emerging Sector Dividend Dogs ETF | $ | 16,122 | $ | 166,197 |
The following Fund designates for federal income purposes for distributions made during the calendar year ended December 31, 2013:
Qualified Dividend Income | Dividend Received Deduction | |||
ALPS International Sector Dividend Dogs ETF | 64.13% | 0.00% | ||
ALPS Sector Dividend Dogs ETF | 84.07% | 83.06% |
In early 2014, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2013 via Form 1099. The Fund will notify shareholders in early 2015 of amounts paid to them by the Funds, if any, during the calendar year 2014.
LICENSING AGREEMENTS
ALPS Sector Dividend Dogs ETF
S-Network® Sector Dividend Dogs Index is a service mark of S-Network Global Indexes, Inc. and has been licensed for use by ALPS Advisors, Inc. The ALPS Sector Dividend Dogs ETF is not sponsored, endorsed, sold or promoted by S-Network Global Indexes, Inc. and S-Network Global Indexes, Inc. makes no representation regarding the advisability of investing in the ALPS Sector Dividend Dogs ETF.
The ALPS Sector Dividend Dogs ETF is not sponsored, endorsed, sold or promoted by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) or its third party licensors. Neither S&P nor its third party licensors make any representation or warranty, express or implied, to the owners of the or ALPS Sector Dividend Dogs ETF any member of the public regarding the advisability of investing in securities generally or in the ALPS Sector Dividend Dogs ETF particularly or the ability of the S-Network® Sector Dividend Dogs Index to track general stock market performance. S&P’s and its third party licensor’s only relationship to S-Network Global Indexes, LLC is the licensing of certain trademarks, service marks and trade names of S&P and/or its third party licensors and for the providing of calculation and maintenance services related to the S-Network® Sector Dividend Dogs Index. Neither S&P nor its third party licensors is responsible for and has not participated in the determination of the prices and amount of the ALPS Sector Dividend Dogs ETF or the timing of the issuance or sale of the ALPS Sector Dividend Dogs ETF or in the determination or calculation of the equation by which the ALPS Sector Dividend Dogs ETF is to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the ALPS Sector Dividend Dogs ETF.
NEITHER S&P, ITS AFFILIATES NOR THEIR THIRD PARTY LICENSORS GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE S-NETWORK® SECTOR DIVIDEND DOGS INDEX OR ANY DATA INCLUDED THEREIN OR ANY COMMUNICATIONS, INCLUDING BUT NOT LIMITED
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ALPS Sector Dividend Dogs Series | ||
Additional Information | November 30, 2014 (Unaudited) |
TO, ORAL OR WRITTEN COMMUNICATIONS (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P, ITS AFFILIATES AND THEIR THIRD PARTY LICENSORS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS OR DELAYS THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO ITS TRADEMARKS, THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P, ITS AFFILIATES OR THEIR THIRD PARTY LICENSORS BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE.
Standard & Poor’s®, and S&P® are registered trademarks of The McGraw-Hill Companies, Inc.; “Calculated by S&P Custom Indices” and its related stylized mark are service marks of The McGraw-Hill Companies, Inc. These marks have been licensed for use by S-Network Global Indexes, LLC.
ALPS International Sector Dividend Dogs ETF
S-Network® International Sector Dividend Dogs Index is a service mark of S-Network Global Indexes, Inc. and has been licensed for use by ALPS Advisors, Inc. The ALPS International Sector Dividend Dogs ETF is not sponsored, endorsed, sold or promoted by S-Network Global Indexes, Inc. and S-Network Global Indexes, Inc. makes no representation regarding the advisability of investing in the ALPS International Sector Dividend Dogs ETF.
ALPS Emerging Sector Dividend Dogs ETF
S-Network® Emerging Sector Dividend Dogs Index is a service mark of S-Network Global Indexes, Inc. and has been licensed for use by ALPS Advisors, Inc. The ALPS Emerging Sector Dividend Dogs ETF is not sponsored, endorsed, sold or promoted by S-Network Global Indexes, Inc. and S-Network Global Indexes, Inc. makes no representation regarding the advisability of investing in the ALPS Emerging Sector Dividend Dogs ETF.
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Board Considerations Regarding Approval of Investment Advisory Agreement | November 30, 2014 (Unaudited) |
At an in-person meeting held on June 9, 2014, 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 the Investment Adviser with respect to the ALPS Sector Dividend Dogs ETF (“SDOG”). The Independent Trustees also met separately to consider the Advisory Agreement.
In evaluating whether to approve the Advisory Agreement for SDOG, the Board considered numerous factors, including (i) the nature, extent and quality of the services to be provided by the Adviser with respect to SDOG under the Advisory Agreement, (ii) the advisory fees and other expenses to be paid by SDOG compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to SDOG by the Adviser and the profits realized by the Adviser and its affiliates from its relationship to SDOG; (iv) the extent to which economies of scale would be realized if and as SDOG assets increase and whether the fee level in the Advisory Agreement reflects these economies of scale; and (v) any additional benefits and other considerations, as further 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 renew 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 SDOG, financial information regarding the Adviser and its parent company, information describing the Adviser’s current organizations and the background and experience of the persons responsible for the day-to-day management of SDOG.
The Independent Trustees reviewed information on the performance of SDOG and the performance of its benchmark index. The Trustees also evaluated the correlation and tracking error between the underlying index and SDOG’s performance. Based upon their review, the Independent Trustees concluded that the nature and extent of services provided to SDOG under the Advisory Agreement were appropriate and that the quality was satisfactory.
The Board noted the services to be provided by the Adviser for the annual advisory fee of 0.40% of the SDOG’s average daily net assets. The Board noted that the advisory fee for SDOG was a unitary fee pursuant to which the Adviser will assume all expenses of SDOG (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the 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 the cost and expense structures of SDOG with other funds’ cost and expense structures, as well as comparisons of SDOG’s performance during similar periods of members of a Lipper identified peer expense group. The Independent Trustees also noted that the advisory fee was higher than the median of its Lipper peer group, however its total expenses were equal to the peer group median. The Independent Trustees also considered information provided by the Adviser about the costs and profitability of the Adviser with respect to SDOG. Based on the foregoing and the other information available to them, the Independent Trustees concluded that the advisory fee for SDOG 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 SDOG and concluded that the advisory fee was reasonable taking into account such benefits. The Independent Trustees noted SDOG’s growth in assets and that SDOG may be achieving some economies of scale. They also noted that SDOG 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 determined that they would continue to evaluate whether further economies of scale have been achieved on an ongoing basis.
Based on consideration of all factors deemed relevant, the Independent Trustees determined that approval of the Advisory Agreement was in the best interests of SDOG. 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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Trustees & Officers | November 30, 2014 (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 Complex | 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. | 45 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder and Chief Financial Officer of Green Alpha Advisors, LLC. Mr. Deems is Co-Portfolio Manager of the Shelton Green Alpha Fund. 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 1998 to June 2007. | 45 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 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 Board member, 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, Prosci Inc. (private business services), 2013 – present; Board Member, Citywide Banks (Colorado community bank) 2014 – present; Director, National Western Stock Show (not-for- profit organization); Director, Biennial of the Americas (not-for-profit organization). | 23 | 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 Sector Dividend Dogs Series | ||
Trustees & Officers | November 30, 2014 (Unaudited) |
INTERESTED TRUSTEE
Name, Address and Year of Birth of Trustee* | Position(s) with Trust | Term of Office 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”), and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”) and ALPS Distributors, Inc. (“ADI”). 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 (9 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, 2014 (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 is Vice President and 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. 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, Broadview Funds Trust, BLDRS Index Funds Trust and Powershares QQQ Trust. | |||
William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer of AAI (since 2006); President and Chief Executive Officer 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 ALPS Advisors, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson is also Secretary of the Principal Real Estate Income Fund since 2014, 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. Because of her position with ALPS, Ms. Nelson is deemed an affiliate of the Trust as defined under the 1940 Act. | |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Assistant Vice-Principal and Paralegal Manager of ALPS. 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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CONTENTS
1 | ||||
5 | ||||
6 | ||||
Financial Statements | ||||
7 | ||||
8 | ||||
9 | ||||
10 | ||||
11 | ||||
12 | ||||
17 | ||||
Board Considerations Regarding Approval of Investment Advisory Agreement | 18 | |||
19 |
www.alpsfunds.com
Table of Contents
Sprott Gold Miners ETF | ||
Performance Overview | November 30, 2014 (Unaudited) | |
Investment Objective
The Fund employs a “passive management” – or indexing – investment approach designed to seek investment results that correspond (before fees and expenses) generally to the performance of the Sprott Zacks Gold Miners Index (the “Underlying Index”).
The Underlying Index was created by Zacks Index Services to provide a means of generally tracking the performance of gold and silver mining companies whose stocks are traded on major U.S. exchanges. The Underlying Index uses a transparent, rules-based methodology that is designed to identify 25 gold stocks with the highest beta* to the spot price of gold, with each stock’s weighting in the index adjusted based on its quarterly revenue growth on a year-over-year basis and the quality of its balance sheet, as measured by long-term debt to equity. The Underlying Index is rebalanced on a quarterly basis to incorporate the latest financial data into the screening process. The Underlying Index may also invest to a lesser degree in silver companies that meet the above criteria.
Performance Overview
Sprott Gold Miners ETF (SGDM) (the “Fund”) for the period July 15, 2014 to November 30, 2014 generated a total return of –30.24%, in-line with the Sprott Zacks Gold Miners Index (the “Fund’s Underlying Index”), net of fees, which returned -30.10%.
The Fund’s Underlying Index emphasizes companies with the highest historical sensitivity to the price of gold, the highest relative revenue growth and the lowest relative long-term debt to equity. We believe these are important factors in determining the long-run success of senior gold miners.
The Fund’s performance was helped by its positions in royalty and streaming companies Franco-Nevada Corp. and Royal Gold, while hurt by its allocations to silver companies and companies with market capitalizations of less than $1 billion.
Gold mining stocks fell sharply in September and October due primarily to a weaker gold price, which was hurt by strength of the U.S. dollar versus the Euro and Japanese yen. While the U.S. economy continues to show signs of improving, Japan’s has slipped back into recession, and the Eurozone remains in the doldrums and is struggling with deflation. In response, the European and Japanese central banks are pledging further monetary stimulus to help reverse the downtrend with the European Central Bank planning to expand its balance sheet by as much as €1 trillion1.
Lower gold prices helped to support buying interest in gold, with large buyers such as Russia, China and India continuing to accumulate gold. Russia has accumulated approximately 150 tonnes of gold so far in 2014, exceeding its 78 tonnes of consumption in 2013 and 75 tonnes in 20122, while demand in China has already exceeded 1,800 tonnes for the year, as measured by withdrawals from the Shanghai Gold Exchange3. Most recently, gold imports to India were 39 tonnes in November, the highest in 41 months4.
Looking forward, we believe the Index’s methodology of emphasizing companies with the highest relative revenue growth and lowest relative long-term debt to equity will provide exposure to higher-quality gold companies with stronger production results and the financial strength to take advantage of opportunities in the sector.
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Sprott Gold Miners ETF | ||
Performance Overview | November 30, 2014 (Unaudited) | |
* Beta is defined as a sensitivity measure based on regression against the spot gold price movement during the trailing 36 months.
Royalties are ongoing economic interests in the production or future production from a property. Streams are metal purchase agreements that provide, in exchange for an upfront deposit, the right to purchase all or a portion of one or more metals produced from a mine at a preset price. Source: Franco-Nevada Corp.
Sources:
1, 2. | RBC Capital Markets, November 2014 http://business.financialpost.com/2014/11/25/6-reasons-to-be-bullish-on-gold/?__lsa=e493-c2ac |
3 | Mineweb, December 2014 http://www.mineweb.com/mineweb/content/en/mineweb-gold-analysis?oid=261205&sn=Detail |
4 | The Times of India, December 2014 http://timesofindia.indiatimes.com/business/india-business/Gold-imports-at-41-month-high-in-Nov/articleshow/45342280.cms |
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Sprott Gold Miners ETF | ||
Performance Overview | November 30, 2014 (Unaudited) | |
Performance (as of November 30, 2014)
Since Inception^ | ||
Sprott Gold Miners ETF - NAV | -30.24% | |
Sprott Gold Miners ETF - Market Price* | -30.04% | |
Sprott Zacks Gold Miners TR Index | -30.10% |
Total Expense Ratio (per the current prospectus) 0.57%
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 1.866.759.5679 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 Commencement date is July 15, 2014. 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 Fund is new with limited operating history.
The Spott Zacks Gold Miners Total Return Index (Ticker: ZAXSGDMT) is comprised of approximately 25 stocks selected, based on investment and other criteria, from a universe of gold and silver mining companies whose stock is listed on a major U.S. exchange. The stocks are selected using a proprietary, quantitative rules-based methodology developed by Zacks Index Services. Total return assumes reinvestment of any dividends and distributions realized during a given time period. An investor cannot invest directly in an index.
The Fund is concentrated in the gold and silver mining industry. As a result, the Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the gold and silver mining industry. Also, gold and silver mining companies are highly dependent on the price of gold and silver bullion. These prices may fluctuate substantially over short periods of time so the Fund’s Share price may be more volatile than other types of investments.
Funds that emphasize investments in small-cap and mid-cap companies will generally experience greater price volatility.
Fund investing in foreign and emerging markets will also generally experience greater price volatility.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
ALPS Portfolio Solutions Distributor, Inc. is the Distributor for the Sprott Gold Miners ETF.
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Sprott Gold Miners ETF | ||
Performance Overview | November 30, 2014 (Unaudited) | |
Top 10 Holdings* (as of November 30, 2014)
Franco-Nevada Corp. | 16.96% | |||
Randgold Resources Ltd., ADR | 15.20% | |||
Goldcorp, Inc. | 13.33% | |||
Eldorado Gold Corp. | 4.76% | |||
Barrick Gold Corp. | 4.48% | |||
Royal Gold, Inc. | 4.47% | |||
Agnico Eagle Mines Ltd. | 4.38% | |||
Silver Wheaton Corp. | 4.25% | |||
Tahoe Resources, Inc. | 4.15% | |||
AngloGold Ashanti Ltd., Sponsored ADR | 2.38% | |||
Total % of Top 10 Holdings | 74.36% |
Country Allocation* (as of November 30, 2014)
Canada | 69.44% | |||
Jersey | 15.20% | |||
U.S. | 8.62% | |||
South Africa | 6.74% | |||
Total | 100.00% |
* | % of Total Investments. |
Future holdings are subject to change.
Growth of $10,000 (as of November 30, 2014)
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.
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Sprott Gold Miners ETF | ||
Disclosure of Fund Expenses | November 30, 2014 (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, 2014.
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 6/1/14 | Ending Account 11/30/14 | Expense Ratio(a) | Expenses Paid During Period 6/1/14 - 11/30/14(b) | |||||
Sprott Gold Miners ETF | ||||||||
Actual(c) | $1,000.00 | $697.60 | 0.57% | $1.83 | ||||
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.21 | 0.57% | $2.89 |
(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 the period is based on the commencement of operations date of July 15, 2014. |
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Sprott Gold Miners ETF | ||
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 Sprott Gold Miners ETF, one of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2014, and the related statements of operations, changes in net assets, and the financial highlight for the period July 15, 2014 (Commencement of Operations) to November 30, 2014. 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, 2014, 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 Sprott Gold Miners ETF of the ALPS ETF Trust as of November 30, 2014, the results of its operations, the changes in its net assets, and the financial highlights for the period July 15, 2014 (Commencement of Operations) to November 30, 2014, in conformity with accounting principles generally accepted in the United States of America.
DELOITTE & TOUCHE LLP
Denver, Colorado
January 29, 2015
6 | November 30, 2014
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Sprott Gold Miners ETF | ||
Schedule of Investments | November 30, 2014 | |
Security Description | Shares | Value | ||||||||
| ||||||||||
COMMON STOCKS (99.96%) | ||||||||||
Gold Mining (85.13%) | ||||||||||
Agnico Eagle Mines Ltd. | 165,707 | $ | 3,892,457 | |||||||
Alamos Gold, Inc. | 179,014 | 1,228,036 | ||||||||
AngloGold Ashanti Ltd., Sponsored ADR(a) | 246,967 | 2,114,038 | ||||||||
AuRico Gold, Inc. | 539,677 | 1,856,489 | ||||||||
Barrick Gold Corp. | 335,044 | 3,983,673 | ||||||||
Eldorado Gold Corp. | 674,706 | 4,230,407 | ||||||||
Franco-Nevada Corp. | 301,506 | 15,081,330 | ||||||||
Gold Fields Ltd., Sponsored ADR | 483,598 | 1,982,752 | ||||||||
Goldcorp, Inc. | 603,452 | 11,851,797 | ||||||||
IAMGOLD Corp.(a) | 332,405 | 701,375 | ||||||||
Kinross Gold Corp.(a) | 704,945 | 1,973,846 | ||||||||
New Gold, Inc.(a) | 352,526 | 1,413,629 | ||||||||
Novagold Resources, Inc.(a) | 265,439 | 732,612 | ||||||||
Pretium Resources, Inc.(a) | 308,434 | 1,674,797 | ||||||||
Randgold Resources Ltd., ADR | 209,031 | 13,520,125 | ||||||||
Royal Gold, Inc. | 62,455 | 3,977,134 | ||||||||
Sandstorm Gold Ltd.(a) | 585,750 | 1,558,095 | ||||||||
Sibanye Gold Ltd., Sponsored ADR | 275,667 | 1,893,832 | ||||||||
Yamana Gold, Inc. | 544,404 | 2,057,847 | ||||||||
|
| |||||||||
Total Gold Mining | 75,724,271 | |||||||||
|
| |||||||||
Precious Metals (6.11%) | ||||||||||
Primero Mining Corp.(a) | 432,027 | 1,754,030 | ||||||||
Tahoe Resources, Inc.(a) | 230,801 | 3,685,892 | ||||||||
|
| |||||||||
Total Precious Metals | 5,439,922 | |||||||||
|
| |||||||||
Silver Mining (8.72%) | ||||||||||
First Majestic Silver Corp.(a) | 293,479 | 1,194,459 | ||||||||
Fortuna Silver Mines, Inc.(a) | 352,087 | 1,362,577 | ||||||||
Silver Standard Resources, Inc.(a) | 273,467 | 1,419,294 | ||||||||
Silver Wheaton Corp. | 189,897 | 3,782,748 | ||||||||
|
| |||||||||
Total Silver Mining | 7,759,078 | |||||||||
|
| |||||||||
TOTAL COMMON STOCKS (Cost $102,673,942) | 88,923,271 | |||||||||
|
| |||||||||
7 Day Yield | Shares | Value | ||||||||
| ||||||||||
SHORT TERM INVESTMENTS (0.01%) |
| |||||||||
Dreyfus Treasury | ||||||||||
Prime Cash | ||||||||||
Management, | ||||||||||
Institutional Shares | 0.000%(b) | 7,368 | 7,368 | |||||||
|
| |||||||||
TOTAL SHORT TERM INVESTMENTS (Cost $7,368) |
| 7,368 | ||||||||
|
| |||||||||
TOTAL INVESTMENTS (99.97%) (Cost $102,681,310) |
| $ | 88,930,639 | |||||||
NET OTHER ASSETS AND LIABILITIES (0.03%) |
| 24,983 | ||||||||
|
| |||||||||
NET ASSETS (100.00%) |
| $ | 88,955,622 | |||||||
|
|
(a) | Non-income producing security. |
(b) | Less than 0.0005%. |
Common Abbreviations:
ADR - American Depositary Receipt.
Ltd. - Limited.
See Notes to Financial Statements.
7 | November 30, 2014
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Statement of Assets and Liabilities | November 30, 2014 | |
ASSETS: | ||||
Investments, at value | $ | 88,930,639 | ||
Cash | 23,683 | |||
Foreign tax reclaims | 3,835 | |||
Dividends receivable | 34,956 | |||
Total Assets | 88,993,113 | |||
LIABILITIES: | ||||
Payable to adviser | 37,491 | |||
Total Liabilities | 37,491 | |||
NET ASSETS | $ | 88,955,622 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 106,519,247 | ||
Accumulated net investment income | 52,007 | |||
Accumulated net realized loss on investments | (3,864,961) | |||
Net unrealized depreciation on investments | (13,750,671) | |||
NET ASSETS | $ | 88,955,622 | ||
INVESTMENTS, AT COST | $ | 102,681,310 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 88,955,622 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 5,100,002 | |||
Net Asset Value, offering and redemption price per share | $ | 17.44 |
See Notes to Financial Statements.
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Statement of Operations | For the Period July 15, 2014 (Commencement of Operations) to November 30, 2014 | |
INVESTMENT INCOME: | ||||
Dividends(a) | $ | 146,869 | ||
Total Investment Income | 146,869 | |||
EXPENSES: | ||||
Investment adviser fees | 94,909 | |||
Total Expense | 94,909 | |||
NET INVESTMENT INCOME | 51,960 | |||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized loss on investments | (3,825,706) | |||
Net change in unrealized depreciation on investments | (13,750,671) | |||
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (17,576,377) | |||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (17,524,417) | ||
(a) | Net of foreign tax withholding $31,659. |
See Notes to Financial Statements.
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Statement of Changes in Net Assets | ||
For the Period July 15, 2014 (Commencement of Operations) to November 30, 2014 | ||||
OPERATIONS: | ||||
Net investment income | $ | 51,960 | ||
Net realized loss on investments | (3,825,706) | |||
Net change in unrealized depreciation on investments | (13,750,671) | |||
Net decrease in net assets resulting from operations | (17,524,417) | |||
CAPITAL SHARE TRANSACTIONS: | ||||
Proceeds from sale of shares | 108,978,762 | |||
Cost of shares redeemed | (2,498,723) | |||
Net increase from capital share transactions | 106,480,039 | |||
Net increase in net assets | 88,955,622 | |||
NET ASSETS: | ||||
Beginning of period | – | |||
End of period * | $ | 88,955,622 | ||
*Including accumulated net investment income of: | $ | 52,007 | ||
OTHER INFORMATION: | ||||
CAPITAL SHARE TRANSACTIONS: | ||||
Beginning shares | – | |||
Shares sold | 5,200,002 | |||
Shares redeemed | (100,000) | |||
Shares outstanding, end of period | 5,100,002 | |||
See Notes to Financial Statements.
10 | November 30, 2014
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Financial Highlights | For a Share Outstanding Throughout the Period Presented | |
For the Period July 15, 2014 (Commencement of Operations) to November 30, 2014 | ||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 25.00 | ||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||
Net investment income (a) | 0.02 | |||
Net realized and unrealized loss | (7.58) | |||
Total from investment operations | (7.56) | |||
Net decrease in net asset value | (7.56) | |||
NET ASSET VALUE, END OF PERIOD | $ | 17.44 | ||
TOTAL RETURN(b) | (30.24)% | |||
RATIOS/SUPPLEMENTAL DATA: | ||||
Net assets, end of period (000s) | $ | 88,956 | ||
Ratio of expenses to average net assets | 0.57%(c) | |||
Ratio of net investment income to average net assets | 0.31%(c) | |||
Portfolio turnover rate(d) | 36% |
(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 for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions. |
See Notes to Financial Statements.
11 | November 30, 2014
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Sprott Gold Miners ETF | ||
Notes to Financial Statements | November 30, 2014 | |
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, 2014, the Trust consists of sixteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the Sprott Gold Miners ETF (the “Fund”). The investment objective of the Fund is to seek investment results that correspond (before fees and expenses) generally to the performance of its underlying index, the Sprott Zacks Gold Miners Index (the “Underlying Index”). The investment advisor uses a “passive” or index approach to try to achieve the Fund’s investment objective. The Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund. The Fund commenced operations on July 15, 2014.
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.
Pursuant to 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.
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. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
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 NASDAQ Stock Market LLC (“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.
12 | November 30, 2014
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Sprott Gold Miners ETF | ||
Notes to Financial Statements | November 30, 2014 | |
B. 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 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 at November 30, 2014:
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks* | $ | 88,923,271 | $ | – | $ | – | $ | 88,923,271 | ||||||||
Short Term Investments | 7,368 | – | – | 7,368 | ||||||||||||
TOTAL | $ | 88,930,639 | $ | – | $ | – | $ | 88,930,639 | ||||||||
* | 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, 2014, 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.
C. Gold and Silver Mining Industry Risk
The Underlying Index is concentrated in the gold and silver mining industry. As a result, the Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the gold and silver mining industry. Competitive pressures may have a significant effect on the financial condition of such companies in the gold and silver mining industry. Also, gold and silver mining companies are highly dependent on the price of gold and silver bullion. These prices may fluctuate substantially over short periods of time so the Fund’s Share price may be more volatile than other types of investments. In times of significant inflation or great economic uncertainty, gold, silver and other precious metals may outperform traditional investments such as bonds and stocks. However, in times of stable economic growth, traditional equity
13 | November 30, 2014
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Sprott Gold Miners ETF | ||
Notes to Financial Statements | November 30, 2014 | |
and debt investments could offer greater appreciation potential and the value of gold, silver and other precious metals may be adversely affected, which could in turn affect the Fund’s returns. The production and sale of precious metals by governments or central banks or other large holders can be affected by various economic, financial, social and political factors, which may be unpredictable and may have a significant impact on the supply and prices of precious metals. Economic and political conditions in those countries that are the largest producers of gold may have a direct effect on the production and marketing of gold and on sales of central bank gold holdings. Some gold and precious metals mining operation companies may hedge their exposure to falls in gold and precious metals prices by selling forward future production, which may result in lower returns during periods when the price of gold and precious metals increases. The gold and precious metals industry can be significantly affected by events relating to international political developments, the success of exploration projects, commodity prices and tax and government regulations.
D. Foreign Investment Risk
The Fund’s investments in non-U.S. issuers, although limited to ADRs, may involve unique risks compared to investing in securities of U.S. issuers. Adverse political, economic or social developments could undermine the value of the Fund’s investments or prevent the Fund from realizing the full value of its investments. Financial reporting standards for companies based in foreign markets differ from those in the United States.
Countries with emerging markets may have relatively unstable governments, may present the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets. The economies of emerging markets countries also may be based on only a few industries, making them more vulnerable to changes in local or global trade conditions and more sensitive to debt burdens or inflation rates.
E. 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.
F. Concentration Risk
The Fund seeks to track the Underlying Index, which itself may have concentration in certain regions, economies, countries, markets, industries or sectors. Based on the current composition of the Underlying Index, the Fund will be concentrated in the gold and silver mining industry. Underperformance or increased risk in such concentrated areas may result in underperformance or increased risk in the Fund.
G. 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 and capital gains distributions, if any, are recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
H. 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.
I. 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, 2014, 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:
Fund | Paid-in Capital | Accumulated Net Investment Income | Accumulated Net Realized Loss on Investments | |||||||||
Sprott Gold Miners ETF | $ | 39,208 | $ | 47 | $ | (39,255) |
Net investment income and net realized (loss), as disclosed on the Statement of Operations and net assets were not affected by this reclassification.
14 | November 30, 2014
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Sprott Gold Miners ETF | ||
Notes to Financial Statements | November 30, 2014 | |
At November 30, 2014, the Fund had available for tax purposes unused capital loss carryforwards as follows:
Short-Term | Long-Term | |
$ 2,010,382 | $ – |
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.
As of November 30, 2014, the components of distributable earnings on a tax basis were as follows:
Undistributed net investment income | $ | 218,627 | ||
Accumulated net realized loss on investments | (2,010,382) | |||
Net unrealized depreciation on investments | (15,771,870) | |||
Total | $ | (17,563,625) | ||
As of November 30, 2014, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
|
| |||
Sprott Gold Miners ETF | ||||
Gross depreciation (excess of tax cost over value) | $ | (15,771,870) | ||
Net unrealized appreciation (depreciation) | $ | (15,771,870) | ||
Cost of investments for income tax purposes | $ | 104,702,509 | ||
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.
J. 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, 2014, 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, but may extend to four years in certain jurisdictions. Being that the Fund commenced operations on July 15, 2014; no tax returns have been filed as of the date of this report.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “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 Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.57% of the Fund’s average daily net assets. From time to time, the Adviser may waive all or a portion of its fee.
Out of the unitary management fee, the Adviser pays substantially all expenses of the Fund, including the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses, such as litigation, not incurred in the ordinary course of the Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all of the Fund’s expenses and to compensate the Adviser for providing services for the Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Fund.
15 | November 30, 2014
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Sprott Gold Miners ETF | ||
Notes to Financial Statements | November 30, 2014 | |
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee or $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings.
4. PURCHASES AND SALES OF SECURITIES
For the period ended November 30, 2014, 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 | ||||||
Sprott Gold Miners ETF | $ | 17,588,222 | $ | 19,257,945 | ||||
For the period ended November 30, 2014, the cost of in-kind purchases and proceeds from in-kind sales were as follows: | ||||||||
Fund | Purchases | Sales | ||||||
Sprott Gold Miners ETF | $ | 108,915,545 | $ | 746,176 |
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.
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Additional Information | November 30, 2014 (Unaudited) | |
PROXY VOTING POLICIES AND PROCEDURES
The Trust is required to disclose annually each Fund’s complete proxy voting record on Form N-PX covering the period July 1 through June 30 and file it with the SEC no later than August 31. Form N-PX for each Fund also will be available at no charge upon request by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203. Each Fund’s Form N-PX also is available on the SEC’s website at www.sec.gov.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of each Fund’s portfolio holdings with the SEC on Form N-Q. The Trust will also disclose a complete schedule of each Fund’s portfolio holdings with the SEC on Form N-CSR after its second and fourth quarters. Form N-Q and Form N-CSR for each Fund will be available on the SEC’s website at http://www.sec.gov. Each Fund’s Form N-Q and Form N-CSR may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-202-551-5850. Each Fund’s Form N-Q and Form N-CSR will be available without charge, upon request, by calling 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
TAX INFORMATION
Pursuant to Section 853(c) of the Internal Revenue Code, the following Fund designated the following:
Foreign Taxes Paid | Foreign Source Income | |||||
Sprott Gold Miners ETF | $ 20,609 | $ 137,395 |
LICENSING AGREEMENT
Zacks Investment Management, Inc. (the “Licensor”) has entered into a license agreement with Sprott Asset Management LP (“Sprott”) to use the “Sprott” name and certain related intellectual property in connection with the underlying index, the Sprott Zacks Gold Miners Index (the “Underlying Index”) (the “Sprott License Agreement”). Pursuant to the Sprott License Agreement, Sprott in turn has entered into a sublicense agreement with ALPS Advisers, Inc. to use the Underlying Index (the “Sublicense Agreement”) in connection with the Sprott Gold Miners ETF (the “Product”).
The following disclosure relates to the Licensor and Sprott:
The Product(s) is not sponsored, endorsed, sold or promoted by ZACKS INVESTMENT MANAGEMENT, INC. (“Licensor”) Licensor makes no representation or warranty, express or implied, regarding the advisability of investing in securities generally or in the Product(s) particularly or the ability of the Index to track general market performance. Licensor’s only relationship to the Licensee is the licensing of the Index which is determined and composed by Licensor without regard to the Licensee or the owners of the Product(s). Licensor has no obligation to take the needs of the Licensee or the owners of the Product(s) into consideration in determining or composing the Index. Licensor shall not be liable to any person for any error in the Index nor shall it be under any obligation to advise any person of any error therein.
The Fund is not sponsored by Sprott. Sprott makes no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of investing in securities or commodities generally or in the Fund particularly and does not guarantee the quality, accuracy or completeness of the Underlying Index or any Underlying Index data included herein or derived therefrom and assume no liability in connection with their use. The Underlying Index is determined and composed without regard to the Adviser or the Fund. Sprott has no obligation to take the needs of the Adviser, the Fund or the shareholders of the Fund into consideration in connection with the foregoing. Sprott is not responsible for and has not participated in the determination of pricing or the timing of the issuance or sale of the Shares of the Fund or in the determination or calculation of the NAV of the Fund. Sprott has no obligation or liability in connection with the administration or trading of the Fund.
Sprott does not guarantee the accuracy and/or completeness of the Underlying Index or any data included therein, and Sprott shall have no liability for any errors, omissions, or interruptions therein. Sprott makes no warranty, express or implied, as to results to be obtained by the Adviser, the Fund, Fund shareholders or any other person or entity from the use of the Underlying Index or any data included therein. Sprott makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Underlying Index or any data included therein. Without limiting any of the foregoing, in no event shall Sprott have any liability for any special, punitive, indirect, or consequential damages (including lost profits) arising out of matters relating to the use of the Underlying Index, even if notified of the possibility of such damages.
17 | November 30, 2014
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Sprott Gold Miners ETF | ||
Board Considerations Regarding Approval of Investment Advisory Agreement | November 30, 2014 (Unaudited) | |
At an in-person meeting held on June 9, 2014 (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 “1940 Act”) (the “Independent Trustees”), evaluated a proposal to approve the Advisory Agreement (the “Sprott ETF Advisory Agreement”) between the Trust and ALPS Advisors, Inc. (the “Adviser”) with respect to the Sprott Gold Miners ETF (the “Sprott ETF”). The Independent Trustees also met separately to consider the Sprott ETF Advisory Agreement.
In evaluating whether to approve the Sprott ETF Advisory Agreement for the Sprott ETF, the Board considered numerous factors including (i) the nature, extent and quality of the services expected to be provided by the Adviser with respect to the Sprott ETF under the Sprott ETF Advisory Agreement; (ii) the advisory fees and other expenses proposed to be paid by the Sprott ETF compared to those of similar funds managed by other investment advisers; (iii) the expected profitability to the Adviser of its proposed advisory relationship with the Sprott ETF and reasonableness of compensation to the Adviser; (iv) the extent to which economies of scale would be realized if and as the Sprott ETF assets increase and whether the fee level in the Sprott ETF Advisory Agreement reflects these economies of scale; and (v) any additional benefits and other considerations, as further described below.
With respect to the nature, extent and quality of the services to be provided by the Adviser under the Sprott ETF Advisory Agreement, representatives from the Adviser presented the Adviser’s material regarding consideration of the Sprott ETF 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 Sprott ETF Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the nature of the services proposed to be provided under the Sprott ETF Advisory Agreement, the proposed investment parameters of the index for the Sprott ETF, financial information regarding the Adviser and 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 Sprott ETF, the anticipated financial support of the Sprott ETF and 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 Sprott ETF are expected to be satisfactory.
At the Meeting, the Independent Trustees considered and approved an annual advisory fee of 0.57% of Sprott ETF’s average daily net assets. The Independent Trustees noted that the advisory fee proposed for the Sprott ETF was a unitary fee pursuant to which the Adviser will assume all expenses of the Sprott 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 Sprott ETF to the Adviser was not unreasonable.
The Independent Trustees also reviewed comparative fee and expense data provided by Lipper Analytical Services (“Lipper”) regarding the Sprott ETF. The Independent Trustees noted that Lipper’s report contained information regarding comparisons of the proposed cost and expense structures of Sprott ETF with members of a Lipper identified peer expense group. The Independent Trustees noted the services to be provided by the Adviser for the annual advisory fee of 0.57% of the Sprott 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 Sprott 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 Sprott ETF’s business) out of the unitary fee. The Independent Trustees considered that, taking into account the impact of the Sprott ETF’s unitary advisory fee, the Sprott ETF’s expense ratio was lower than the median of its Lipper peer group. In evaluating the reasonableness of the fee, the Independent Trustees considered, among other things, a supplementary peer universe provided by the Adviser. Based on the foregoing and the other information available to them, the Independent Trustees concluded that the advisory fee for SprottETF 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 relationships with the Sprott ETF and concluded that the advisory fees were reasonable taking into account such benefits.
The Independent Trustees considered the extent to which economies of scale would be realized as the Sprott ETF grows and whether fee levels reflect a reasonable sharing of such economies of scale for the benefit of the Fund’s investors. Because the Sprott ETF is newly organized, the Independent Trustees reviewed the unitary advisory fee proposed for Sprott ETF and anticipated expenses of the Sprott ETF and determined to review economies of scale in the future when the SprottETF 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 Sprott 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 Independent Trustees considered relevant in the exercise of their reasonable business judgment.
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Sprott Gold Miners ETF | ||
Trustees & Officers | November 30, 2014 (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. | 45 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder and Chief Financial Officer of Green Alpha Advisors, LLC. Mr. Deems is Co-Portfolio Manager of the Shelton Green Alpha Fund. 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 1998 to June 2007. | 45 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 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 Board member, 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, Prosci Inc. (private business services), 2013 – present; Board Member, Citywide Banks (Colorado community bank) 2014 – present; Director, National Western Stock Show (not-for-profit organization); Director, Biennial of the Americas (not-for-profit organization). | 23 | 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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Sprott Gold Miners ETF | ||
Trustees & Officers | November 30, 2014 (Unaudited) | |
INTERESTED TRUSTEE
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 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”), and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”) and ALPS Distributors, Inc. (“ADI”). 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 (9 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 | November 30, 2014
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Sprott Gold Miners ETF | ||
Trustees & Officers | November 30, 2014 (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 | Ms. Zimdars is Vice President and 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. 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 Broadview Funds Trust, BLDRS Index Funds Trust and Powershares QQQ Trust. | |||
William Parmentier, 1952 | Vice President | Since | Mr. Parmentier is Chief Investment Officer of AAI (since 2006); President and Chief Executive Officer 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 ALPS Advisors, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson is also Secretary of the Principal Real Estate Income Fund since 2014, 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. Because of her position with ALPS, Ms. Nelson is deemed an affiliate of the Trust as defined under the 1940 Act. | |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since | Ms. Craig joined ALPS in 2007 and is currently Assistant Vice-Principal and Paralegal Manager of ALPS. 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. |
21 | November 30, 2014
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Table of Contents
ANNUAL REPORT
VelocityShares Tail Risk Hedged Large Cap ETF | TRSK
VelocityShares Volatility Hedged Large Cap ETF | SPXH
November 30, 2014 |
Table of Contents
TABLE OF CONTENTS |
Page | ||||
PERFORMANCE OVERVIEW | ||||
1 | ||||
3 | ||||
5 | ||||
6 | ||||
SCHEDULE OF INVESTMENTS | ||||
7 | ||||
8 | ||||
10 | ||||
11 | ||||
12 | ||||
FINANCIAL HIGHLIGHTS | ||||
13 | ||||
14 | ||||
15 | ||||
23 | ||||
BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT ADVISORY AGREEMENTS | 25 | |||
27 |
www.velocitysharesetfs.com
Table of Contents
VelocityShares Tail Risk Hedged Large Cap ETF | ||
Performance Overview | November 30, 2014 (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 Underlying Index is an index comprised of three large capitalization equity ETFs and two volatility related ETFs (“The Underlying Index ETFs”). The ETF will seek to achieve its investment objective by investing at least 80% of its total assets in Underlying Index ETFs. The ETF also intends to invest 15%, but may invest up to 20%, of its assets in swap agreements or other derivatives instead of investing directly in certain Underlying Index ETFs.
Performance Overview
For the fiscal year ended November 30, 2014, the VelocityShares Tail Risk Hedged Large Cap ETF (TRSK) produced a total return of 8.94% in-line with the VelocityShares Tail Risk Hedged Large Cap Index, the Fund’s Underlying Index, net of fees, which returned 9.41%. The Fund underperformed the S&P 500® which returned 17.17% 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 S&P 500 ETF (IVV)) contributed a return of 13.9%, and the assets invested in the Volatility Component detracted -4.97% 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 13.7 at the beginning of the period to 13.33 at the end of the fiscal year. The VIX spiked considerably in October on economic concerns, the Fed halting Quantitative Easing and risk of an Ebola epidemic, but that was short-lived. In June the Volatility Component had a net short volatility position, but it jumped to an over 100% long position in during the October VIX spike. The Volatility Component then moved back to a more moderate long position of 14% at the end of the fiscal year. This swift short-term swing in the volatility exposure resulted in a negative performance from mid-October through the end of the fiscal year. The strategy performed as expected: the volatility exposure increased as volatility rose, and then the exposure was reduced as volatility fell.
Performance (as of November 30, 2014)
1 Year | Since Inception^ | |||||||||
VelocityShares Tail Risk Hedged Large Cap ETF - NAV | 8.94% | 12.37% | ||||||||
VelocityShares Tail Risk Hedged Large Cap ETF - Market Price* | 8.86% | 12.34% | ||||||||
VelocityShares Tail Risk Hedged Large Cap Index | 9.41% | 12.86% |
Total Expense Ratio (per the current prospectus) 0.71%.
^ | The Fund commenced operations on June 21, 2013. |
* | 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.
The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, VIX has been considered by many to be the world’s premier barometer of investor sentiment and market volatility.
“VelocityShares” and the VelocityShares logo are trademarks of VelocityShares Index & Calculation Services, a division of VelocityShares, LLC.
1 | November 30, 2014
Table of Contents
VelocityShares Tail Risk Hedged Large Cap ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
Top Holdings* (as of November 30, 2014)
Vanguard® S&P 500® ETF | 33.34 | % | ||
SPDR® S&P 500® ETF | 33.33 | % | ||
iShares® Core S&P 500® ETF | 33.33 | % | ||
Total % of Top Holdings | 100.00 | % |
* | % of Total Investments. |
Future holdings are subject to change.
Growth of $10,000 (as of November 30, 2014)
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.
2 | November 30, 2014
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VelocityShares Volatility Hedged Large Cap ETF | ||
Performance Overview | November 30, 2014 (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 Underlying Index is an index comprised of three large capitalization equity ETFs and two volatility related ETFs (“The Underlying Index ETFs”). The ETF will seek to achieve its investment objective by investing at least 80 % of its total assets in Underlying Index ETFs. The ETF also intends to invest 15%, but may invest up to 20%, of its assets in swap agreements or other derivatives instead of investing directly in certain Underlying Index ETFs.
Performance Overview
For the fiscal year ended November 30, 2014, the VelocityShares Volatility Hedged Large Cap ETF (SPXH) produced a total return of 11.00% in-line with the VelocityShares Volatility Hedged Large Cap Index, the Fund’s Underlying Index, net of fees, which returned 11.58%. The Fund underperformed the S&P 500® which returned 17.17% 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 S&P 500 ETF (IVV)) contributed a return of 13.95%, and the assets invested in the Volatility Component were down 3.3% for the period.
Volatility, as measured by the VIX®, fell from 13.7 at the beginning of the period to 13.33 at the end of the fiscal year. The VIX spiked considerably in October on economic concerns, the Fed halting Quantitative Easing and risk of an Ebola epidemic, 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.
Performance (as of November 30, 2014)
1 Year | Since Inception^ | |||||||||
VelocityShares Volatility Hedged Large Cap ETF - NAV | 11.00% | 16.27% | ||||||||
VelocityShares Volatility Hedged Large Cap ETF - Market Price* | 10.85% | 16.22% | ||||||||
VelocityShares Volatility Hedged Large Cap Index | 11.58% | 16.87% |
Total Expense Ratio (per the current prospectus) 0.71%.
^ | The Fund commenced operations on June 21, 2013. |
* | 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.
The CBOE Volatility Index® (VIX®) is a key measure of market expectations of near-term volatility conveyed by S&P 500 stock index option prices. Since its introduction in 1993, VIX has been considered by many to be the world’s premier barometer of investor sentiment and market volatility.
“VelocityShares” and the VelocityShares logo are trademarks of VelocityShares Index & Calculation Services, a division of VelocityShares, LLC.
3 | November 30, 2014
Table of Contents
VelocityShares Volatility Hedged Large Cap ETF | ||
Performance Overview | November 30, 2014 (Unaudited) |
Top Holdings* (as of November 30, 2014)
Vanguard® S&P 500® ETF | 33.34 | % | ||
iShares® Core S&P 500® ETF | 33.33 | % | ||
SPDR® S&P 500® ETF | 33.33 | % | ||
Total % of Top Holdings | 100.00 | % |
* | % of Total Investments. |
Future holdings are subject to change.
Growth of $10,000 (as of November 30, 2014)
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 | November 30, 2014
Table of Contents
VelocityShares | ||
November 30, 2014 (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, 2014.
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 6/1/14 | Ending Account Value 11/30/14 | Expense Ratio(a) | Expenses Paid During Period 6/1/14 - 11/30/14(b) | |||||
VelocityShares Tail Risk Hedged Large Cap ETF | ||||||||
Actual | $ 1,000.00 | $ 1,048.10 | 0.65% | $ 3.34 | ||||
Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,021.81 | 0.65% | $ 3.29 | ||||
VelocityShares Volatility Hedged Large Cap ETF | ||||||||
Actual | $ 1,000.00 | $ 1,054.80 | 0.65% | $ 3.35 | ||||
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. |
5 | November 30, 2014
Table of Contents
VelocityShares | ||
Report of Independent Registered 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 VelocityShares Tail Risk Hedged Large Cap ETF and VelocityShares Volatility Hedged Large Cap ETF, two of the portfolios constituting the ALPS ETF Trust (the “Trust”) as of November 30, 2014, and the related statements of operations for the year then ended, and the statements of changes in net assets and the financial highlights for the year then ended and the period June 21, 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 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, 2014, 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 VelocityShares Tail Risk Hedged Large Cap ETF and VelocityShares Volatility Hedged Large Cap ETF of the ALPS ETF Trust as of November 30, 2014, the results of their operations for the year then ended, and the changes in their net assets and the financials highlights for the year then ended and the period June 21, 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 29, 2015
6 | November 30, 2014
Table of Contents
Schedule of Investments | November 30, 2014 |
Security Description | Shares | Value | ||||||
EXCHANGE TRADED FUNDS (85.28%) |
| |||||||
Equity Fund (85.28%) | ||||||||
iShares® Core S&P 500® ETF | 47,185 | $ | 9,841,847 | |||||
SPDR® S&P 500® ETF | 47,500 | 9,842,000 | ||||||
Vanguard® S&P 500® ETF | 51,792 | 9,842,034 | ||||||
|
| |||||||
Total United States | 29,525,881 | |||||||
|
| |||||||
TOTAL EXCHANGE TRADED FUNDS (Cost $26,298,144) |
| 29,525,881 | ||||||
|
| |||||||
TOTAL INVESTMENTS (85.28%) (Cost $26,298,144) |
| $ | 29,525,881 | |||||
NET OTHER ASSETS AND LIABILITIES (14.72%)(a) |
| 5,097,091 | ||||||
|
| |||||||
NET ASSETS (100.00%) | $ | 34,622,972 | ||||||
|
|
(a) | Includes cash, in the amount of $1,350,000, which is being held as collateral for total return swap contracts. |
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 Date | Notional Amount | Unrealized Depreciation | |||||||||||||||||||||||||
S&P 500® VIX® Futures Tail Risk Index-Short Term: | ||||||||||||||||||||||||||||||
BNP Paribas | 1.970 | % | 09/02/2015 | $ | 3,259,649 | $ | (598,844 | ) | ||||||||||||||||||||||
S&P 500® VIX® Futures Tail Risk Index-Short Term: | ||||||||||||||||||||||||||||||
BNP Paribas | 1.970 | % | 10/02/2015 | 331,161 | (51,280 | ) | ||||||||||||||||||||||||
S&P 500® VIX® Futures Tail Risk Index-Short Term: | ||||||||||||||||||||||||||||||
BNP Paribas | 1.970 | % | 11/03/2015 | 85,000 | (12,046 | ) | ||||||||||||||||||||||||
S&P 500® VIX® Futures Tail Risk Index-Short Term: | ||||||||||||||||||||||||||||||
BNP Paribas | 1.970 | % | 12/02/2015 | 98,912 | (12,577 | ) | ||||||||||||||||||||||||
S&P 500® VIX® Futures Tail Risk Index-Short Term: | ||||||||||||||||||||||||||||||
BNP Paribas | 1.970 | % | 01/05/2016 | 938,152 | (119,732 | ) | ||||||||||||||||||||||||
S&P 500® VIX® Futures Tail Risk Index-Short Term: | ||||||||||||||||||||||||||||||
BNP Paribas | 1.970 | % | 04/14/2016 | 402,000 | (35,092 | ) | ||||||||||||||||||||||||
S&P 500® VIX® Futures Tail Risk Index-Short Term: | ||||||||||||||||||||||||||||||
BNP Paribas | 1.970 | % | 07/14/2016 | 880,045 | (39,268 | ) | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||
$ | 5,994,919 | $ | (868,839 | ) | ||||||||||||||||||||||||||
|
|
* | The Fund receives monthly payments based on any positive monthly return of the Reference Obligation net of the rate paid by the Fund. The Fund makes payments on any negative monthly return of such Reference Obligation in addition to the rate paid by the Fund. |
See Notes to Financial Statements.
7 | November 30, 2014
Table of Contents
VelocityShares Volatility Hedged Large Cap ETF | ||
November 30, 2014 |
Security Description | Shares | Value | ||||||
EXCHANGE TRADED FUNDS (85.26%) |
| |||||||
Equity Fund (85.26%) | ||||||||
iShares® Core S&P 500® ETF | 102,287 | $ | 21,335,022 | |||||
SPDR® S&P 500® ETF | 102,968 | 21,334,970 | ||||||
Vanguard® S&P 500® ETF | 112,272 | 21,335,048 | ||||||
|
| |||||||
Total United States | 64,005,040 | |||||||
|
| |||||||
TOTAL EXCHANGE TRADED FUNDS (Cost $58,394,070) |
| 64,005,040 | ||||||
|
| |||||||
TOTAL INVESTMENTS (85.26%) (Cost $58,394,070) |
| $ | 64,005,040 | |||||
NET OTHER ASSETS AND LIABILITIES (14.74%)(a) |
| 11,065,063 | ||||||
|
| |||||||
NET ASSETS (100.00%) | $ | 75,070,103 | ||||||
|
|
(a) | Includes cash, in the amount of $1,950,000, which is being held as collateral for total return swap contracts. |
Common Abbreviations:
ETF | - | Exchange Traded Fund. | ||
S&P | - | Standard and Poor’s. | ||
SPDR | - | Standard and Poor’s Depositary Receipt. |
See Notes to Financial Statements.
8 | November 30, 2014
Table of Contents
VelocityShares Volatility Hedged Large Cap ETF | ||
Schedule of Investments | November 30, 2014 |
TOTAL RETURN SWAP CONTRACTS*
Reference Obligation | Swap Counterparty | Rate Paid by the Fund | Termination Date | Notional Amount | Unrealized Appreciation | |||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 07/14/2016 | $ | 3,616,073 | $ | 3,101 | ||||||||
|
| |||||||||||||
$ | 3,616,073 | $ | 3,101 | |||||||||||
|
|
Reference Obligation | Swap Counterparty | Rate Paid by the Fund | Termination Date | Notional Amount | Unrealized Depreciation | |||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 01/05/2015 | $ | 377,056 | $ | (45,465) | ||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 02/02/2016 | 77,339 | (8,021) | ||||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 02/03/2015 | 5,271 | (737) | ||||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 03/03/2015 | 5,241 | (550) | ||||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 04/02/2015 | 5,132 | (619) | ||||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 05/04/2015 | 453,217 | (44,772) | ||||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 07/02/2015 | 230,972 | (28,557) | ||||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 08/04/2015 | 2,335,720 | (297,330) | ||||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 09/02/2015 | 679,510 | (53,343) | ||||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 10/02/2015 | 326,517 | (17,516) | ||||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 11/03/2015 | 247,282 | (11,190) | ||||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 12/02/2015 | 214,088 | (11,206) | ||||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 01/05/2016 | 1,585,748 | (189,529) | ||||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 03/02/2016 | 871,311 | (86,064) | ||||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 04/14/2016 | 601,568 | (51,518) | ||||||||||
S&P® 500 VIX® Futures Variable Long/Short Index-Short Term: | ||||||||||||||
BNP Paribas | 1.970% | 07/14/2016 | 371,825 | (16,316) | ||||||||||
|
| |||||||||||||
$ | 8,387,797 | $ | (862,733) | |||||||||||
|
|
* | The Fund receives monthly payments based on any positive monthly return of the Reference Obligation net of the rate paid by the Fund. The Fund makes payments on any negative monthly return of such Reference Obligation in addition to the rate paid by the Fund. |
See Notes to Financial Statements.
9 | November 30, 2014
Table of Contents
VelocityShares | ||
November 30, 2014 |
VelocityShares Tail Risk Hedged Large Cap ETF | VelocityShares Volatility Hedged Large Cap ETF | |||||||
|
| |||||||
ASSETS: | ||||||||
Investments, at value | $ | 29,525,881 | $ | 64,005,040 | ||||
Cash | 4,465,612 | 9,929,333 | ||||||
Unrealized appreciation on total return swap contracts | – | 3,101 | ||||||
Receivable for investments sold | 229,140 | 196,131 | ||||||
Deposit with broker for total return swaps | 1,350,000 | 1,950,000 | ||||||
| ||||||||
Total assets | 35,570,633 | 76,083,605 | ||||||
| ||||||||
LIABILITIES: | ||||||||
Payable due to broker for total return swap contracts | 60,504 | 114,238 | ||||||
Unrealized depreciation on total return swap contracts | 868,839 | 862,733 | ||||||
Payable to adviser | 18,318 | 36,531 | ||||||
| ||||||||
Total liabilities | 947,661 | 1,013,502 | ||||||
| ||||||||
NET ASSETS | $ | 34,622,972 | $ | 75,070,103 | ||||
| ||||||||
| ||||||||
NET ASSETS CONSIST OF: | ||||||||
Paid-in capital | $ | 32,338,612 | $ | 70,320,729 | ||||
Accumulated net realized loss on investments | (74,538 | ) | (1,964) | |||||
Net unrealized appreciation on investments | 2,358,898 | 4,751,338 | ||||||
| ||||||||
NET ASSETS | $ | 34,622,972 | $ | 75,070,103 | ||||
| ||||||||
| ||||||||
INVESTMENTS, AT COST | $ | 26,298,144 | $ | 58,394,070 | ||||
PRICING OF SHARES | ||||||||
Net Assets | $ | 34,622,972 | $ | 75,070,103 | ||||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 1,200,002 | 2,450,002 | ||||||
Net Asset Value, offering and redemption price per share | $ | 28.85 | $ | 30.64 |
See Notes to Financial Statements.
10 | November 30, 2014
Table of Contents
VelocityShares | ||
For the Year Ended November 30, 2014 |
VelocityShares Hedged Large Cap ETF | VelocityShares Hedged Large Cap ETF | |||||||
INVESTMENT INCOME: | ||||||||
Dividends | $ | 356,962 | $ | 503,280 | ||||
| ||||||||
Total Investment Income | 356,962 | 503,280 | ||||||
| ||||||||
EXPENSES: | ||||||||
Investment adviser fees | 151,106 | 240,850 | ||||||
| ||||||||
Total Expenses | 151,106 | 240,850 | ||||||
| ||||||||
NET INVESTMENT INCOME | 205,856 | 262,430 | ||||||
| ||||||||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||||||
Net realized gain on investments | 56,846 | 14,705 | ||||||
Net realized loss on total return swap contracts | (143,586 | ) | (123,986) | |||||
Net change in unrealized appreciation on investments | 3,091,459 | 4,963,856 | ||||||
Net change in unrealized depreciation on total return swap contracts | (830,555 | ) | (877,980) | |||||
| ||||||||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 2,174,164 | 3,976,595 | ||||||
| ||||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 2,380,020 | $ | 4,239,025 | ||||
| ||||||||
|
See Notes to Financial Statements.
11 | November 30, 2014
Table of Contents
VelocityShares | ||
VelocityShares Tail Risk Hedged Large Cap ETF | VelocityShares Volatility Hedged Large Cap ETF | |||||||||||||||
|
| |||||||||||||||
For the Year Ended November 30, 2014 | For the Period to November 30, | For the Year Ended November 30, 2014 | For the Period to November 30, | |||||||||||||
OPERATIONS: | ||||||||||||||||
Net investment income | $ | 205,856 | $ | 20,813 | $ | 262,430 | $ | 27,141 | ||||||||
Net realized gain/(loss) on investments, total return swap contracts | (86,740) | 132,810 | (109,281) | (7,009) | ||||||||||||
Net change in unrealized appreciation on investments, total return swap contracts | 2,260,904 | 97,994 | 4,085,876 | 665,462 | ||||||||||||
| ||||||||||||||||
Net increase in net assets resulting from operations | 2,380,020 | 251,617 | 4,239,025 | 685,594 | ||||||||||||
| ||||||||||||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||||||||||
From net investment income | (134,087) | (18,058 | ) | (148,685) | (20,539) | |||||||||||
From net realized gains | – | – | (6,021) | – | ||||||||||||
From tax return of capital | (51,870) | (1,713 | ) | (88,105) | (9,582) | |||||||||||
| ||||||||||||||||
Total distributions | (185,957) | (19,771 | ) | (242,811) | (30,121) | |||||||||||
| ||||||||||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||||||||||
Proceeds from sale of shares | 31,091,332 | 5,000,050 | 62,717,368 | 7,701,048 | ||||||||||||
Cost of shares redeemed | – | (3,894,319 | ) | – | – | |||||||||||
| ||||||||||||||||
Net increase from share transactions | 31,091,332 | 1,105,731 | 62,717,368 | 7,701,048 | ||||||||||||
| ||||||||||||||||
Net increase in net assets | 33,285,395 | 1,337,577 | 66,713,582 | 8,356,521 | ||||||||||||
NET ASSETS | ||||||||||||||||
Beginning of period | 1,337,577 | – | 8,356,521 | – | ||||||||||||
| ||||||||||||||||
End of period * | $ | 34,622,972 | $ | 1,337,577 | $ | 75,070,103 | $ | 8,356,521 | ||||||||
| ||||||||||||||||
| ||||||||||||||||
*Including accumulated net investment income of: | $ | – | $ | – | $ | – | $ | – | ||||||||
OTHER INFORMATION: | ||||||||||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Beginning shares | 50,002 | – | 300,002 | – | ||||||||||||
Shares sold | 1,150,000 | 200,002 | 2,150,000 | 300,002 | ||||||||||||
Shares redeemed | – | (150,000 | ) | – | – | |||||||||||
| ||||||||||||||||
Shares outstanding, end of period | 1,200,002 | 50,002 | 2,450,002 | 300,002 | ||||||||||||
| ||||||||||||||||
|
See Notes to Financial Statements.
12 | November 30, 2014
Table of Contents
Financial Highlights | For a Share Outstanding Throughout the Years Presented |
For the Year Ended November 30, 2014 | For the Period June 21, 2013 of operations) to November 30, 2013 | |||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 26.75 | $ | 25.00 | ||||||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||
Net investment income(a) | 0.24 | 0.24 | ||||||||||||||
Net realized and unrealized gain | 2.14 | 1.91 | ||||||||||||||
Total from investment operations | 2.38 | 2.15 | ||||||||||||||
DISTRIBUTIONS: | ||||||||||||||||
From net investment income | (0.23) | (0.37) | ||||||||||||||
From tax return of capital | (0.05) | (0.03) | ||||||||||||||
Total distributions | (0.28) | (0.40) | ||||||||||||||
NET INCREASE IN NET ASSET VALUE | 2.10 | 1.75 | ||||||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 28.85 | $ | 26.75 | ||||||||||||
TOTAL RETURN(b) | 8.94 | % | 8.66 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||
Net assets, end of period (000s) | $ | 34,623 | $ | 1,338 | ||||||||||||
Ratio of expenses to average net assets | 0.65 | % | 0.65 | %(c) | ||||||||||||
Ratio of net investment income to average net assets | 0.89 | % | 2.21 | %(c) | ||||||||||||
Portfolio turnover rate(d) | 2 | % | 4 | % |
(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 for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions. |
See Notes to Financial Statements.
13 | November 30, 2014
Table of Contents
Financial Highlights | For a Share Outstanding Throughout the Years Presented |
For the Year Ended November 30, 2014 | For the Period June 21, 2013 (commencement of operations) to November 30, 2013 | |||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 27.85 | $ | 25.00 | ||||||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||
Net investment income(a) | 0.21 | 0.12 | ||||||||||||||
Net realized and unrealized gain | 2.84 | 2.88 | ||||||||||||||
Total from investment operations | 3.05 | 3.00 | ||||||||||||||
DISTRIBUTIONS: | ||||||||||||||||
From net investment income | (0.19 | ) | (0.10 | ) | ||||||||||||
From net realized gains | (0.00 | ) (b) | – | |||||||||||||
From tax return of capital | (0.07 | ) | (0.05 | ) | ||||||||||||
Total distributions | (0.26 | ) | (0.15 | ) | ||||||||||||
NET INCREASE IN NET ASSET VALUE | 2.79 | 2.85 | ||||||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 30.64 | $ | 27.85 | ||||||||||||
TOTAL RETURN(c) | 11.00 | % | 12.04 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||
Net assets, end of period (000s) | $ | 75,070 | $ | 8,357 | ||||||||||||
Ratio of expenses to average net assets | 0.65 | % | 0.65 | %(d) | ||||||||||||
Ratio of net investment income to average net assets | 0.71 | % | 1.05 | %(d) | ||||||||||||
Portfolio turnover rate(e) | 1 | % | 2 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Less than $0.005 per share. |
(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 for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions. |
See Notes to Financial Statements.
14 | November 30, 2014
Table of Contents
VelocityShares | ||
November 30, 2014 |
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, 2014, the Trust consists of sixteen separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the VelocityShares Tail Risk Hedged Large Cap ETF and VelocityShares Volatility Hedged Large Cap ETF (each a “Fund” and collectively, the “Funds”).
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 VelocityShares Tail Risk Hedged Large Cap Index, the “Underlying Indexes”. Each Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
Shares of the Funds are listed on the New York Stock Exchange (“NYSE”) Arca. Each Fund issues and redeems Shares on a continuous basis, at net asset value (“NAV”), in blocks of 50,000 Shares, each of which is called a “Creation Unit.” A portion of Creation Units are issued and redeemed in securities and/or derivatives included in a specified index and will be created and redeemed in-kind. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
Pursuant to 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.
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. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
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 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
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Notes to Financial Statements | November 30, 2014 |
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. 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:
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 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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The following is a summary of the inputs used to value each Fund’s investments at November 30, 2014:
VelocityShares Tail Risk Hedged Large Cap ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Unadjusted Quoted Prices | Level 3 - Unadjusted Quoted Prices | Total | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Exchange Traded Funds | $ | 29,525,881 | $ | – | $ | – | $ | 29,525,881 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
TOTAL | $ | 29,525,881 | $ | – | $ | – | $ | 29,525,881 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Other Financial Instruments* | ||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Total Return Swap Contracts | $ | – | $ | (868,839) | $ | – | $ | (868,839) | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Total | $ | – | $ | (868,839) | $ | – | $ | (868,839) | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
|
VelocityShares Volatility Hedged Large Cap ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Unadjusted Quoted Prices | Level 3 - Unadjusted Quoted Prices | Total | ||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Exchange Traded Funds | $ | 64,005,040 | $ | – | $ | – | $ | 64,005,040 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
TOTAL | $ | 64,005,040 | $ | – | $ | – | $ | 64,005,040 | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Other Financial Instruments* | ||||||||||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Total Return Swap Contracts | $ | – | $ | 3,101 | $ | – | $ | 3,101 | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
Total Return Swap Contracts | $ | – | $ | (862,733) | $ | – | $ | (862,733) | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
Total | $ | – | $ | (859,632) | $ | – | $ | (859,632) | ||||||||||||||||||||||||
| ||||||||||||||||||||||||||||||||
|
* | Other financial instruments are instruments not reflected in the Schedule of Investments. |
Each Fund recognizes transfers between levels as of the end of the period. For the year ended November 30, 2014, none of the Funds had 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.
C. 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.
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 and capital gains distributions, if any, are 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.
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Notes to Financial Statements | November 30, 2014 |
For the period ended November 30, 2014, permanent book and tax differences resulting primarily from in-kind transactions and swap adjustments were identified and reclassified among the components of the Funds’ net assets as follows:
Fund | Paid-in Capital | Accumulated Net Investment Loss | Accumulated Net Realized Gain on Investments | |||||||||||||||||||||
VelocityShares Tail Risk Hedged Large Cap ETF | $ | – | $ | (71,769 | ) | $ | 71,769 | |||||||||||||||||
VelocityShares Volatility Hedged Large Cap ETF | – | (113,745 | ) | 113,745 |
Net investment income and net realized (loss), as disclosed on the Statement of Operations, and net assets were not affected by their reclassifications.
At November 30, 2014, the Funds had available for tax purposes unused capital loss carryforwards as follows:
Fund | Short-Term | Long-Term | ||||||||||||||
VelocityShares Tail Risk Hedged Large Cap ETF | $ | 27,471 | $ | 47,067 |
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 by the Funds during the year ended November 30, 2014 was as follows:
Ordinary Income | Long Term Capital Gain | Return of Capital | ||||||||||||||||||||||
November 30, 2014 | ||||||||||||||||||||||||
VelocityShares Tail Risk Hedged Large Cap ETF | $ | 134,087 | $ | – | $ | 51,870 | ||||||||||||||||||
VelocityShares Volatility Hedged Large Cap ETF | 148,685 | 6,021 | 88,105 | |||||||||||||||||||||
November 30, 2013 | ||||||||||||||||||||||||
VelocityShares Tail Risk Hedged Large Cap ETF | $ | 18,058 | $ | – | 1,713 | |||||||||||||||||||
VelocityShares Volatility Hedged Large Cap ETF | 20,539 | – | 9,582 |
As of November 30, 2014, the components of distributable earnings on a tax basis for the Fund were as follows:
VelocityShares Tail Cap ETF | VelocityShares Volatility Hedged Large Cap ETF | |||||||||||||||
Accumulated net realized loss on investments | $ | (74,538 | ) | $ | – | |||||||||||
Net unrealized appreciation on investments | 2,358,898 | 4,749,374 | ||||||||||||||
Total | $ | 2,284,360 | $ | 4,749,374 | ||||||||||||
As of November 30, 2014, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Gross Appreciation tax cost) | Net Appreciation/(Depreciation) of Foreign Currency and Derivatives | Net Unrealized Appreciation/(Depreciation) | Cost of Investments for Income Tax Purposes | |||||||||||||
VelocityShares Tail Risk Hedged Large Cap ETF | $ | 3,227,737 | $ | (868,839 | ) | $ | 2,358,898 | $ | 26,298,144 | |||||||
VelocityShares Volatility Hedged Large Cap ETF | 5,609,006 | (859,632 | ) | 4,749,374 | 58,396,034 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales.
G. 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
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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, 2014, none of the Funds had 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, but may extend to four years in certain jurisdictions. Tax returns for open years incorporate no uncertain tax positions that require a provision for income taxes.
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.
Cash collateral that has been pledged to cover derivative obligations of the Funds and cash collateral received from the counterparty, if any, is reported separately on the Statements of Assets and Liabilities as cash pledged as collateral and cash received as collateral, respectively. Non-cash collateral pledged by the Funds, if any, is noted in the Statements of Investments.
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 Counterparty 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, 2014 |
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 year ended November 30, 2014, 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, 2014 are disclosed in the Schedule of Investments.
The effect of derivative instruments on the Statements of Assets and Liabilities for the year ended November 30, 2014:
Risk Exposure | Asset Derivatives and Liabilities Location | Fair Value | Liability Derivatives Statement 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 | $ | – | Unrealized depreciation on total return swap contracts | $ | 868,839 | ||||||
| ||||||||||||
$ | – | $ | 868,839 | |||||||||
| ||||||||||||
VelocityShares Volatility Hedged Large Cap ETF |
| |||||||||||
Equity Contracts | Unrealized appreciation on total return swap contracts | $ | 3,101 | Unrealized depreciation on total return swap contracts | $ | 862,733 | ||||||
| ||||||||||||
$ | 3,101 | $ | 862,733 | |||||||||
|
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 derivative Instruments on the Statements of Operations for the year ended November 30, 2014:
Risk Exposure | Location of Gain/(Loss) on Derivatives Recognized in Income | Realized Gain/(Loss) on Derivatives Recognized in | Change in Unrealized Depreciation on Derivatives 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 depreciation on total return swap contracts | $ | (143,586) | $ | (830,555) | |||||
| ||||||||||
$ | (143,586) | $ | (830,555) | |||||||
| ||||||||||
VelocityShares Volatility Hedged Large Cap ETF |
| |||||||||
Equity Contracts (Total Return Swap Contracts) | Net realized loss on total return swap contracts/Net change in unrealized depreciation on total return swap contracts | $ | (123,986) | $ | (877,980) | |||||
| ||||||||||
$ | (123,986) | $ | (877,980) | |||||||
|
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Notes to Financial Statements | November 30, 2014 |
Volume of derivative instruments for the Funds for the year ended November 30, 2014 was as follows:
Derivative Type | Unit of Measurement | Monthly Average | ||||||
| ||||||||
VelocityShares Tail Risk Hedged Large Cap ETF | ||||||||
Total Return Swap Contracts | Notional Amount | $ | 3,961,482 | |||||
VelocityShares Volatility Hedged Large Cap ETF | ||||||||
Total Return Swap Contracts | Notional Amount | $ | 6,102,442 |
U.S. GAAP 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, 2014:
Offsetting of Derivatives Assets
November 30, 2014
Gross Amounts Not Offset in the Statement of Assets and Liabilities | ||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||
Description | Gross Amounts of Recognized | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts Presented in the | Financial Instruments | Cash Collateral Received | Net Amount Receivable | ||||||||||||||||||||
| ||||||||||||||||||||||||||
VelocityShares Volatility Hedged Large Cap ETF |
| |||||||||||||||||||||||||
Total Return Swap Contracts | $ | 3,101 | $ | – | $ | 3,101 | $ | (3,101 | ) | $ | – | $ | – | |||||||||||||
| ||||||||||||||||||||||||||
Total | $ | 3,101 | $ | – | $ | 3,101 | $ | (3,101 | ) | $ | – | $ | – | |||||||||||||
|
Offsetting of Derivatives Liabilities
November 30, 2014
Gross Amounts Not Offset in the Statement of Assets and Liabilites | ||||||||||||||||||||||||||
|
| |||||||||||||||||||||||||
Description | Gross Amounts of Recognized Liabilities | Gross Amounts Offset in the Statement of Assets and Liabilities | Net Amounts Presented in the Statement of Assets and Liabilities | Financial Instruments | Cash Collateral Pledged | Net Amount Payable | ||||||||||||||||||||
| ||||||||||||||||||||||||||
VelocityShares Tail Risk Hedged Large Cap ETF |
| |||||||||||||||||||||||||
Total Return Swap Contracts | $ | (868,839 | ) | $ | – | $ | (868,839 | ) | $ | – | $ | 868,839 | $ | – | ||||||||||||
| ||||||||||||||||||||||||||
Total | $ | (868,839 | ) | $ | – | $ | (868,839 | ) | $ | – | $ | 868,839 | $ | – | ||||||||||||
| ||||||||||||||||||||||||||
VelocityShares Volatility Hedged Large Cap ETF |
| |||||||||||||||||||||||||
Total Return Swap Contracts | $ | (862,733 | ) | $ | – | $ | (862,733 | ) | $ | 3,101 | $ | 859,632 | $ | – | ||||||||||||
| ||||||||||||||||||||||||||
Total | $ | (862,733 | ) | $ | – | $ | (862,733 | ) | $ | 3,101 | $ | 859,632 | $ | – | ||||||||||||
|
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Notes to Financial Statements | November 30, 2014 |
4. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “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 Adviser a unitary fee for the services and facilities it provides, 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 Tail Risk Hedged Large Cap ETF | 0.65% | |||
VelocityShares Volatility Hedged Large Cap ETF | 0.65% |
Out of the unitary management fee, the Adviser pays substantially all expenses of each Fund, including the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for acquired fund fees and expenses, interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses, such as litigation and other expenses not incurred in the ordinary course of each Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all of each Fund’s expenses and to compensate the Adviser for providing services for the each Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Funds.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee or $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings.
5. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 2014, 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 Tail Risk Hedged Large Cap ETF | $ | 408,278 | $ | 1,926,935 | ||||||
VelocityShares Volatility Hedged Large Cap ETF | 369,354 | 1,775,979 | ||||||||
For the year ended November 30, 2014, the cost of in-kind purchases and proceeds from in-kind sales, were as follows: | ||||||||||
Purchases | Sales | |||||||||
| ||||||||||
VelocityShares Tail Risk Hedged Large Cap ETF | $ | 26,757,838 | $ | – | ||||||
VelocityShares Volatility Hedged Large Cap ETF | 53,322,542 | – |
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.
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VelocityShares | ||
November 30, 2014 (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
The Fund designates the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2013:
QDI | DRD | |||||||
| ||||||||
VelocityShares Tail Risk Hedged Large Cap ETF | 71.84% | 46.90% | ||||||
VelocityShares Volatility Hedged Large Cap ETF | 100.00% | 91.20% |
In early 2014, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2013 via Form 1099. The Fund will notify shareholders in early 2015 of amounts paid to them by the Funds, if any, during the calendar year 2014.
Pursuant to Section 852(b)(3) of the Internal Revenue Code, the Velocity Shares Volatility Hedged Large Cap Fund designated $6,021 as long-term capital gain distributions for the year ended November 30, 2014.
LISCENSING AGREEMENTS
VelocityShares Tail Risk Hedged Large Cap ETF
The VelocityShares Tail Risk Hedged Large Cap Index is the exclusive property of Velocity Shares Index and Calculation Services, a division of VelocityShares LLC.
Neither VelocityShares Index & Calculation Services, VelocityShares LLC (together, “VelocityShares”) nor any other party makes any representation or warranty, express or implied, to the owners of the Funds or any member of the public regarding the advisability of investing in the Funds generally or the similarities or variations between the performance of the index and the performance of the underlying security. VelocityShares is the licensor of certain trademarks, service marks and trade names of VelocityShares and of the index which is determined, composed and calculated by VelocityShares without regard to the issuer of the Funds. Neither VelocityShares nor any other party guarantees the accuracy and/or the completeness of the indices or any date included therein. VelocityShares disclaims all warranties of merchantability or fitness for any particular purpose with respect to the indices or any data included therein.
ALTHOUGH VELOCITYSHARES SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE INDEXES FROM SOURCES WHICH VELOCITYSHARES CONSIDERS RELIABLE, NEITHER VELOCITYSHARES NOR ANY OTHER PARTY GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEXES OR ANY DATA INCLUDED THEREIN. NEITHER VELOCITYSHARES NOR ANY OTHER PARTY MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE’S CUSTOMERS AND COUNTERPARTIES, HOLDERS OF THE FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEXES OR ANY OTHER DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. NEITHER VELOCITYSHARES NOR ANY OTHER PARTY MAKES ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEXES OR ANY DATA INCLUDED THEREIN AND VELOCITYSHARES HEREBY EXPRESSLY DISCLAIMS ALLS UCH WARRANTIES. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL VELOCITYSHARES OR ANY OTHER PARTY HAVE ANY LIABILTY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBLITY OF SUCH DAMAGES.
23 | November 30, 2014
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VelocityShares | ||
Additional Information | November 30, 2014 (Unaudited) |
VelocityShares Volatility Hedged Large Cap ETF
The VelocityShares Volatility Hedged LargeCap Index is the exclusive property of Velocity Shares Index and Calculation Services, a division of VelocityShares LLC.
Neither VelocityShares Index & Calculation Services, VelocityShares LLC (together, “VelocityShares”) nor any other party makes any representation or warranty, express or implied, to the owners of the Funds or any member of the public regarding the advisability of investing in the Funds generally or the similarities or variations between the performance of the index and the performance of the underlying security. VelocityShares is the licensor of certain trademarks, service marks and trade names of VelocityShares and of the index which is determined, composed and calculated by VelocityShares without regard to the issuer of the Funds. Neither VelocityShares nor any other party guarantees the accuracy and/or the completeness of the indices or any date included therein. VelocityShares disclaims all warranties of merchantability or fitness for any particular purpose with respect to the indices or any data included therein.
ALTHOUGH VELOCITYSHARES SHALL OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE INDEXES FROM SOURCES WHICH VELOCITYSHARES CONSIDERS RELIABLE, NEITHER VELOCITYSHARES NOR ANY OTHER PARTY GUARANTEES THE ACCURACY AND/OR THE COMPLETENESS OF THE INDEXES OR ANY DATA INCLUDED THEREIN. NEITHER VELOCITYSHARES NOR ANY OTHER PARTY MAKES ANY WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, LICENSEE’S CUSTOMERS AND COUNTERPARTIES, HOLDERS OF THE FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEXES OR ANY OTHER DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED HEREUNDER OR FOR ANY OTHER USE. NEITHER VELOCITYSHARES NOR ANY OTHER PARTY MAKES ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE INDEXES OR ANY DATA INCLUDED THEREIN AND VELOCITYSHARES HEREBY EXPRESSLY DISCLAIMS ALLS UCH WARRANTIES. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL VELOCITYSHARES OR ANY OTHER PARTY HAVE ANY LIABILTY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER DAMAGES.
24 | November 30, 2014
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VelocityShares | ||
Board Considerations Regarding Approval of Investment Advisory Agreements | November 30, 2014 (Unaudited) |
VelocityShares Tail Risk Hedged Large Cap ETF
At an in-person meeting held on June 9, 2014, 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 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, including (i) the nature, extent and quality of the services to be provided by the Adviser with respect to TRSK under the Advisory Agreement; (ii) the advisory fees and other expenses to be paid by TRSK compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to TRSK by the Adviser and the profits realized by the Adviser and its affiliates from its relationship to TRSK; (iv) the extent to which economies of scale would be realized if and as TRSK’s assets increase and whether the fee level in the Advisory Agreement reflects these economies of scale; and (v) any additional benefits and other considerations, as further 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 renew the Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the services to be provided under the Advisory Agreement, the investment parameters of the index for TRSK, financial information regarding the Adviser and its parent company, information describing the Adviser’s current organizations and the background and experience of the persons responsible for the day-to-day management of TRSK.
The Independent Trustees reviewed information on the performance of TRSK and the performance of its benchmark index. The Trustees also evaluated the correlation and tracking error between the underlying index and TRSK’s performance. Based upon their review, the Board concluded the nature and extent of services provided to SPXH under the Advisory Agreement were appropriate and that the quality was satisfactory.
The Independent Trustees noted the services to be provided by the Adviser for the annual advisory fee of 0.65% of TRSK’s average daily net assets. The Independent Trustees noted that the advisory fee for TRSK was a unitary fee pursuant to which the Adviser assumes all expenses of TRSK (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the 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 the cost and expense structures of TRSK with other funds’ cost and expense structures during similar periods of members of a Lipper identified peer expense group. The Independent Trustees noted that the advisory fee rate for TRSK was higher than others in its Lipper peer group but that TRSK’s total expense ratio was at the median of its Lipper peer group. The Independent Trustees also noted that Lipper intentionally omitted the performance group and performance universe due to the limited performance history of TRSK. The Independent Trustees also considered information provided by the Adviser about the costs and profitability of the Adviser with respect to TRSK. 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 noted the relatively small size of TRSK and considered whether there have been economies of scale with respect to management of TRSK, whether TRSK has appropriately benefited from any economies of scale, and whether the fee is reasonable in relation to TRSK’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 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.
25 | November 30, 2014
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VelocityShares | ||
Board Considerations Regarding Approval of Investment Advisory Agreements | November 30, 2014 (Unaudited) |
VelocityShares Volatility Hedged Large Cap ETF
At an in-person meeting held on June 9, 2014, 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 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, including (i) the nature, extent and quality of the services to be provided by the Adviser with respect to SPXH under the Advisory Agreement; (ii) the advisory fees and other expenses to be paid by SPXH compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to SPXH by the Adviser and the profits realized by the Adviser and its affiliates from its relationship to SPXH; (iv) the extent to which economies of scale would be realized if and as SPXH’s assets increase and whether the fee level in the Advisory Agreement reflects these economies of scale; and (v) any additional benefits and other considerations, as further 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 renew the Advisory Agreement (the “15(c) Materials”). The Independent Trustees considered and reviewed information concerning the services to be provided under the Advisory Agreement, the investment parameters of the index for SPXH, financial information regarding the Adviser and its parent company, information describing the Adviser’s current organizations and the background and experience of the persons responsible for the day-to-day management of SPXH.
The Independent Trustees reviewed information on the performance of SPXH and the performance of its benchmark index. The Trustees also evaluated the correlation and tracking error between the underlying index and SPXH’s performance. Based upon their review, the Board concluded that the nature and extent of services provided to SPXH under the Advisory Agreement were appropriate and that the quality was satisfactory.
The Independent Trustees noted the services to be provided by the Adviser for the annual advisory fee of 0.65% of SPXH’s average daily net assets. The Independent Trustees noted that the advisory fee for SPXH was a unitary fee pursuant to which the Adviser assumes all expenses of SPXH (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the 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 the cost and expense structures of SPXH with other funds’ cost and expense structures during similar periods of members of a Lipper identified peer expense group. The Independent Trustees noted that the advisory fee rate for SPXH was higher than others in its Lipper peer group but that SPXH’s total expense ratio was only slightly higher than the median of its Lipper peer group. The Independent Trustees also noted that Lipper intentionally omitted the performance group and performance universe due to the limited performance history of SPXH. The Independent Trustees also considered information provided by the Adviser about the costs and profitability of the Adviser with respect to SPXH. 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 noted the relatively small size of SPXH and considered whether there have been economies of scale with respect to management of SPXH, whether SPXH has appropriately benefited from any economies of scale, and whether the fee is reasonable in relation to SPXH’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 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.
26 | November 30, 2014
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VelocityShares | ||
November 30, 2014 (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. | 45 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 funds); Reaves Utility Income Fund; and Westcore Trust (12 funds). | |||||
Jeremy W. Deems, 1976 | Trustee | Since March 2008 | Mr. Deems is the Co-Founder and Chief Financial Officer of Green Alpha Advisors, LLC. Mr. Deems is Co-Portfolio Manager of the Shelton Green Alpha Fund. 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 1998 to June 2007. | 45 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (9 funds); Financial Investors Trust (32 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 Board member, 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, Prosci Inc. (private business services), 2013 – present; Board Member, Citywide Banks (Colorado community bank) 2014 – present; Director, National Western Stock Show (not-for-profit organization); Director, Biennial of the Americas (not-for-profit organization). | 23 | 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. |
27 | November 30, 2014
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VelocityShares | ||
Trustees & Officers | November 30, 2014 (Unaudited) |
INTERESTED TRUSTEE
Name, Address and Year of Birth of Trustee* | Position(s) Held | 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”), and ALPS Portfolio Solutions Distributor, Inc. (“APSD”) and Executive Vice President and Director of ALPS and ALPS Holdings, Inc. (“AHI”) and ALPS Distributors, Inc. (“ADI”). 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 (9 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. |
28 | November 30, 2014
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VelocityShares | ||
Trustees & Officers | November 30, 2014 (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 H. Zimdars, 1976 | Chief Compliance Officer (“CCO”) | Since December 2009 | Ms. Zimdars is Vice President and 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. 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, Broadview Funds Trust, BLDRS Index Funds Trust and Powershares QQQ Trust. | |||
William Parmentier, 1952 | Vice President | Since March 2008 | Mr. Parmentier is Chief Investment Officer of AAI (since 2006); President and Chief Executive Officer 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 ALPS Advisors, Inc. Ms. Nelson joined ALPS in January, 2003. Ms. Nelson is also Secretary of the Principal Real Estate Income Fund since 2014, 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. Because of her position with ALPS, Ms. Nelson is deemed an affiliate of the Trust as defined under the 1940 Act. | |||
Jennifer A. Craig, 1973 | Assistant Secretary | Since October 2013 | Ms. Craig joined ALPS in 2007 and is currently Assistant Vice-Principal and Paralegal Manager of ALPS. 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. |
29 | November 30, 2014
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| ![]() | |||
This report has been prepared for shareholders of the ETFs described herein and may be distributed to others only if preceded or accompanied by a prospectus.
ALPS Portfolio Solutions Distributor, Inc., distributor for the ETFs. |
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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, 2014 and November 30, 2013, the aggregate fees billed for professional services rendered by the principal accountant for the audit of the Registrant’s annual financial statements were $258,900 and $277,000, respectively. |
(b) | Audit-Related Fees: For the Registrant’s fiscal year ended November 30, 2014 and November 30, 2013, the aggregate fees billed for professional services rendered by the principal accountant for the verification of the Registrant’s securities and similar investments in accordance with Rule 17f-2 under the Investment Company Act of 1940 were $0 and $0, respectively. |
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(c) | Tax Fees: For the Registrant’s fiscal year ended November 30, 2014 and November 30, 2013, the aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning were $99,380 and $85,665, respectively. The fiscal year 2014 and 2013 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, 2014 and November 30, 2013, 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, 2014 and November 30, 2013 of the Registrant were $399,000 and $307,165, respectively. These fees consisted of non-audit fees billed to (i) the Registrant of $99,380 and $85,665 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 $299,620 and $221,500, 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) | Code of ethics, or any amendments these to, that is the subject of disclosure required by Item 2 is attached hereto. |
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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 6, 2015 |
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 6, 2015 | |
By: | /s/ Patrick D. Buchanan | |
Patrick D. Buchanan | ||
Treasurer (Principal Financial Officer) | ||
Date: | February 6, 2015 |