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
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811-22154
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Grail Advisors ETF Trust
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(Exact name of registrant as
specified in charter)
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One Ferry Building Ste. 255
San Francisco, CA
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94111
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(Address of principal executive
offices)
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(Zip code)
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William M. Thomas
One Ferry Building Ste. 255
San Francisco, CA 94111
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(Name and address of agent for
service)
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Registrants telephone number, including
area code:
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1-415-677-5870
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Date of fiscal year end:
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October 31
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Date of reporting period:
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October 31,
2009
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Form N-CSR is to be used by management investment companies to file
reports with the Commission not later than 10 days after the transmission to
stockholders of any report that is required to be transmitted to stockholders
under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1).
The Commission may use the information provided on Form N-CSR in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form
N-CSR, and the Commission will make this information public. A registrant is
not required to respond to the collection of information contained in Form
N-CSR unless the Form displays a currently valid Office of Management and
Budget ("OMB") control number. Please direct comments concerning the
accuracy of the information collection burden estimate and any suggestions for
reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth
Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of
information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
Annual Report
October 31, 2009
Grail Advisors Actively Managed ETFs
Grail American Beacon Large Cap Value ETF
RP Growth ETF
RP Focused Large Cap Growth ETF
RP Technology ETF
RP Financials ETF
www.grailadvisors.com 1-415-677-5870
TABLE OF CONTENTS
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Page
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SHAREHOLDER LETTER
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2
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MANAGEMENT'S DISCUSSION OF FUNDS' PERFORMANCE AND ANALYSIS
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4
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SHAREHOLDER EXPENSE EXAMPLES
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9
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FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS
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11
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SCHEDULES OF INVESTMENTS
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GRAIL AMERICAN BEACON LARGE CAP VALUE ETF
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13
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RP
GROWTH ETF
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15
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RP FOCUSED LARGE CAP GROWTH ETF
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17
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RP
TECHNOLOGY ETF
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18
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RP
FINANCIALS ETF
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19
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STATEMENTS OF ASSETS AND LIABILITIES
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20
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STATEMENTS OF OPERATIONS
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21
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STATEMENTS OF CHANGES IN NET ASSETS
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22
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FINANCIAL HIGHLIGHTS
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23
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NOTES TO FINANCIAL STATEMENTS
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24
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
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34
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BOARD REVIEW AND APPROVAL OF ADVISORY AGREEMENTS
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35
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BOARD OF TRUSTEES AND OFFICERS
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40
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SUPPLEMENTAL INFORMATION
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42
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DEAR FELLOW SHAREHOLDERS,
First, let me say how pleased I am to welcome you to Grail Advisors, and to the exciting new world of actively-managed Exchange-Traded Funds ("ETFs"). You are part of a growing number of individuals and institutions who have entrusted us to manage a portion of their savings.
Since the first ETFthe Standard and Poor's Depository Receipt Trusthit the market in 1993, the interest for these mutual fund alternatives has grown exponentially. And why not? ETFs are easy to buy, tax-efficient, and totally transparent in that they disclose the list of securities they're invested in every day. The funds, which have generally been created to passively track a particular industry or market index, enable investors to trade a portfolio of stocks with a single investment as easily as if they were buying an individual stock.
But as the demand for ETFs as building blocks in multi-asset portfolios grew, so too did the opportunity for smart product development in the space. Grail Advisors came together with the express objective of launching the industry's first, true actively-managed ETFs. This evolutionary leap in the management of these funds relied on our team's broad depth of industry knowledge and years of investment product development experience.
The first result of our efforts was the launch of
Grail American Beacon Large Cap Value ETF (ticker GVT)
in May of this year. Sub-advised by American Beacon Advisors, Inc., the fund represents the industry's first actively-managed ETF in the equity space using traditional active management from a leading asset management firm. More than that, GVT quickly and effectively narrowed the gap between large and small investors, as it allowed retail investors easy access to an institutional strategy and offered a cost-efficient alternative for an institutional asset manager to launch its strategy.
In October, Grail Advisors ETF Trust was greatly enhanced with the launch of four actively-managed ETFs sub-advised by RiverPark Advisors, LLC
RP Growth ETF (ticker RPX)
,
RP Focused Large Cap Growth ETF (ticker RWG)
,
RP Technology ETF (ticker RPQ)
, and
RP Financials ETF (ticker RFF)
. The new offerings represent the industry's first actively-managed ETFs in the equity space utilizing a single-manager approach.
While the operating history of all the Grail Advisors ETFs is relatively brief, I hope you'll take a few minutes to inspect the commentary included in the following pages. I think you'll find each of the portfolio managers has a discipline that's easily explainable and consistently applied, and each is willing to stick to his or her approach regardless of market movements and trends. We believe these characteristics will ultimately distinguish these managers across the long term.
I firmly believe the Grail Advisors Actively Managed ETFs have the potential to literally re-shape the face of managed investments by delivering transparency, efficiency, and access to a best-of-breed product. We're already seeing an increasing number of investment managers coming to the realization that the full disclosure and transparency of ETFs is a competitive advantage in today's marketplace. To that end, we expect to
2
develop a full suite of active ETFsboth single manager and multi-managerwith a good number of perceptive investment firms.
Our goal from the outset was to bring traditional, active fund management to the ETF marketplace. That day has come, and all of us at Grail Advisors are extremely grateful for your willingness to come along with us, especially in these remarkably difficult times. We thank you for your support.
William M. Thomas
Chief Executive Officer, Grail Advisors
3
MANAGEMENT'S DISCUSSION OF FUNDS' PERFORMANCE AND ANALYSIS
Grail American Beacon Large Cap Value ETF GVT
The Grail American Beacon Large Cap Value ETF gained 21.32% from its inception on 5/1/09 through 10/31/09. The ETF outperformed the Russell 1000 Value Index, which gained 20.21%. The ETF's top five performers were consumer and small business bank Bank of America Corp., mortgage and long-term care insurance provider Genworth Financial, Inc., investment bank JPMorgan Chase & Co., financial services company Wells Fargo & Co. and technology leader Apple, Inc. The ETF's bottom five performers were electricity provider FPL Group, Inc., financial services holding company Synovus Financial Corp., mobile device maker Nokia OYJ, and financial services companies KeyCorp and Mitsubishi UFJ Financial Group, Inc.
Top 10 Holdings
Security
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Percentage
of Net
Assets
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ConocoPhillips
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3.71
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%
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JPMorgan Chase & Co.
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3.29
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%
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Bank of America Corp.
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2.79
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%
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International Business
Machines Corp.
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2.42
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%
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Eli Lilly & Co.
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1.98
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%
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Vodafone Group PLC ADR
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1.86
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%
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Wells Fargo & Co.
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1.84
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%
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Home Depot, Inc.
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1.73
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%
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Boeing Co.
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1.65
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%
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Safeway, Inc.
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1.65
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%
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Sector Allocations
Sector
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Percentage
of Net
Assets
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Financials
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21.48
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%
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Information Technology
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13.82
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%
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Industrials
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13.20
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%
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Consumer Staples
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10.15
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%
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Health Care
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9.80
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%
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Energy
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9.28
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%
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Consumer Discretionary
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9.12
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%
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Utilities
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4.90
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%
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Telecommunication Services
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2.83
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%
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Materials
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2.58
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%
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Total Investments
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97.16
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%
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Other Assets in Excess of
Liabilities
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2.84
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%
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Net Assets
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100.00
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%
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The Hypothetical Growth of a $10,000 Investment chart is omitted as the Fund had fewer than six months of operating history at October 31, 2009.
The performance data quoted above represents past performance. Past performance is not a guarantee of future results. Investment return and value of the Fund shares will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Fund performance current to the most recent month-end is available by calling (415) 677-5870 or by visiting www.grailadvisors.com.
4
MANAGEMENT'S DISCUSSION OF FUNDS' PERFORMANCE AND ANALYSIS
RP Growth ETF RPX
The RP Growth ETF gained 0.48% from its inception on 10/2/09 through the end of the month, 10/31/09. The ETF's performance lagged the performance of the S&P 500 Index which gained 0.74%. The ETF's top five performers were internet retailer Amazon.com, Inc., casual apparel retailer J. Crew Group, Inc., payment processor MasterCard, Inc., internet advertiser Google, Inc. and ratings agency Moody's Corp. The ETF's bottom five performers were smart phone vendor Research In Motion Ltd., bio engineered seed company Monsanto Co., for-profit education company Apollo Group, Inc., gaming company Wynn Resorts Ltd. and cruise line company Carnival Corp.
Top 10 Holdings
Security
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|
Percentage
of Net
Assets
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Dollar Tree, Inc.
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2.30
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%
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Apple, Inc.
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2.23
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%
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McDonald's Corp.
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2.18
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%
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MasterCard, Inc. Class A
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2.16
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%
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CME Group, Inc.
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2.16
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%
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QUALCOMM, Inc.
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2.15
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%
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Target Corp.
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2.06
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%
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American Tower Corp. Class A
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2.01
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%
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Paychex, Inc.
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2.00
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%
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XTO Energy, Inc.
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2.00
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%
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Sector Allocations
Sector
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Percentage
of Net
Assets
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Consumer Discretionary
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29.35
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%
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Information Technology
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22.90
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%
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Financials
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17.39
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%
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Industrials
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8.17
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%
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Health Care
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5.71
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%
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Energy
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5.31
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%
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Telecommunication Services
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3.88
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%
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Materials
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3.41
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%
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Consumer Staples
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1.51
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%
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Utilities
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1.02
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%
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|
Total Investments
|
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98.65
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%
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|
Other Assets in Excess of
Liabilities
|
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1.35
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%
|
|
Net Assets
|
|
|
100.00
|
%
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|
The Hypothetical Growth of a $10,000 Investment chart is omitted as the Fund had fewer than six months of operating history at October 31, 2009.
The performance data quoted above represents past performance. Past performance is not a guarantee of future results. Investment return and value of the Fund shares will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Fund performance current to the most recent month-end is available by calling (415) 677-5870 or by visiting www.grailadvisors.com.
5
MANAGEMENT'S DISCUSSION OF FUNDS' PERFORMANCE AND ANALYSIS
RP Focused Large Cap Growth ETF RWG
The RP Focused Large Cap Growth ETF gained 0.36% from its inception on 10/2/09 through the end of the month, 10/31/09. The ETF's performance lagged the performance of the Russell 1000 Growth Index which gained 1.05%. The ETF's top five performers were internet advertiser Google, Inc., payment processor Visa, Inc., credit card company American Express Co., pharmacy benefits management company Express Scripts, Inc. and technology leader Apple, Inc. The ETF's bottom five performers were bio engineered seed company Monsanto Co., bank trust firm Northern Trust Corp., bio pharmaceutical company Gilead Sciences, Inc., investment bank Goldman Sachs Group, Inc. and freight forwarding firm Expeditors International of Washington, Inc.
Top 10 Holdings
Security
|
|
Percentage
of Net
Assets
|
|
Express Scripts, Inc.
|
|
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6.18
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%
|
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Apple, Inc.
|
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6.07
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%
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|
Google, Inc. Class A
|
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|
5.89
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%
|
|
PepsiCo, Inc.
|
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5.64
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%
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Berkshire Hathaway, Inc. Class B
|
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5.50
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%
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|
Gilead Sciences, Inc.
|
|
|
5.48
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%
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|
Visa, Inc. Class A
|
|
|
5.43
|
%
|
|
Monsanto Co.
|
|
|
5.06
|
%
|
|
Cognizant Technology
Solutions Corp. Class A
|
|
|
4.92
|
%
|
|
QUALCOMM, Inc.
|
|
|
4.52
|
%
|
|
Sector Allocations
Sector
|
|
Percentage
of Net
Assets
|
|
Information Technology
|
|
|
36.91
|
%
|
|
Health Care
|
|
|
15.04
|
%
|
|
Financials
|
|
|
13.33
|
%
|
|
Materials
|
|
|
8.86
|
%
|
|
Consumer Staples
|
|
|
8.28
|
%
|
|
Industrials
|
|
|
3.64
|
%
|
|
Energy
|
|
|
2.34
|
%
|
|
Consumer Discretionary
|
|
|
2.29
|
%
|
|
Short Term Investment
|
|
|
9.24
|
%
|
|
Total Investments
|
|
|
99.93
|
%
|
|
Other Assets in Excess of
Liabilities
|
|
|
0.07
|
%
|
|
Net Assets
|
|
|
100.00
|
%
|
|
The Hypothetical Growth of a $10,000 Investment chart is omitted as the Fund had fewer than six months of operating history at October 31, 2009.
The performance data quoted above represents past performance. Past performance is not a guarantee of future results. Investment return and value of the Fund shares will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Fund performance current to the most recent month-end is available by calling (415) 677-5870 or by visiting www.grailadvisors.com.
6
MANAGEMENT'S DISCUSSION OF FUNDS' PERFORMANCE AND ANALYSIS
RP Technology ETF RPQ
The RP Technology ETF gained 0.52% from its inception on 10/2/09 through the end of the month, 10/31/09. This compared positively to the NASDAQ Composite's loss of 0.57%. The fund's top five performers were internet retailer Amazon.com, Inc., internet advertiser Google, Inc., consumer electronics technology licensor Dolby Laboratories, Inc., payment processor MasterCard, Inc., and financial index creator MSCI, Inc. The fund's bottom five performers were smartphone vendor Research In Motion Ltd., videogame producer Activision Blizzard, Inc., retail point of sale computer maker MICROS Systems, Inc., online broker Charles Schwab Corp. and network management software company SolarWinds, Inc.
Top 10 Holdings
Security
|
|
Percentage
of Net
Assets
|
|
QUALCOMM, Inc.
|
|
|
3.53
|
%
|
|
EMC Corp.
|
|
|
3.38
|
%
|
|
Apple, Inc.
|
|
|
3.29
|
%
|
|
Research in Motion Ltd.
|
|
|
3.25
|
%
|
|
Google, Inc. Class A
|
|
|
3.25
|
%
|
|
Oracle Corp.
|
|
|
3.02
|
%
|
|
Paychex, Inc.
|
|
|
2.92
|
%
|
|
Verizon Communications, Inc.
|
|
|
2.92
|
%
|
|
Solera Holdings, Inc.
|
|
|
2.84
|
%
|
|
International Business Machines Corp.
|
|
|
2.76
|
%
|
|
Sector Allocations
Sector
|
|
Percentage
of Net
Assets
|
|
Information Technology
|
|
|
64.29
|
%
|
|
Financials
|
|
|
7.84
|
%
|
|
Consumer Discretionary
|
|
|
7.23
|
%
|
|
Telecommunication Services
|
|
|
5.50
|
%
|
|
Industrials
|
|
|
4.30
|
%
|
|
Utilities
|
|
|
1.97
|
%
|
|
Health Care
|
|
|
1.89
|
%
|
|
Short Term Investment
|
|
|
5.09
|
%
|
|
Total Investments
|
|
|
98.11
|
%
|
|
Other Assets in Excess of
Liabilities
|
|
|
1.89
|
%
|
|
Net Assets
|
|
|
100.00
|
%
|
|
The Hypothetical Growth of a $10,000 Investment chart is omitted as the Fund had fewer than six months of operating history at October 31, 2009.
The performance data quoted above represents past performance. Past performance is not a guarantee of future results. Investment return and value of the Fund shares will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Fund performance current to the most recent month-end is available by calling (415) 677-5870 or by visiting www.grailadvisors.com.
7
MANAGEMENT'S DISCUSSION OF FUNDS' PERFORMANCE AND ANALYSIS
RP Financials ETF RFF
The RP Financials ETF performance was flat from its inception on 10/2/09 through the end of the month, 10/31/09. The ETF's performance compared positively to the performance of the S&P 500 Financials Index which declined 1.68%. The ETF's top five performers were regional bank US Bancorp, payments processor firms MasterCard, Inc. and Visa, Inc., ratings agency Moody's Corp. and financial index creator MSCI, Inc. The ETF's bottom five performers were bank trust firm Northern Trust Corp., trust bank State Street Corp., online broker Charles Schwab Corp., financial service providers Alliance Data Systems Corp. and Interactive Brokers Group, Inc.
Top 10 Holdings
Security
|
|
Percentage
of Net
Assets
|
|
MasterCard, Inc. Class A
|
|
|
3.72
|
%
|
|
Goldman Sachs Group, Inc.
|
|
|
3.43
|
%
|
|
Berkshire Hathaway, Inc. Class B
|
|
|
3.42
|
%
|
|
JPMorgan Chase & Co.
|
|
|
3.25
|
%
|
|
US Bancorp
|
|
|
3.24
|
%
|
|
Charles Schwab Corp.
|
|
|
3.15
|
%
|
|
American Express Co.
|
|
|
3.07
|
%
|
|
CME Group, Inc.
|
|
|
2.98
|
%
|
|
Wells Fargo & Co.
|
|
|
2.91
|
%
|
|
Visa, Inc. Class A
|
|
|
2.73
|
%
|
|
Sector Allocations
Sector
|
|
Percentage
of Net
Assets
|
|
Financials
|
|
|
84.18
|
%
|
|
Information Technology
|
|
|
12.11
|
%
|
|
Short Term Investment
|
|
|
3.17
|
%
|
|
Total Investments
|
|
|
99.46
|
%
|
|
Other Assets in Excess of
Liabilities
|
|
|
0.54
|
%
|
|
Net Assets
|
|
|
100.00
|
%
|
|
The Hypothetical Growth of a $10,000 Investment chart is omitted as the Fund had fewer than six months of operating history at October 31, 2009.
The performance data quoted above represents past performance. Past performance is not a guarantee of future results. Investment return and value of the Fund shares will fluctuate so that an investor's shares, when sold, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Fund performance current to the most recent month-end is available by calling (415) 677-5870 or by visiting www.grailadvisors.com.
8
SHAREHOLDER EXPENSE EXAMPLES
As a shareholder of a Grail Advisors Actively Managed ETF, you incur two types of costs(1) transaction costs and (2) ongoing costs, including management fees. The following example is intended to help you understand your ongoing costs (in dollars and cents) of investing in a Fund and to compare these costs with the ongoing costs of investing in other funds.
The examples are based on an investment of $1,000 invested at the beginning of the period and held from commencement of operations to October 31, 2009.
ACTUAL EXPENSES
The first line under each Fund in the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line for your Fund under the heading entitled "Expenses Paid Since Inception Through 10/31/2009" to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line under each Fund in the table provides information about hypothetical account values and hypothetical expenses based on each 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 the ongoing costs of investing in your 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of Fund shares. Therefore, the second line under each Fund in the table is useful in comparing ongoing Fund costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
9
|
|
Beginning
Account
Value At
Inception
|
|
Ending
Account
Value
10/31/2009
|
|
Annualized
Expense Ratios
for the Period
Since Inception*
|
|
Expenses Paid
Since
Inception
Through
10/31/2009
|
|
Grail American Beacon
Large Cap Value ETF
1
|
|
Actual
|
|
$
|
1,000.00
|
|
|
$
|
1,216.73
|
|
|
|
0.79
|
%
|
|
$
|
4.41
|
|
|
Hypothetical (5% return
before expenses)
|
|
$
|
1,000.00
|
|
|
$
|
1,021.22
|
|
|
|
0.79
|
%
|
|
$
|
4.02
|
|
|
RP
Growth ETF
2
|
|
Actual
|
|
$
|
1,000.00
|
|
|
$
|
1,029.44
|
|
|
|
0.89
|
%
|
|
$
|
4.55
|
|
|
Hypothetical (5% return
before expenses)
|
|
$
|
1,000.00
|
|
|
$
|
1,020.72
|
|
|
|
0.89
|
%
|
|
$
|
4.53
|
|
|
RP
Focused Large Cap
Growth ETF
2
|
|
Actual
|
|
$
|
1,000.00
|
|
|
$
|
1,022.08
|
|
|
|
0.89
|
%
|
|
$
|
4.54
|
|
|
Hypothetical (5% return
before expenses)
|
|
$
|
1,000.00
|
|
|
$
|
1,020.72
|
|
|
|
0.89
|
%
|
|
$
|
4.53
|
|
|
RP
Technology ETF
2
|
|
Actual
|
|
$
|
1,000.00
|
|
|
$
|
1,031.89
|
|
|
|
0.89
|
%
|
|
$
|
4.56
|
|
|
Hypothetical (5% return
before expenses)
|
|
$
|
1,000.00
|
|
|
$
|
1,020.72
|
|
|
|
0.89
|
%
|
|
$
|
4.53
|
|
|
RP
Financials ETF
2
|
|
Actual
|
|
$
|
1,000.00
|
|
|
$
|
1,000.00
|
|
|
|
0.89
|
%
|
|
$
|
4.49
|
|
|
Hypothetical (5% return
before expenses)
|
|
$
|
1,000.00
|
|
|
$
|
1,020.72
|
|
|
|
0.89
|
%
|
|
$
|
4.53
|
|
|
* Expense ratios reflect expense caps from the date the fund commenced operations through October 31, 2009.
1
Fund commenced operations May 1, 2009.
2
Fund commenced operations October 2, 2009.
Expenses are calculated using the Fund's annualized expense ratio, multiplied by the ending account value for the period, multiplied by 184/365 (to reflect the one-half year period).
10
FREQUENCY DISTRIBUTION OF DISCOUNTS AND PREMIUMS (UNAUDITED)
The tables that follow present information about the differences between the daily market price on secondary markets for shares of a Fund and that Fund's net asset value. Net asset value, or "NAV", is the price per share at which each Fund issues and redeems shares. It is calculated in accordance with the standard formula for valuing mutual fund shares. The "Market Price" of each Fund generally is determined using the midpoint between the highest bid and the lowest offer on the stock exchange on which the shares of such Fund are listed for trading, as of the time that the Fund's NAV is calculated. Each Fund's Market Price may be at, above or below its NAV. The NAV of each Fund will fluctuate with changes in the market value of its portfolio holdings. The Market Price of each Fund will fluctuate in accordance with changes in its NAV, as well as market supply and demand.
Premiums or discounts are the differences (expressed as a percentage) between the NAV and Market Price of a Fund on a given day, generally at the time NAV is calculated. A premium is the amount that a Fund is trading above the reported NAV, expressed as a percentage of the NAV. A discount is the amount that a Fund is trading below the reported NAV, expressed as a percentage of the NAV.
The following information shows the frequency distributions of premiums and discounts for each of the Funds. The information shown for each Fund is for the period from the inception date of such Fund through October 31, 2009.
Each line in the table shows the number of trading days in which the Fund traded within the premium/discount range indicated. The number of trading days in each premium/discount range is also shown as a percentage of the total number of trading days in the period covered by each table. All data presented here represents past performance, which cannot be used to predict future results.
|
|
Market Price Above or Equal
to Net Asset Value
|
|
Market Price Below Net Asset Value
|
|
|
|
Basis Point
Differential
|
|
Number
of Days
|
|
Percentage
of Total
Days
|
|
Basis Point
Differential
|
|
Number
of Days
|
|
Percentage
of Total
Days
|
|
Grail American
Beacon Large Cap
Value ETF
|
|
May 4, 2009 -
October 31, 2009
|
|
|
0
|
|
|
|
12
|
|
|
|
28.57
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-49
|
|
|
|
26
|
|
|
|
61.91
|
%
|
|
|
1-49
|
|
|
|
82
|
|
|
|
96.47
|
%
|
|
|
|
|
50-99
|
|
|
|
1
|
|
|
|
2.38
|
%
|
|
|
50-99
|
|
|
|
2
|
|
|
|
2.35
|
%
|
|
|
|
|
100-199
|
|
|
|
1
|
|
|
|
2.38
|
%
|
|
|
100-199
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
>200
|
|
|
|
2
|
|
|
|
4.76
|
%
|
|
|
>200
|
|
|
|
1
|
|
|
|
1.18
|
%
|
|
|
|
|
Total
|
|
|
|
42
|
|
|
|
100.00
|
%
|
|
|
Total
|
|
|
|
85
|
|
|
|
100.00
|
%
|
|
RP
Growth ETF
|
|
October 2, 2009 -
October 31, 2009
|
|
|
0
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-49
|
|
|
|
21
|
|
|
|
100.00
|
%
|
|
|
1-49
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
50-99
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
50-99
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
100-199
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
100-199
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
>200
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
>200
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
Total
|
|
|
|
21
|
|
|
|
100.00
|
%
|
|
|
Total
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
11
|
|
Market Price Above or Equal
to Net Asset Value
|
|
Market Price Below Net Asset Value
|
|
|
|
Basis Point
Differential
|
|
Number
of Days
|
|
Percentage
of Total
Days
|
|
Basis Point
Differential
|
|
Number
of Days
|
|
Percentage
of Total
Days
|
|
RP
Focused Large
Cap Growth ETF
|
|
October 2, 2009 -
October 31, 2009
|
|
|
0
|
|
|
|
1
|
|
|
|
6.25
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-49
|
|
|
|
14
|
|
|
|
87.50
|
%
|
|
|
1-49
|
|
|
|
5
|
|
|
|
100.00
|
%
|
|
|
|
|
50-99
|
|
|
|
1
|
|
|
|
6.25
|
%
|
|
|
50-99
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
100-199
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
100-199
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
>200
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
>200
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
Total
|
|
|
|
16
|
|
|
|
100.00
|
%
|
|
|
Total
|
|
|
|
5
|
|
|
|
100.00
|
%
|
|
RP
Technology ETF
|
|
October 2, 2009 -
October 31, 2009
|
|
|
0
|
|
|
|
1
|
|
|
|
5.56
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-49
|
|
|
|
17
|
|
|
|
94.44
|
%
|
|
|
1-49
|
|
|
|
3
|
|
|
|
100.00
|
%
|
|
|
|
|
50-99
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
50-99
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
100-199
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
100-199
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
>200
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
>200
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
Total
|
|
|
|
18
|
|
|
|
100.00
|
%
|
|
|
Total
|
|
|
|
3
|
|
|
|
100.00
|
%
|
|
RP
Financials ETF
|
|
October 2, 2009 -
October 31, 2009
|
|
|
0
|
|
|
|
2
|
|
|
|
9.52
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1-49
|
|
|
|
19
|
|
|
|
90.48
|
%
|
|
|
1-49
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
50-99
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
50-99
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
100-199
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
100-199
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
>200
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
>200
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
|
|
|
Total
|
|
|
|
21
|
|
|
|
100.00
|
%
|
|
|
Total
|
|
|
|
0
|
|
|
|
0.00
|
%
|
|
12
GRAIL AMERICAN BEACON LARGE CAP VALUE ETF
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2009
Investments
|
|
Shares
|
|
Value
|
|
COMMON STOCKS97.2%
|
|
Automobiles & Components0.5%
|
|
Gentex Corp.
|
|
|
964
|
|
|
$
|
15,434
|
|
|
Banks7.1%
|
|
Banco Santander SA
(a)
|
|
|
1,249
|
|
|
|
20,059
|
|
|
Comerica, Inc.
|
|
|
195
|
|
|
|
5,411
|
|
|
KeyCorp
|
|
|
1,585
|
|
|
|
8,543
|
|
|
M&T Bank Corp.
|
|
|
381
|
|
|
|
23,946
|
|
|
Mitsubishi UFJ Financial Group, Inc.
(a)
|
|
|
3,932
|
|
|
|
20,879
|
|
|
PNC Financial Services Group, Inc.
|
|
|
781
|
|
|
|
38,222
|
|
|
SunTrust Banks, Inc.
|
|
|
274
|
|
|
|
5,236
|
|
|
Synovus Financial Corp.
|
|
|
3,134
|
|
|
|
6,957
|
|
|
U.S. Bancorp
|
|
|
797
|
|
|
|
18,506
|
|
|
Wells Fargo & Co.
|
|
|
2,020
|
|
|
|
55,590
|
|
|
Zions Bancorporation
|
|
|
885
|
|
|
|
12,532
|
|
|
Total Banks
|
|
|
|
|
|
|
215,881
|
|
|
Capital Goods12.1%
|
|
3
M Co.
|
|
|
349
|
|
|
|
25,676
|
|
|
Boeing Co.
|
|
|
1,050
|
|
|
|
50,190
|
|
|
Caterpillar, Inc.
|
|
|
199
|
|
|
|
10,957
|
|
|
Cummins, Inc.
|
|
|
457
|
|
|
|
19,678
|
|
|
Deere & Co.
|
|
|
514
|
|
|
|
23,413
|
|
|
Eaton Corp.
|
|
|
180
|
|
|
|
10,881
|
|
|
Empresa Brasileira de Aeronautica SA
(a)
*
|
|
|
630
|
|
|
|
12,758
|
|
|
General Electric Co.
|
|
|
1,618
|
|
|
|
23,073
|
|
|
Honeywell International, Inc.
|
|
|
857
|
|
|
|
30,758
|
|
|
Lockheed Martin Corp.
|
|
|
270
|
|
|
|
18,573
|
|
|
Northrop Grumman Corp.
|
|
|
982
|
|
|
|
49,228
|
|
|
PACCAR, Inc.
|
|
|
592
|
|
|
|
22,147
|
|
|
Raytheon Co.
|
|
|
638
|
|
|
|
28,889
|
|
|
Textron, Inc.
|
|
|
683
|
|
|
|
12,144
|
|
|
Tyco International Ltd.
|
|
|
539
|
|
|
|
18,083
|
|
|
United Technologies Corp.
|
|
|
165
|
|
|
|
10,139
|
|
|
Total Capital Goods
|
|
|
|
|
|
|
366,587
|
|
|
Consumer Durables & Apparel1.2%
|
|
Fortune Brands, Inc.
|
|
|
206
|
|
|
|
8,024
|
|
|
Polo Ralph Lauren Corp.
|
|
|
363
|
|
|
|
27,014
|
|
|
Total Consumer Durables & Apparel
|
|
|
|
|
|
|
35,038
|
|
|
Consumer Services1.3%
|
|
Carnival Corp.
|
|
|
348
|
|
|
|
10,134
|
|
|
McDonald's Corp.
|
|
|
487
|
|
|
|
28,543
|
|
|
Total Consumer Services
|
|
|
|
|
|
|
38,677
|
|
|
Diversified Financials8.4%
|
|
American Express Co.
|
|
|
311
|
|
|
|
10,835
|
|
|
Bank of America Corp.
|
|
|
5,813
|
|
|
|
84,754
|
|
|
Bank of New York Mellon Corp.
|
|
|
309
|
|
|
|
8,238
|
|
|
Charles Schwab Corp.
|
|
|
845
|
|
|
|
14,652
|
|
|
Citigroup, Inc.*
|
|
|
4,644
|
|
|
|
18,994
|
|
|
JPMorgan Chase & Co.
|
|
|
2,394
|
|
|
|
99,997
|
|
|
Investments
|
|
Shares
|
|
Value
|
|
Morgan Stanley
|
|
|
462
|
|
|
$
|
14,839
|
|
|
State Street Corp.
|
|
|
70
|
|
|
|
2,939
|
|
|
Total Diversified Financials
|
|
|
|
|
|
|
255,248
|
|
|
Energy9.3%
|
|
Chevron Corp.
|
|
|
538
|
|
|
|
41,179
|
|
|
ConocoPhillips
|
|
|
2,247
|
|
|
|
112,754
|
|
|
Devon Energy Corp.
|
|
|
518
|
|
|
|
33,520
|
|
|
Exxon Mobil Corp.
|
|
|
419
|
|
|
|
30,030
|
|
|
Royal Dutch Shell PLC
(a)
|
|
|
777
|
|
|
|
45,190
|
|
|
Weatherford International Ltd.*
|
|
|
1,074
|
|
|
|
18,827
|
|
|
Total Energy
|
|
|
|
|
|
|
281,500
|
|
|
Food & Staples Retailing2.1%
|
|
Safeway, Inc.
|
|
|
2,245
|
|
|
|
50,131
|
|
|
Wal-Mart Stores, Inc.
|
|
|
251
|
|
|
|
12,470
|
|
|
Total Food & Staples Retailing
|
|
|
|
|
|
|
62,601
|
|
|
Food, Beverage & Tobacco6.9%
|
|
Coca-Cola Co.
|
|
|
159
|
|
|
|
8,476
|
|
|
ConAgra Foods, Inc.
|
|
|
1,254
|
|
|
|
26,334
|
|
|
Diageo PLC
(a)
|
|
|
377
|
|
|
|
24,513
|
|
|
Hershey Co.
|
|
|
582
|
|
|
|
21,994
|
|
|
H.J. Heinz Co.
|
|
|
279
|
|
|
|
11,227
|
|
|
Kellogg Co.
|
|
|
542
|
|
|
|
27,935
|
|
|
Kraft Foods, Inc. Class A
|
|
|
339
|
|
|
|
9,329
|
|
|
Lorillard, Inc.
|
|
|
137
|
|
|
|
10,648
|
|
|
PepsiCo, Inc.
|
|
|
209
|
|
|
|
12,655
|
|
|
Philip Morris International, Inc.
|
|
|
652
|
|
|
|
30,879
|
|
|
Unilever NV
|
|
|
821
|
|
|
|
25,361
|
|
|
Total Food, Beverage & Tobacco
|
|
|
|
|
|
|
209,351
|
|
|
Health Care Equipment & Services3.6%
|
|
Baxter International, Inc.
|
|
|
508
|
|
|
|
27,462
|
|
|
Cigna Corp.
|
|
|
877
|
|
|
|
24,416
|
|
|
Hospira, Inc.*
|
|
|
515
|
|
|
|
22,990
|
|
|
UnitedHealth Group, Inc.
|
|
|
438
|
|
|
|
11,366
|
|
|
Universal Health Services, Inc. Class B
|
|
|
293
|
|
|
|
16,305
|
|
|
Zimmer Holdings, Inc.*
|
|
|
150
|
|
|
|
7,886
|
|
|
Total Health Care Equipment & Services
|
|
|
|
|
|
|
110,425
|
|
|
Household & Personal Products1.2%
|
|
L'Oreal SA
(a)
|
|
|
1,198
|
|
|
|
24,451
|
|
|
Procter & Gamble Co.
|
|
|
199
|
|
|
|
11,542
|
|
|
Total Household & Personal Products
|
|
|
|
|
|
|
35,993
|
|
|
Insurance6.0%
|
|
ACE Ltd.*
|
|
|
568
|
|
|
|
29,172
|
|
|
Aflac, Inc.
|
|
|
411
|
|
|
|
17,052
|
|
|
Allstate Corp.
|
|
|
553
|
|
|
|
16,352
|
|
|
Genworth Financial, Inc. Class A*
|
|
|
1,254
|
|
|
|
13,317
|
|
|
Hartford Financial Services Group, Inc.
|
|
|
448
|
|
|
|
10,985
|
|
|
Lincoln National Corp.
|
|
|
340
|
|
|
|
8,102
|
|
|
The accompanying notes are an integral part of these financial statements.
13
SCHEDULE OF INVESTMENTS (continued)
OCTOBER 31, 2009
Investments
|
|
Shares
|
|
Value
|
|
Insurance6.0%
(continued)
|
|
MetLife, Inc.
|
|
|
763
|
|
|
$
|
25,965
|
|
|
Prudential Financial, Inc.
|
|
|
203
|
|
|
|
9,182
|
|
|
Travelers Cos, Inc.
|
|
|
664
|
|
|
|
33,061
|
|
|
XL Capital Ltd. Class A
|
|
|
1,062
|
|
|
|
17,427
|
|
|
Total Insurance
|
|
|
|
|
|
|
180,615
|
|
|
Materials2.6%
|
|
Air Products & Chemicals, Inc.
|
|
|
486
|
|
|
|
37,485
|
|
|
Alcoa, Inc.
|
|
|
399
|
|
|
|
4,956
|
|
|
Dow Chemical Co.
|
|
|
508
|
|
|
|
11,928
|
|
|
E.I. Du Pont de Nemours & Co.
|
|
|
319
|
|
|
|
10,151
|
|
|
PPG Industries, Inc.
|
|
|
253
|
|
|
|
14,277
|
|
|
Total Materials
|
|
|
|
|
|
|
78,797
|
|
|
Media2.0%
|
|
CBS Corp. Class B
(b)
|
|
|
546
|
|
|
|
6,426
|
|
|
Comcast Corp. Class A*
|
|
|
905
|
|
|
|
12,688
|
|
|
Interpublic Group of Cos., Inc.*
|
|
|
1,514
|
|
|
|
9,114
|
|
|
Time Warner Cable, Inc.*
|
|
|
313
|
|
|
|
12,345
|
|
|
Walt Disney Co.
|
|
|
717
|
|
|
|
19,624
|
|
|
Total Media
|
|
|
|
|
|
|
60,197
|
|
|
Pharmaceuticals, Biotechnology & Life Sciences6.1%
|
|
Amgen, Inc.*
|
|
|
219
|
|
|
|
11,767
|
|
|
Bristol-Myers Squibb Co.
|
|
|
866
|
|
|
|
18,879
|
|
|
Eli Lilly & Co.
|
|
|
1,766
|
|
|
|
60,062
|
|
|
Johnson & Johnson
|
|
|
470
|
|
|
|
27,754
|
|
|
Merck & Co., Inc.
|
|
|
695
|
|
|
|
21,496
|
|
|
Pfizer, Inc.
|
|
|
2,129
|
|
|
|
36,257
|
|
|
Schering-Plough Corp.
|
|
|
367
|
|
|
|
10,349
|
|
|
Total Pharmaceuticals,
Biotechnology & Life Sciences
|
|
|
|
|
|
|
186,564
|
|
|
Retailing4.2%
|
|
Gap, Inc.
|
|
|
370
|
|
|
|
7,896
|
|
|
Home Depot, Inc.
|
|
|
2,093
|
|
|
|
52,513
|
|
|
JC Penney Co., Inc.
|
|
|
1,033
|
|
|
|
34,223
|
|
|
Limited Brands, Inc.
|
|
|
702
|
|
|
|
12,355
|
|
|
Target Corp.
|
|
|
419
|
|
|
|
20,292
|
|
|
Total Retailing
|
|
|
|
|
|
|
127,279
|
|
|
Semiconductors & Semiconductor Equipment1.2%
|
|
Intel Corp.
|
|
|
857
|
|
|
|
16,377
|
|
|
Texas Instruments, Inc.
|
|
|
886
|
|
|
|
20,777
|
|
|
Total Semiconductors &
Semiconductor Equipment
|
|
|
|
|
|
|
37,154
|
|
|
Software & Services4.8%
|
|
Accenture PLC Class A
|
|
|
143
|
|
|
|
5,302
|
|
|
Adobe Systems, Inc.*
|
|
|
760
|
|
|
|
25,034
|
|
|
CA, Inc.
|
|
|
1,753
|
|
|
|
36,673
|
|
|
eBay, Inc.*
|
|
|
328
|
|
|
|
7,305
|
|
|
Investments
|
|
Shares
|
|
Value
|
|
Microsoft Corp.
|
|
|
929
|
|
|
$
|
25,761
|
|
|
Oracle Corp.
|
|
|
2,124
|
|
|
|
44,816
|
|
|
Total Software & Services
|
|
|
|
|
|
|
144,891
|
|
|
Technology Hardware & Equipment7.8%
|
|
Apple, Inc.*
|
|
|
220
|
|
|
|
41,470
|
|
|
Dell, Inc.*
|
|
|
807
|
|
|
|
11,693
|
|
|
EMC Corp.*
|
|
|
1,797
|
|
|
|
29,597
|
|
|
Hewlett-Packard Co.
|
|
|
867
|
|
|
|
41,148
|
|
|
International Business Machines Corp.
|
|
|
608
|
|
|
|
73,331
|
|
|
Molex, Inc. Class A
|
|
|
842
|
|
|
|
13,935
|
|
|
Nokia OYJ
(a)
|
|
|
234
|
|
|
|
2,951
|
|
|
Tyco Electronics Ltd.
|
|
|
1,077
|
|
|
|
22,886
|
|
|
Total Technology
Hardware & Equipment
|
|
|
|
|
|
|
237,011
|
|
|
Telecommunication Services2.8%
|
|
AT&T, Inc.
|
|
|
754
|
|
|
|
19,355
|
|
|
Verizon Communications, Inc.
|
|
|
339
|
|
|
|
10,031
|
|
|
Vodafone Group PLC
(a)
|
|
|
2,542
|
|
|
|
56,407
|
|
|
Total Telecommunication Services
|
|
|
|
|
|
|
85,793
|
|
|
Transportation1.1%
|
|
Burlington Northern Santa Fe Corp.
|
|
|
123
|
|
|
|
9,264
|
|
|
FedEx Corp.
|
|
|
348
|
|
|
|
25,296
|
|
|
Total Transportation
|
|
|
|
|
|
|
34,560
|
|
|
Utilities4.9%
|
|
Dominion Resources, Inc.
|
|
|
788
|
|
|
|
26,863
|
|
|
Edison International
|
|
|
459
|
|
|
|
14,605
|
|
|
Entergy Corp.
|
|
|
129
|
|
|
|
9,897
|
|
|
Exelon Corp.
|
|
|
547
|
|
|
|
25,687
|
|
|
FPL Group, Inc.
|
|
|
797
|
|
|
|
39,133
|
|
|
Public Service Enterprise Group, Inc.
|
|
|
438
|
|
|
|
13,052
|
|
|
Questar Corp.
|
|
|
484
|
|
|
|
19,283
|
|
|
Total Utilities
|
|
|
|
|
|
|
148,520
|
|
|
Total Investments97.2%
(Cost $2,804,680)
|
|
|
|
|
|
|
2,948,116
|
|
|
Other Assets in Excess of Liabilities2.8%
|
|
|
|
|
|
|
85,722
|
|
|
Net Assets100.0%
|
|
|
|
|
|
$
|
3,033,838
|
|
|
* Nonincome producing security.
(a)
American Depositary Receipts.
(b)
Non-voting Shares.
The accompanying notes are an integral part of these financial statements.
14
RP GROWTH ETF
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2009
Investments
|
|
Shares
|
|
Value
|
|
COMMON STOCKS98.6%
|
|
Aerospace & Defense0.9%
|
|
Precision Castparts Corp.
|
|
|
246
|
|
|
$
|
23,500
|
|
|
Air Freight & Logistics2.8%
|
|
CH Robinson Worldwide, Inc.
|
|
|
432
|
|
|
|
23,808
|
|
|
Expeditors International of
Washington, Inc.
|
|
|
712
|
|
|
|
22,941
|
|
|
United Parcel Service, Inc.
|
|
|
442
|
|
|
|
23,727
|
|
|
Total Air Freight & Logistics
|
|
|
|
|
|
|
70,476
|
|
|
Capital Markets7.4%
|
|
Charles Schwab Corp.
|
|
|
2,610
|
|
|
|
45,257
|
|
|
Goldman Sachs Group, Inc.
|
|
|
266
|
|
|
|
45,266
|
|
|
Stifel Financial Corp.*
|
|
|
456
|
|
|
|
23,694
|
|
|
T. Rowe Price Group, Inc.
|
|
|
684
|
|
|
|
33,331
|
|
|
TD Ameritrade Holding Corp.*
|
|
|
1,944
|
|
|
|
37,519
|
|
|
Total Capital Markets
|
|
|
|
|
|
|
185,067
|
|
|
Chemicals3.4%
|
|
Ecolab, Inc.
|
|
|
856
|
|
|
|
37,630
|
|
|
Monsanto Co.
|
|
|
714
|
|
|
|
47,967
|
|
|
Total Chemicals
|
|
|
|
|
|
|
85,597
|
|
|
Commercial Services & Supplies3.5%
|
|
Iron Mountain, Inc.*
|
|
|
1,913
|
|
|
|
46,735
|
|
|
Stericycle, Inc.*
|
|
|
774
|
|
|
|
40,534
|
|
|
Total Commercial Services & Supplies
|
|
|
|
|
|
|
87,269
|
|
|
Communications Equipment6.9%
|
|
Cisco Systems, Inc.*
|
|
|
1,062
|
|
|
|
24,267
|
|
|
Juniper Networks, Inc.*
|
|
|
1,880
|
|
|
|
47,959
|
|
|
QUALCOMM, Inc.
|
|
|
1,302
|
|
|
|
53,916
|
|
|
Research In Motion Ltd.*
|
|
|
816
|
|
|
|
47,924
|
|
|
Total Communications Equipment
|
|
|
|
|
|
|
174,066
|
|
|
Computers & Peripherals4.0%
|
|
Apple, Inc.*
|
|
|
297
|
|
|
|
55,984
|
|
|
EMC Corp.*
|
|
|
2,782
|
|
|
|
45,820
|
|
|
Total Computers & Peripherals
|
|
|
|
|
|
|
101,804
|
|
|
Construction & Engineering0.9%
|
|
Quanta Services, Inc.*
|
|
|
1,130
|
|
|
|
23,956
|
|
|
Consumer Finance1.8%
|
|
American Express Co.
|
|
|
1,288
|
|
|
|
44,874
|
|
|
Diversified Consumer Services2.2%
|
|
Apollo Group, Inc. Class A*
|
|
|
340
|
|
|
|
19,414
|
|
|
Strayer Education, Inc.
|
|
|
172
|
|
|
|
34,911
|
|
|
Total Diversified Consumer Services
|
|
|
|
|
|
|
54,325
|
|
|
Investments
|
|
Shares
|
|
Value
|
|
Diversified Financial Services6.3%
|
|
CME Group, Inc.
|
|
|
179
|
|
|
$
|
54,167
|
|
|
IntercontinentalExchange, Inc.*
|
|
|
386
|
|
|
|
38,673
|
|
|
JPMorgan Chase & Co.
|
|
|
856
|
|
|
|
35,755
|
|
|
Moody's Corp.
|
|
|
1,222
|
|
|
|
28,937
|
|
|
Total Diversified Financial Services
|
|
|
|
|
|
|
157,532
|
|
|
Electric Utilities1.0%
|
|
ITC Holdings Corp.
|
|
|
579
|
|
|
|
25,719
|
|
|
Energy Equipment & Services1.3%
|
|
Schlumberger Ltd.
|
|
|
528
|
|
|
|
32,842
|
|
|
Food & Staples Retailing1.5%
|
|
Costco Wholesale Corp.
|
|
|
666
|
|
|
|
37,862
|
|
|
Health Care Equipment & Supplies2.1%
|
|
Edwards Lifesciences Corp.*
|
|
|
366
|
|
|
|
28,160
|
|
|
Intuitive Surgical, Inc.*
|
|
|
96
|
|
|
|
23,650
|
|
|
Total Health Care Equipment & Supplies
|
|
|
|
|
|
|
51,810
|
|
|
Health Care Providers & Services3.6%
|
|
Express Scripts, Inc.*
|
|
|
484
|
|
|
|
38,681
|
|
|
Laboratory Corp. of America Holdings*
|
|
|
380
|
|
|
|
26,178
|
|
|
Quest Diagnostics, Inc.
|
|
|
480
|
|
|
|
26,846
|
|
|
Total Health Care Providers & Services
|
|
|
|
|
|
|
91,705
|
|
|
Hotels, Restaurants & Leisure8.9%
|
|
Burger King Holdings, Inc.
|
|
|
1,422
|
|
|
|
24,402
|
|
|
Carnival Corp.
|
|
|
1,495
|
|
|
|
43,534
|
|
|
McDonald's Corp.
|
|
|
935
|
|
|
|
54,800
|
|
|
Penn National Gaming, Inc.*
|
|
|
1,130
|
|
|
|
28,397
|
|
|
Vail Resorts, Inc.*
|
|
|
1,399
|
|
|
|
48,182
|
|
|
Wynn Resorts Ltd.*
|
|
|
440
|
|
|
|
23,857
|
|
|
Total Hotels, Restaurants & Leisure
|
|
|
|
|
|
|
223,172
|
|
|
Household Durables1.3%
|
|
Toll Brothers, Inc.*
|
|
|
1,920
|
|
|
|
33,254
|
|
|
Insurance1.0%
|
|
Berkshire Hathaway, Inc. Class B*
|
|
|
8
|
|
|
|
26,264
|
|
|
Internet & Catalog Retail2.6%
|
|
Amazon.com, Inc.*
|
|
|
296
|
|
|
|
35,167
|
|
|
priceline.com, Inc.*
|
|
|
188
|
|
|
|
29,664
|
|
|
Total Internet & Catalog Retail
|
|
|
|
|
|
|
64,831
|
|
|
Internet Software & Services3.4%
|
|
Equinix, Inc.*
|
|
|
544
|
|
|
|
46,414
|
|
|
Google, Inc. Class A*
|
|
|
74
|
|
|
|
39,673
|
|
|
Total Internet Software & Services
|
|
|
|
|
|
|
86,087
|
|
|
The accompanying notes are an integral part of these financial statements.
15
SCHEDULE OF INVESTMENTS (continued)
OCTOBER 31, 2009
Investments
|
|
Shares
|
|
Value
|
|
IT Services5.5%
|
|
MasterCard, Inc. Class A
|
|
|
248
|
|
|
$
|
54,317
|
|
|
Paychex, Inc.
|
|
|
1,775
|
|
|
|
50,428
|
|
|
Visa, Inc. Class A
|
|
|
452
|
|
|
|
34,244
|
|
|
Total IT Services
|
|
|
|
|
|
|
138,989
|
|
|
Media3.6%
|
|
Discovery Communications, Inc.
Class A*
|
|
|
1,730
|
|
|
|
47,575
|
|
|
Walt Disney Co.
|
|
|
1,548
|
|
|
|
42,369
|
|
|
Total Media
|
|
|
|
|
|
|
89,944
|
|
|
Multiline Retail4.4%
|
|
Dollar Tree, Inc.*
|
|
|
1,277
|
|
|
|
57,631
|
|
|
Target Corp.
|
|
|
1,072
|
|
|
|
51,917
|
|
|
Total Multiline Retail
|
|
|
|
|
|
|
109,548
|
|
|
Oil, Gas & Consumable Fuels4.0%
|
|
Southwestern Energy Co.*
|
|
|
586
|
|
|
|
25,538
|
|
|
Ultra Petroleum Corp.*
|
|
|
510
|
|
|
|
24,760
|
|
|
XTO Energy, Inc.
|
|
|
1,210
|
|
|
|
50,287
|
|
|
Total Oil, Gas & Consumable Fuels
|
|
|
|
|
|
|
100,585
|
|
|
Real Estate Investment Trusts0.9%
|
|
Vornado Realty Trust
|
|
|
388
|
|
|
|
23,109
|
|
|
Software3.0%
|
|
Electronic Arts, Inc.*
|
|
|
2,001
|
|
|
|
36,498
|
|
|
Oracle Corp.
|
|
|
1,800
|
|
|
|
37,980
|
|
|
Total Software
|
|
|
|
|
|
|
74,478
|
|
|
Specialty Retail4.0%
|
|
GameStop Corp. Class A*
|
|
|
1,329
|
|
|
|
32,281
|
|
|
J. Crew Group, Inc.*
|
|
|
698
|
|
|
|
28,464
|
|
|
Lowe's Cos, Inc.
|
|
|
2,030
|
|
|
|
39,727
|
|
|
Total Specialty Retail
|
|
|
|
|
|
|
100,472
|
|
|
Textiles, Apparel & Luxury Goods2.5%
|
|
Coach, Inc.
|
|
|
1,140
|
|
|
|
37,586
|
|
|
Polo Ralph Lauren Corp.
|
|
|
326
|
|
|
|
24,261
|
|
|
Total Textiles,
Apparel & Luxury Goods
|
|
|
|
|
|
|
61,847
|
|
|
Wireless Telecommunication Services3.9%
|
|
American Tower Corp. Class A*
|
|
|
1,374
|
|
|
|
50,591
|
|
|
SBA Communications Corp.*
|
|
|
1,659
|
|
|
|
46,800
|
|
|
Total Wireless
Telecommunication Services
|
|
|
|
|
|
|
97,391
|
|
|
Total Investments98.6%
(Cost $2,474,498)
|
|
|
|
|
|
|
2,478,375
|
|
|
Other Assets in Excess of Liabilities1.4%
|
|
|
|
|
|
|
34,200
|
|
|
Net Assets100.0%
|
|
|
|
|
|
$
|
2,512,575
|
|
|
* Nonincome producing security.
The accompanying notes are an integral part of these financial statements.
16
RP FOCUSED LARGE CAP GROWTH ETF
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2009
Investments
|
|
Shares
|
|
Value
|
|
COMMON STOCKS90.7%
|
|
Air Freight & Logistics3.6%
|
|
Expeditors International of
Washington, Inc.
|
|
|
2,838
|
|
|
$
|
91,440
|
|
|
Beverages5.7%
|
|
PepsiCo, Inc.
|
|
|
2,339
|
|
|
|
141,626
|
|
|
Biotechnology5.5%
|
|
Gilead Sciences, Inc.*
|
|
|
3,232
|
|
|
|
137,522
|
|
|
Capital Markets7.8%
|
|
Goldman Sachs Group, Inc.
|
|
|
652
|
|
|
|
110,951
|
|
|
Northern Trust Corp.
|
|
|
1,704
|
|
|
|
85,626
|
|
|
Total Capital Markets
|
|
|
|
|
|
|
196,577
|
|
|
Chemicals8.9%
|
|
Ecolab, Inc.
|
|
|
2,166
|
|
|
|
95,217
|
|
|
Monsanto Co.
|
|
|
1,890
|
|
|
|
126,970
|
|
|
Total Chemicals
|
|
|
|
|
|
|
222,187
|
|
|
Communications Equipment4.5%
|
|
QUALCOMM, Inc.
|
|
|
2,734
|
|
|
|
113,215
|
|
|
Computers & Peripherals9.4%
|
|
Apple, Inc.*
|
|
|
808
|
|
|
|
152,308
|
|
|
EMC Corp.*
|
|
|
5,106
|
|
|
|
84,096
|
|
|
Total Computers & Peripherals
|
|
|
|
|
|
|
236,404
|
|
|
Energy Equipment & Services2.3%
|
|
National Oilwell Varco, Inc.*
|
|
|
1,430
|
|
|
|
58,616
|
|
|
Food & Staples Retailing2.6%
|
|
Whole Foods Market, Inc.*
|
|
|
2,060
|
|
|
|
66,044
|
|
|
Health Care Equipment & Supplies3.4%
|
|
Varian Medical Systems, Inc.*
|
|
|
2,076
|
|
|
|
85,074
|
|
|
Health Care Providers & Services6.2%
|
|
Express Scripts, Inc.*
|
|
|
1,938
|
|
|
|
154,885
|
|
|
Insurance5.5%
|
|
Berkshire Hathaway, Inc. Class B*
|
|
|
42
|
|
|
|
137,886
|
|
|
Internet Software & Services5.9%
|
|
Google, Inc. Class A*
|
|
|
276
|
|
|
|
147,969
|
|
|
IT Services17.1%
|
|
Cognizant Technology Solutions Corp.
Class A*
|
|
|
3,196
|
|
|
|
123,525
|
|
|
Paychex, Inc.
|
|
|
3,454
|
|
|
|
98,128
|
|
|
Visa, Inc. Class A
|
|
|
1,800
|
|
|
|
136,368
|
|
|
Western Union Co.
|
|
|
3,880
|
|
|
|
70,500
|
|
|
Total IT Services
|
|
|
|
|
|
|
428,521
|
|
|
Investments
|
|
Shares
|
|
Value
|
|
Specialty Retail2.3%
|
|
Lowe's Companies, Inc.
|
|
|
2,942
|
|
|
$
|
57,575
|
|
|
TOTAL COMMON STOCKS
(Cost $2,276,142)
|
|
|
|
|
2,275,541
|
|
|
SHORT TERM INVESTMENT9.2%
|
|
Bank Deposit9.2%
|
|
Bank of New York Cash Reserve 0.05%
(Cost $231,761)
|
|
|
231,761
|
|
|
|
231,761
|
|
|
Total Investments99.9%
(Cost $2,507,903)
|
|
|
|
|
2,507,302
|
|
|
Other Assets in Excess of Liabilities0.1%
|
|
|
|
|
1,835
|
|
|
Net Assets100.0%
|
|
|
|
$
|
2,509,137
|
|
|
* Nonincome producing security
The accompanying notes are an integral part of these financial statements.
17
RP TECHNOLOGY ETF
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2009
Investments
|
|
Shares
|
|
Value
|
|
COMMON STOCKS93.0%
|
|
Capital Markets2.3%
|
|
Charles Schwab Corp.
|
|
|
3,332
|
|
|
$
|
57,777
|
|
|
Communications Equipment13.8%
|
|
Cisco Systems, Inc.*
|
|
|
2,399
|
|
|
|
54,817
|
|
|
CommScope, Inc.*
|
|
|
2,088
|
|
|
|
56,418
|
|
|
Juniper Networks, Inc.*
|
|
|
2,555
|
|
|
|
65,178
|
|
|
QUALCOMM, Inc.
|
|
|
2,138
|
|
|
|
88,535
|
|
|
Research In Motion Ltd.*
|
|
|
1,391
|
|
|
|
81,693
|
|
|
Total Communications Equipment
|
|
|
|
|
|
|
346,641
|
|
|
Computers & Peripherals11.7%
|
|
Apple, Inc.*
|
|
|
439
|
|
|
|
82,751
|
|
|
EMC Corp.*
|
|
|
5,149
|
|
|
|
84,804
|
|
|
International Business Machines Corp.
|
|
|
575
|
|
|
|
69,351
|
|
|
NetApp, Inc.*
|
|
|
2,104
|
|
|
|
56,913
|
|
|
Total Computers & Peripherals
|
|
|
|
|
|
|
293,819
|
|
|
Construction & Engineering1.9%
|
|
Quanta Services, Inc.*
|
|
|
2,260
|
|
|
|
47,912
|
|
|
Diversified Financial Services4.0%
|
|
CME Group, Inc.
|
|
|
162
|
|
|
|
49,023
|
|
|
MSCI, Inc. Class A*
|
|
|
1,688
|
|
|
|
51,315
|
|
|
Total Diversified Financial Services
|
|
|
|
|
|
|
100,338
|
|
|
Diversified Telecommunication Services2.9%
|
|
Verizon Communications, Inc.
|
|
|
2,478
|
|
|
|
73,324
|
|
|
Electric Utilities1.9%
|
|
ITC Holdings Corp.
|
|
|
1,100
|
|
|
|
48,862
|
|
|
Electronic Equipment, Instruments and
Components2.7%
|
|
Dolby Laboratories, Inc.*
|
|
|
1,636
|
|
|
|
68,614
|
|
|
Health Care Equipment & Supplies1.9%
|
|
Intuitive Surgical, Inc.*
|
|
|
190
|
|
|
|
46,806
|
|
|
Internet & Catalog Retail4.8%
|
|
Amazon.com, Inc.*
|
|
|
402
|
|
|
|
47,762
|
|
|
Blue Nile, Inc.*
|
|
|
402
|
|
|
|
24,140
|
|
|
priceline.com, Inc.*
|
|
|
302
|
|
|
|
47,653
|
|
|
Total Internet & Catalog Retail
|
|
|
|
|
|
|
119,555
|
|
|
Internet Software & Services8.3%
|
|
Equinix, Inc.*
|
|
|
747
|
|
|
|
63,734
|
|
|
Google, Inc. Class A*
|
|
|
152
|
|
|
|
81,490
|
|
|
WebMD Health Corp.*
|
|
|
1,896
|
|
|
|
64,578
|
|
|
Total Internet Software & Services
|
|
|
|
|
|
|
209,802
|
|
|
Investments
|
|
Shares
|
|
Value
|
|
IT Services8.6%
|
|
Accenture PLC Class A
|
|
|
1,006
|
|
|
$
|
37,302
|
|
|
Cognizant Technology Solutions
Corp. Class A*
|
|
|
970
|
|
|
|
37,491
|
|
|
Mastercard, Inc. Class A
|
|
|
310
|
|
|
|
67,896
|
|
|
Paychex, Inc.
|
|
|
2,582
|
|
|
|
73,355
|
|
|
Total IT Services
|
|
|
|
|
|
|
216,044
|
|
|
Media2.4%
|
|
Discovery Communications, Inc.
Class A*
|
|
|
2,178
|
|
|
|
59,895
|
|
|
Professional Services2.3%
|
|
CoStar Group, Inc.*
|
|
|
1,516
|
|
|
|
58,851
|
|
|
Real Estate Investment Trusts1.5%
|
|
Digital Realty Trust, Inc.
|
|
|
808
|
|
|
|
36,465
|
|
|
Semiconductors & Semiconductor Equipment1.2%
|
|
Avago Technologies Ltd.*
|
|
|
1,993
|
|
|
|
29,895
|
|
|
Software18.3%
|
|
Adobe Systems, Inc.*
|
|
|
1,134
|
|
|
|
37,354
|
|
|
Ariba, Inc.*
|
|
|
3,232
|
|
|
|
38,202
|
|
|
Concur Technologies, Inc.*
|
|
|
944
|
|
|
|
33,644
|
|
|
Electronic Arts, Inc.*
|
|
|
3,283
|
|
|
|
59,882
|
|
|
Intuit, Inc.*
|
|
|
1,754
|
|
|
|
50,989
|
|
|
MICROS Systems, Inc.*
|
|
|
2,070
|
|
|
|
55,724
|
|
|
Oracle Corp.
|
|
|
3,598
|
|
|
|
75,918
|
|
|
Salesforce.com, Inc.*
|
|
|
658
|
|
|
|
37,341
|
|
|
Solera Holdings, Inc.
|
|
|
2,212
|
|
|
|
71,271
|
|
|
Total Software
|
|
|
|
|
|
|
460,325
|
|
|
Wireless Telecommunication Services2.5%
|
|
American Tower Corp. Class A*
|
|
|
1,718
|
|
|
|
63,257
|
|
|
TOTAL COMMON STOCKS
(Cost $2,318,546)
|
|
|
|
|
|
|
2,338,182
|
|
|
SHORT TERM INVESTMENT5.1%
|
|
Bank Deposit5.1%
|
|
Bank of New York Cash Reserve 0.05%
(Cost $127,831)
|
|
|
127,831
|
|
|
|
127,831
|
|
|
Total Investments98.1%
(Cost $2,446,377)
|
|
|
|
|
|
|
2,466,013
|
|
|
Other Assets in Excess of Liabilities1.9%
|
|
|
|
|
|
|
47,487
|
|
|
Net Assets100.0%
|
|
|
|
|
|
$
|
2,513,500
|
|
|
* Nonincome producing security
The accompanying notes are an integral part of these financial statements.
18
RP FINANCIALS ETF
SCHEDULE OF INVESTMENTS
OCTOBER 31, 2009
Investments
|
|
Shares
|
|
Value
|
|
COMMON STOCKS96.3%
|
|
Capital Markets31.0%
|
|
Bank of New York Mellon Corp.
|
|
|
1,278
|
|
|
$
|
34,071
|
|
|
BlackRock, Inc.
|
|
|
234
|
|
|
|
50,659
|
|
|
Blackstone Group LP*
|
|
|
3,558
|
|
|
|
47,748
|
|
|
Charles Schwab Corp.
|
|
|
4,540
|
|
|
|
78,724
|
|
|
Franklin Resources, Inc.
|
|
|
246
|
|
|
|
25,739
|
|
|
Goldman Sachs Group, Inc.
|
|
|
504
|
|
|
|
85,766
|
|
|
Invesco Ltd.
|
|
|
1,696
|
|
|
|
35,870
|
|
|
Jefferies Group, Inc.*
|
|
|
1,394
|
|
|
|
36,383
|
|
|
Lazard Ltd. Class A
|
|
|
890
|
|
|
|
33,598
|
|
|
Morgan Stanley
|
|
|
1,206
|
|
|
|
38,737
|
|
|
Northern Trust Corp.
|
|
|
1,208
|
|
|
|
60,702
|
|
|
Och-Ziff Capital Management
Group LLC Class A
|
|
|
4,164
|
|
|
|
50,509
|
|
|
State Street Corp.
|
|
|
877
|
|
|
|
36,816
|
|
|
Stifel Financial Corp.*
|
|
|
900
|
|
|
|
46,764
|
|
|
T. Rowe Price Group, Inc.
|
|
|
1,088
|
|
|
|
53,018
|
|
|
TD Ameritrade Holding Corp.*
|
|
|
3,083
|
|
|
|
59,502
|
|
|
Total Capital Markets
|
|
|
|
|
|
|
774,606
|
|
|
Commercial Banks10.9%
|
|
Fifth Third Bancorp
|
|
|
5,030
|
|
|
|
44,968
|
|
|
First Horizon National Corp.*
|
|
|
1,872
|
|
|
|
22,146
|
|
|
PNC Financial Services Group, Inc.
|
|
|
1,042
|
|
|
|
50,996
|
|
|
US Bancorp
|
|
|
3,492
|
|
|
|
81,084
|
|
|
Wells Fargo & Co.
|
|
|
2,646
|
|
|
|
72,818
|
|
|
Total Commercial Banks
|
|
|
|
|
|
|
272,012
|
|
|
Consumer Finance4.0%
|
|
American Express Co.
|
|
|
2,206
|
|
|
|
76,857
|
|
|
Discover Financial Services
|
|
|
1,566
|
|
|
|
22,143
|
|
|
Total Consumer Finance
|
|
|
|
|
|
|
99,000
|
|
|
Diversified Financial Services12.8%
|
|
CME Group, Inc.
|
|
|
246
|
|
|
|
74,442
|
|
|
Interactive Brokers Group, Inc.*
|
|
|
1,250
|
|
|
|
20,013
|
|
|
IntercontinentalExchange, Inc.*
|
|
|
526
|
|
|
|
52,700
|
|
|
JPMorgan Chase & Co.
|
|
|
1,950
|
|
|
|
81,452
|
|
|
Moody's Corp.
|
|
|
1,802
|
|
|
|
42,671
|
|
|
MSCI, Inc.*
|
|
|
1,652
|
|
|
|
50,221
|
|
|
Total Diversified Financial Services
|
|
|
|
|
|
|
321,499
|
|
|
Insurance17.3%
|
|
ACE Ltd.*
|
|
|
702
|
|
|
|
36,055
|
|
|
Aflac, Inc.
|
|
|
584
|
|
|
|
24,230
|
|
|
AON Corp.
|
|
|
910
|
|
|
|
35,044
|
|
|
Arch Capital Group Ltd.*
|
|
|
550
|
|
|
|
37,054
|
|
|
Assurant, Inc.
|
|
|
1,166
|
|
|
|
34,898
|
|
|
Berkshire Hathaway, Inc. Class B*
|
|
|
26
|
|
|
|
85,358
|
|
|
Chubb Corp.
|
|
|
738
|
|
|
|
35,808
|
|
|
Fidelity National Financial, Inc. Class A
|
|
|
2,424
|
|
|
|
32,894
|
|
|
Travelers Companies, Inc.
|
|
|
766
|
|
|
|
38,139
|
|
|
Investments
|
|
Shares
|
|
Value
|
|
Willis Group Holdings Ltd.
|
|
|
1,326
|
|
|
$
|
35,802
|
|
|
WR Berkley Corp.
|
|
|
1,484
|
|
|
|
36,684
|
|
|
Total Insurance
|
|
|
|
|
|
|
431,966
|
|
|
IT Services12.1%
|
|
Alliance Data Systems Corp.*
|
|
|
1,024
|
|
|
|
56,300
|
|
|
Lender Processing Services, Inc.
|
|
|
968
|
|
|
|
38,526
|
|
|
MasterCard, Inc. Class A
|
|
|
424
|
|
|
|
92,865
|
|
|
Visa, Inc. Class A
|
|
|
898
|
|
|
|
68,032
|
|
|
Western Union Co.
|
|
|
2,596
|
|
|
|
47,169
|
|
|
Total IT Services
|
|
|
|
|
|
|
302,892
|
|
|
Real Estate Investment Trusts6.2%
|
|
Annaly Capital Management, Inc.
|
|
|
2,052
|
|
|
|
34,699
|
|
|
Digital Realty Trust, Inc.
|
|
|
1,098
|
|
|
|
49,553
|
|
|
Public Storage
|
|
|
654
|
|
|
|
48,134
|
|
|
Vornado Realty Trust
|
|
|
386
|
|
|
|
22,990
|
|
|
Total Real Estate Investment Trusts
|
|
|
|
|
|
|
155,376
|
|
|
Thrifts & Mortgage Finance2.0%
|
|
Hudson City Bancorp, Inc.
|
|
|
1,892
|
|
|
|
24,861
|
|
|
People's United Financial, Inc.
|
|
|
1,584
|
|
|
|
25,392
|
|
|
Total Thrifts & Mortgage Finance
|
|
|
|
|
|
|
50,253
|
|
|
TOTAL COMMON STOCKS
(Cost $2,407,175)
|
|
|
|
|
|
|
2,407,604
|
|
|
SHORT TERM INVESTMENT3.2%
|
|
Bank Deposit3.2%
|
|
Bank of New York Cash Reserve 0.05%
(Cost $79,186)
|
|
|
79,186
|
|
|
|
79,186
|
|
|
Total Investments99.5%
(Cost $2,486,361)
|
|
|
|
|
|
|
2,486,790
|
|
|
Other Assets in Excess of Liabilities0.5%
|
|
|
|
|
|
|
13,577
|
|
|
Net Assets100.0%
|
|
|
|
|
|
$
|
2,500,367
|
|
|
* Nonincome producing security
The accompanying notes are an integral part of these financial statements.
19
STATEMENTS OF ASSETS AND LIABILITIES
OCTOBER 31, 2009
|
|
Grail
American
Beacon
Large Cap
Value ETF
|
|
RP
Growth
ETF
|
|
RP
Focused
Large Cap
Growth
ETF
|
|
RP
Technology
ETF
|
|
RP
Financials
ETF
|
|
AS
SETS:
|
|
Investments, at cost:
|
|
$
|
2,804,680
|
|
|
$
|
2,474,498
|
|
|
$
|
2,507,903
|
|
|
$
|
2,446,377
|
|
|
$
|
2,486,361
|
|
|
Investments at value
|
|
|
2,948,116
|
|
|
|
2,478,375
|
|
|
|
2,507,302
|
|
|
|
2,466,013
|
|
|
|
2,486,790
|
|
|
Cash
|
|
|
48,716
|
|
|
|
21,987
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Receivables:
|
|
Capital shares sold
|
|
|
3,087,203
|
|
|
|
2,559,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Due from manager
|
|
|
153,807
|
|
|
|
34,921
|
|
|
|
34,926
|
|
|
|
34,924
|
|
|
|
35,115
|
|
|
Deferred offering costs
|
|
|
44,374
|
|
|
|
21,743
|
|
|
|
21,743
|
|
|
|
21,743
|
|
|
|
23,897
|
|
|
Investment in securities sold
|
|
|
17,605
|
|
|
|
112,507
|
|
|
|
|
|
|
|
43,773
|
|
|
|
22,119
|
|
|
Dividends and interest
receivable
|
|
|
4,016
|
|
|
|
1,264
|
|
|
|
1,078
|
|
|
|
2,964
|
|
|
|
719
|
|
|
Total Assets
|
|
|
6,303,837
|
|
|
|
5,230,791
|
|
|
|
2,565,049
|
|
|
|
2,569,417
|
|
|
|
2,568,640
|
|
|
LIABILITIES:
|
|
Payables:
|
|
Capital shares redeemed
|
|
|
3,087,203
|
|
|
|
2,559,994
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Compliance fees
|
|
|
13,637
|
|
|
|
2,118
|
|
|
|
2,118
|
|
|
|
2,118
|
|
|
|
2,118
|
|
|
Investment securities purchased
|
|
|
11,535
|
|
|
|
102,296
|
|
|
|
|
|
|
|
|
|
|
|
10,005
|
|
|
Advisory fees
|
|
|
1,827
|
|
|
|
1,070
|
|
|
|
1,060
|
|
|
|
1,063
|
|
|
|
1,067
|
|
|
Trustee fees
|
|
|
2
|
|
|
|
1,184
|
|
|
|
1,184
|
|
|
|
1,184
|
|
|
|
1,184
|
|
|
Other accrued expenses
|
|
|
155,795
|
|
|
|
51,554
|
|
|
|
51,550
|
|
|
|
51,552
|
|
|
|
53,899
|
|
|
Total Liabilities
|
|
|
3,269,999
|
|
|
|
2,718,216
|
|
|
|
55,912
|
|
|
|
55,917
|
|
|
|
68,273
|
|
|
NET ASSETS
|
|
$
|
3,033,838
|
|
|
$
|
2,512,575
|
|
|
$
|
2,509,137
|
|
|
$
|
2,513,500
|
|
|
$
|
2,500,367
|
|
|
NET ASSETS CONSIST OF:
|
|
Paid-in capital
|
|
$
|
2,773,675
|
|
|
$
|
2,497,998
|
|
|
$
|
2,497,998
|
|
|
$
|
2,497,998
|
|
|
$
|
2,497,805
|
|
|
Undistributed net investment
income
|
|
|
44,175
|
|
|
|
2,036
|
|
|
|
2,093
|
|
|
|
3,324
|
|
|
|
1,369
|
|
|
Undistributed (accumulated)
net realized gain (loss) on
investments
|
|
|
72,552
|
|
|
|
8,664
|
|
|
|
9,647
|
|
|
|
(7,458
|
)
|
|
|
764
|
|
|
Net unrealized appreciation
(depreciation) on investments
|
|
|
143,436
|
|
|
|
3,877
|
|
|
|
(601
|
)
|
|
|
19,636
|
|
|
|
429
|
|
|
NET ASSETS
|
|
$
|
3,033,838
|
|
|
$
|
2,512,575
|
|
|
$
|
2,509,137
|
|
|
$
|
2,513,500
|
|
|
$
|
2,500,367
|
|
|
Shares outstanding (unlimited
number of shares of beneficial
interest authorized, without
par value)
|
|
|
100,022
|
|
|
|
100,010
|
|
|
|
100,010
|
|
|
|
100,010
|
|
|
|
100,010
|
|
|
Net asset value, per share
|
|
$
|
30.33
|
|
|
$
|
25.12
|
|
|
$
|
25.09
|
|
|
$
|
25.13
|
|
|
$
|
25.00
|
|
|
The accompanying notes are an integral part of these financial statements.
20
STATEMENTS OF OPERATIONS
FOR THE PERIOD ENDED OCTOBER 31, 2009
|
|
Grail
American
Beacon
Large Cap
Value ETF*
|
|
RP
Growth
ETF**
|
|
RP
Focused
Large Cap
Growth
ETF**
|
|
RP
Technology
ETF**
|
|
RP
Financials
ETF**
|
|
INVESTMENT INCOME:
|
|
Dividends and interest income
|
|
$
|
38,500
|
|
|
$
|
1,688
|
|
|
$
|
1,727
|
|
|
$
|
2,964
|
|
|
$
|
823
|
|
|
EXPENSES:
|
|
Organizational and offering fees
|
|
|
60,909
|
|
|
|
2,252
|
|
|
|
2,252
|
|
|
|
2,252
|
|
|
|
2,445
|
|
|
Professional fees
|
|
|
44,836
|
|
|
|
23,957
|
|
|
|
23,954
|
|
|
|
23,955
|
|
|
|
23,956
|
|
|
Trustees fees
|
|
|
30,001
|
|
|
|
1,183
|
|
|
|
1,183
|
|
|
|
1,183
|
|
|
|
1,183
|
|
|
Compliance fees
|
|
|
13,637
|
|
|
|
2,117
|
|
|
|
2,117
|
|
|
|
2,117
|
|
|
|
2,117
|
|
|
Shareholder reporting fees
|
|
|
12,005
|
|
|
|
3,688
|
|
|
|
3,688
|
|
|
|
3,688
|
|
|
|
3,688
|
|
|
Insurance fees
|
|
|
10,618
|
|
|
|
379
|
|
|
|
379
|
|
|
|
379
|
|
|
|
379
|
|
|
Administration fees
|
|
|
8,369
|
|
|
|
771
|
|
|
|
771
|
|
|
|
771
|
|
|
|
771
|
|
|
Advisory fees
|
|
|
7,983
|
|
|
|
1,070
|
|
|
|
1,060
|
|
|
|
1,063
|
|
|
|
1,067
|
|
|
Exchange listing fees
|
|
|
3,967
|
|
|
|
658
|
|
|
|
658
|
|
|
|
658
|
|
|
|
658
|
|
|
Transfer agent fees
|
|
|
744
|
|
|
|
123
|
|
|
|
123
|
|
|
|
123
|
|
|
|
123
|
|
|
Custody fees
|
|
|
80
|
|
|
|
627
|
|
|
|
627
|
|
|
|
627
|
|
|
|
627
|
|
|
Total Expenses
|
|
|
193,149
|
|
|
|
36,825
|
|
|
|
36,812
|
|
|
|
36,816
|
|
|
|
37,014
|
|
|
Less expense waivers/
reimbursements
|
|
|
(180,536
|
)
|
|
|
(34,921
|
)
|
|
|
(34,926
|
)
|
|
|
(34,924
|
)
|
|
|
(35,115
|
)
|
|
Net Expenses
|
|
|
12,613
|
|
|
|
1,904
|
|
|
|
1,886
|
|
|
|
1,892
|
|
|
|
1,899
|
|
|
Net Investment Income (Loss)
|
|
|
25,887
|
|
|
|
(216
|
)
|
|
|
(159
|
)
|
|
|
1,072
|
|
|
|
(1,076
|
)
|
|
NET REALIZED AND UNREALIZED
GAIN (LOSS) ON INVESTMENTS:
|
|
Net realized gain (loss) on
investments
|
|
$
|
71,176
|
|
|
$
|
8,664
|
|
|
$
|
9,647
|
|
|
$
|
(7,458
|
)
|
|
$
|
764
|
|
|
Net realized gain on in-kind
redemptions
|
|
|
400,766
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total realized gain (loss)
|
|
|
471,942
|
|
|
|
8,664
|
|
|
|
9,647
|
|
|
|
(7,458
|
)
|
|
|
764
|
|
|
Net unrealized appreciation
(depreciation) on investments
|
|
|
143,436
|
|
|
|
3,877
|
|
|
|
(601
|
)
|
|
|
19,636
|
|
|
|
429
|
|
|
Net realized and unrealized
gain on investments
|
|
|
615,378
|
|
|
|
12,541
|
|
|
|
9,046
|
|
|
|
12,178
|
|
|
|
1,193
|
|
|
Net increase in net assets
resulting from operations
|
|
$
|
641,265
|
|
|
$
|
12,325
|
|
|
$
|
8,887
|
|
|
$
|
13,250
|
|
|
$
|
117
|
|
|
* Commencement of operations was May 1, 2009.
** Commencement of operations was October 2, 2009.
The accompanying notes are an integral part of these financial statements.
21
STATEMENTS OF CHANGES IN NET ASSETS
|
|
Grail
American
Beacon
Large Cap
Value ETF
|
|
RP
Growth
ETF
|
|
RP
Focused
Large Cap
Growth
ETF
|
|
RP
Technology
ETF
|
|
RP
Financials
ETF
|
|
|
|
For the
Period
May 1,
2009*
Through
October 31,
2009
|
|
For the
Period
October 2,
2009*
Through
October 31,
2009
|
|
For the
Period
October 2,
2009*
Through
October 31,
2009
|
|
For the
Period
October 2,
2009*
Through
October 31,
2009
|
|
For the
Period
October 2,
2009*
Through
October 31,
2009
|
|
INCREASE IN NET ASSETS
RESULTING FROM
OPERATIONS:
|
|
Net investment income (loss)
|
|
$
|
25,887
|
|
|
$
|
(216
|
)
|
|
$
|
(159
|
)
|
|
$
|
1,072
|
|
|
$
|
(1,076
|
)
|
|
Net realized gain (loss) on
investments
|
|
|
471,942
|
|
|
|
8,664
|
|
|
|
9,647
|
|
|
|
(7,458
|
)
|
|
|
764
|
|
|
Net unrealized appreciation
(depreciation) on investments
|
|
|
143,436
|
|
|
|
3,877
|
|
|
|
(601
|
)
|
|
|
19,636
|
|
|
|
429
|
|
|
Net increase in net assets
resulting from operations
|
|
|
641,265
|
|
|
|
12,325
|
|
|
|
8,887
|
|
|
|
13,250
|
|
|
|
117
|
|
|
SHAREHOLDER TRANSACTIONS:
|
|
Proceeds from shares sold
|
|
|
94,010,886
|
|
|
|
6,386,757
|
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
|
|
3,828,767
|
|
|
Cost of shares redeemed
|
|
|
(91,717,313
|
)
|
|
|
(3,886,757
|
)
|
|
|
|
|
|
|
|
|
|
|
(1,328,767
|
)
|
|
Net increase in net assets
resulting from shareholder
transactions
|
|
|
2,293,573
|
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
|
|
2,500,000
|
|
|
Increase in net assets
|
|
|
2,934,838
|
|
|
|
2,512,325
|
|
|
|
2,508,887
|
|
|
|
2,513,250
|
|
|
|
2,500,117
|
|
|
NET ASSETS:
|
|
Beginning of period
|
|
|
99,000
|
|
|
|
250
|
|
|
|
250
|
|
|
|
250
|
|
|
|
250
|
|
|
End of period
|
|
$
|
3,033,838
|
|
|
$
|
2,512,575
|
|
|
$
|
2,509,137
|
|
|
$
|
2,513,500
|
|
|
$
|
2,500,367
|
|
|
Including undistributed net
investment income as
follows:
|
|
$
|
44,175
|
|
|
$
|
2,036
|
|
|
$
|
2,093
|
|
|
$
|
3,324
|
|
|
$
|
1,369
|
|
|
CHANGES IN SHARES OUTSTANDING:
|
|
Shares outstanding, beginning
of period
|
|
|
3,960
|
|
|
|
10
|
|
|
|
10
|
|
|
|
10
|
|
|
|
10
|
|
|
Shares sold
|
|
|
3,250,000
|
|
|
|
250,000
|
|
|
|
100,000
|
|
|
|
100,000
|
|
|
|
150,000
|
|
|
Shares redeemed
|
|
|
(3,153,938
|
)
|
|
|
(150,000
|
)
|
|
|
|
|
|
|
|
|
|
|
(50,000
|
)
|
|
Shares outstanding, end
of period
|
|
|
100,022
|
|
|
|
100,010
|
|
|
|
100,010
|
|
|
|
100,010
|
|
|
|
100,010
|
|
|
* Commencement of operations.
The accompanying notes are an integral part of these financial statements.
22
FINANCIAL HIGHLIGHTS
OCTOBER 31, 2009
|
|
Grail
American
Beacon
Large Cap
Value ETF
|
|
RP
Growth
ETF
|
|
RP
Focused
Large Cap
Growth
ETF
|
|
RP
Technology
ETF
|
|
RP
Financials
ETF
|
|
|
|
For the
Period
May 1,
2009
1
Through
October 31,
2009
|
|
For the Period October 2, 2009
1
Through
October 31, 2009
|
|
Per Share Operating Performance:
|
|
Net asset value, beginning
of period
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
$
|
25.00
|
|
|
Net investment income (loss)
2
|
|
|
0.22
|
|
|
|
3
|
|
|
|
3
|
|
|
|
0.01
|
|
|
|
(0.01
|
)
|
|
Net realized and unrealized
gain on investments
|
|
|
5.11
|
|
|
|
0.12
|
|
|
|
0.09
|
|
|
|
0.12
|
|
|
|
0.01
|
|
|
Total gain from investment
operations
|
|
|
5.33
|
|
|
|
0.12
|
|
|
|
0.09
|
|
|
|
0.13
|
|
|
|
|
|
|
Net asset value, end of period
|
|
$
|
30.33
|
|
|
$
|
25.12
|
|
|
$
|
25.09
|
|
|
$
|
25.13
|
|
|
$
|
25.00
|
|
|
Total Return at NAV
4
|
|
|
21.32
|
%
|
|
|
0.48
|
%
|
|
|
0.36
|
%
|
|
|
0.52
|
%
|
|
|
0.00
|
%
|
|
Total Return at Market
4
|
|
|
21.12
|
%
|
|
|
0.56
|
%
|
|
|
0.64
|
%
|
|
|
0.68
|
%
|
|
|
0.04
|
%
|
|
Ratios/Supplemental Data:
|
|
Net assets, end of period
(000
's omitted)
|
|
$
|
3,034
|
|
|
$
|
2,513
|
|
|
$
|
2,509
|
|
|
$
|
2,514
|
|
|
$
|
2,500
|
|
|
Ratio to average net assets of:
|
|
Expenses, net of expense
waivers
5
|
|
|
0.79
|
%
|
|
|
0.89
|
%
|
|
|
0.89
|
%
|
|
|
0.89
|
%
|
|
|
0.89
|
%
|
|
Expenses, prior to expense
waivers
5
|
|
|
12.10
|
%
|
|
|
17.21
|
%
|
|
|
17.36
|
%
|
|
|
17.32
|
%
|
|
|
17.35
|
%
|
|
Net investment income, net
of waivers
5
|
|
|
1.62
|
%
|
|
|
(0.10
|
)%
|
|
|
(0.08
|
)%
|
|
|
0.50
|
%
|
|
|
(0.50
|
)%
|
|
Portfolio turnover rate
6
|
|
|
18.41
|
%
|
|
|
10.93
|
%
|
|
|
5.67
|
%
|
|
|
6.88
|
%
|
|
|
1.48
|
%
|
|
1
Commencement of operations.
2
Based on average shares outstanding.
3
Less than $0.005 per share.
4
Total return at Net Asset Value is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions at net asset value during the period and redemption on the last day of the period. Total return at Market is calculated assuming an initial investment made at the market price at the beginning of the period, reinvestment of all dividends and distributions at market price during the period and redemption on the last day of the period. The market price is a mean of bid and ask prices at end of day. Total return calculated for a period of less than one year is not annualized. The total return would have been lower if certain expenses had not been reimbursed/waived by the investment advisor.
5
Annualized.
6
Portfolio turnover rate is not annualized and excludes the value of portfolio securities received or delivered as a result of in-kind creations or redemptions of the Funds' capital shares.
The accompanying notes are an integral part of these financial statements.
23
NOTES TO FINANCIAL STATEMENTS
OCTOBER 31, 2009
1. ORGANIZATION
Grail Advisors ETF Trust (the "Trust") was organized as a Delaware statutory trust on December 7, 2007 and has authorized capital of unlimited shares. The Trust is an open-end management investment company, registered under the Investment Company Act of 1940, as amended (the "Act"), which is currently comprised of five active funds (collectively, the "Funds" or "ETFs" and each individually, a "Fund" or an "ETF"): the Grail American Beacon Large Cap Value ETF, RP Growth ETF, RP Focused Large Cap Growth ETF, RP Technology ETF and RP Financials ETF. Operations commenced on May 1, 2009 for the Grail American Beacon Large Cap Value ETF and October 2, 2009 for the RP Growth ETF, RP Focused Large Cap Growth ETF, RP Technology ETF and RP Financials ETF.
The Grail American Beacon Large Cap Value ETF seeks long-term capital appreciation by investing at least 80% of the Fund's net assets (plus the amount of any borrowings for investment purposes) in equity securities of large market capitalization U.S. companies. These companies generally have market capitalizations similar to the market capitalizations of the companies in the Russell 1000® Index at the time of investment. The Russell 1000 Index measures the performance of the 1,000 largest U.S. companies based on total market capitalization. The Fund's investments may include common stocks, preferred stocks, securities convertible into U.S. common stocks, U.S. dollar-denominated American Depositary Receipts ("ADRs"), and U.S. dollar-denominated foreign stocks traded on U.S. exchanges (collectively referred to as "stocks").
RP Growth ETF seeks long-term capital appreciation by investing at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in equity securities of companies that RiverPark Advisors, LLC ("RP"), the Fund's sub-adviser, believes have above-average growth prospects. RP uses a fundamental research-driven approach to identifying those industries and companies with the strongest growth prospects for revenue, earnings and/or cash flow over the medium and long term, and seeks to buy stock in those companies at attractive valuations. The Fund may invest in companies of any market capitalization and in any industry. The Fund expects to invest primarily in the securities of U.S. companies, and may also invest in U.S. securities tied economically to foreign investments, such as ADRs.
RP Focused Large Cap Growth ETF seeks long-term capital appreciation by investing at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in equity securities of large capitalization companies that Wedgewood Partners, Inc. ("Wedgewood"), the Fund's sub-adviser, believes have above-average growth prospects. The Fund considers companies with market capitalizations in excess of $5 billion to be large capitalization companies. The Fund is non-diversified and expects to invest in a limited number of companies, generally holding securities of between 20 and 30 companies. The Fund expects to invest primarily in the securities of U.S. companies, and may also invest in U.S. securities tied economically to foreign investments, such as ADRs.
24
NOTES TO FINANCIAL STATEMENTS (continued)
OCTOBER 31, 2009
RP Technology ETF seeks long-term capital appreciation by investing at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in equity securities of companies that develop, produce or distribute technology-related products and services. The Fund will invest in companies both within and outside the technology sector (the technology sector is narrower than what RP, as the Fund's sub-adviser, considers to be technology-related businesses) and the Fund will invest in companies whose value, in RP's view, derive from embracing technological innovation. These companies are not limited to the technology industry, and may include companies in sectors such as industrial and business machines; communications; computer hardware and software; computer services and peripheral products; electronics; electronic media; internet; television and video equipment and services; satellite technology and equipment; and semiconductors.
RP Financials ETF seeks long-term capital appreciation by investing at least 80% of its net assets (plus the amount of any borrowings for investment purposes) in equity securities of financial services companies. The Fund considers financial services companies to be those companies that derive a significant portion of their revenues from any aspect of the financial services industry, including, but not limited to, banking, lending, brokerage, exchanges, insurance, and money management, as well as real estate investment trusts ("REITs").
2. SIGNIFICANT ACCOUNTING POLICIES
These financial statements are prepared in accordance with U.S. generally accepted accounting principles, which require management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amount of increase and decrease in net assets from operations during the fiscal period. Actual amounts could differ from these estimates. The following summarizes the significant accounting policies of the Funds:
Investment Valuation
Security holdings traded on a national securities exchange are valued based on their last sale price. Price information on listed securities is taken from the exchange where the security is primarily traded. Securities regularly traded in an over-the-counter market are valued at the latest quoted sale price in such market or in the case of the NASDAQ, at the NASDAQ official closing price. Other portfolio securities and assets for which market quotations are not readily available are valued based on fair value as determined in good faith and in accordance with procedures adopted by the Trust's Board of Trustees (the "Board"). The net asset value ("NAV") per share of each Fund is computed by dividing the value of the net assets of each Fund by the total number of outstanding shares of that Fund, rounded to the nearest cent. The Bank of New York Mellon Corp. calculates each Fund's NAV at the close of regular trading (ordinarily 4:00 p.m. Eastern Time) every day the New York Stock Exchange is open.
25
NOTES TO FINANCIAL STATEMENTS (continued)
OCTOBER 31, 2009
Cash and Cash Equivalents
Cash and cash equivalents consist of highly liquid investments, with maturities of three months or less when acquired.
Investment Transactions
Investment transactions are accounted for on the trade date. Realized gains and losses on sales of investment securities are calculated using the identified cost method.
Investment Income
Dividend income is recognized on the ex-dividend date. Interest income is accrued daily based on the effective interest method. The value of additional securities received as dividend payments is recorded as income and as an increase to the cost basis of the securities. Changes in foreign currency exchange rates may affect the value of dividends earned.
Expenses
Expenses of the Trust, which are directly identifiable to a specific Fund, are applied to that Fund. Expenses which are not readily identifiable to a specific Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expense and the relative net assets of each Fund.
Distributions to Shareholders
Each Fund pays out dividends from its net investment income to shareholders annually. Each Fund distributes its net capital gains, if any, annually. Each Fund typically earns income dividends from stocks. These amounts, net of expenses, are passed along to Fund shareholders as "income dividend distributions." Each Fund realizes capital gains or losses whenever it sells securities. Net long-term capital gains are distributed to shareholders as "capital gains distributions."
Indemnification
The Trust Instrument of the Trust disclaims liability of the shareholders or the officers of the Trust for acts or obligations of the Trust which are binding only on the assets and property of the Trust. The Trust Instrument provides for indemnification out of a Fund's property for all loss and expense of a Fund's shareholders being held personally liable solely by reason of his or her being or having been a shareholder and not because of his or her acts or omissions or for some other reason.
3. ADVISORY FEES, SERVICING FEES AND OTHER TRANSACTIONS
Grail Advisors, LLC (the "Manager") has overall responsibility for the general management and administration of the Funds, subject to the supervision of the Board. For the services it provides to the Funds, the Manager receives a management fee based
26
NOTES TO FINANCIAL STATEMENTS (continued)
OCTOBER 31, 2009
on a percentage of average daily net assets of each Fund. Out of the management fee, the Manager pays all fees and expenses of the Sub-Advisers. Each Fund is responsible for the payment of all other expenses associated with the operations, including, but not limited to: brokerage expenses, taxes, interest, fees and expenses of counsel to the Funds, fees and expenses of the Trustees, fees and expenses associated with the Funds' compliance program, litigation expenses, fees and expenses of the Funds' independent auditors, registration fees, expenses associated with compliance by the Funds with regulatory requirements, including those relating to the development and distribution of their prospectus and shareholder reports, and extraordinary expenses.
For services provided, each Fund pays the Manager an annualized fee of 0.65% (0.50% in the case of Grail American Beacon Large Cap Value ETF), based upon each Fund's average daily net assets.
The Trust and the Manager have entered into a written fee waiver and expense reimbursement agreement pursuant to which the Manager has agreed to waive a portion of its fees and/or reimburse expenses to the extent necessary to keep the net annual fund operating expenses for the Grail American Beacon Large Cap Value ETF from exceeding 0.79% ("Expense Cap"), based upon the Fund's average daily net assets. This agreement will remain in effect and will be contractually binding through at least May 1, 2010.
The Trust and the Manager have entered into a written fee waiver and expense reimbursement agreement pursuant to which the Manager has agreed to waive a portion of its fees and/or reimburse expenses to the extent necessary to keep the net annual fund operating expenses for the RP Growth ETF, RP Focused Large Cap Growth ETF, RP Technology ETF and RP Financials ETF from exceeding 0.89% ("Expense Cap"), based upon each Fund's average daily net assets. This agreement will remain in effect and will be contractually binding through at least August 31, 2010.
The Manager may recoup fees waived or expenses reimbursed at any time within three years from the year such expenses were incurred, so long as the repayment does not cause the Expense Cap to be exceeded.
For the period ended October 31, 2009, the Manager waived the following fees and/or reimbursed the following expenses, which are all available to be recouped until October 31, 2012:
Fund
|
|
Fees Waived and/
or Reimbursed
|
|
Grail American Beacon Large Cap Value ETF
|
|
$
|
218,036
|
*
|
|
RP
Growth ETF
|
|
|
34,921
|
|
|
RP Focused Large Cap Growth ETF
|
|
|
34,926
|
|
|
RP
Technology ETF
|
|
|
34,924
|
|
|
RP
Financials ETF
|
|
|
35,115
|
|
|
* Includes $37,500 of expenses waived prior to fund inception.
27
NOTES TO FINANCIAL STATEMENTS (continued)
OCTOBER 31, 2009
American Beacon Advisors, Inc. ("ABA") acts as primary sub-adviser of the Grail American Beacon Large Cap Value ETF. ABA evaluates investment sub-advisers (subject to requisite approvals), recommends to the Manager allocations of assets among investment sub-advisers, monitors the investment sub-advisers' investment programs and results, and invests the portion of ETF assets that the investment sub-advisers determine should be allocated to high quality short-term debt obligations. Pursuant to a Primary Investment Sub-Advisory Agreement between the Manager and ABA, ABA receives fees from the Manager to provide the services described above. These fees are paid by the Manager out of the advisory fees it receives from the Fund; they are not separately paid by the Fund.
The Grail American Beacon Large Cap Value ETF's assets are allocated among three investment sub-advisers: Brandywine Global Investment Management, LLC; Hotchkis and Wiley Capital Management, LLC; and Metropolitan West Capital Management, LLC. With respect to any assets allocated to it, each investment sub-adviser has discretion to purchase and sell securities in accordance with the Fund's objectives, policies, restrictions and more specific policies provided by the Manager or ABA. Pursuant to an Investment Sub-Advisory Agreement among the Manager, ABA and the investment sub-adviser, each investment sub-adviser receives fees from ABA to provide day-to-day investment advisory services to the Fund. These fees are paid out of the advisory fees the Manager receives from the Fund; they are not separately paid by the Fund.
RP acts as primary sub-adviser of the RP Focused Large Cap Growth ETF and as the exclusive sub-adviser of the RP Growth ETF, RP Technology ETF and RP Financials ETF. Wedgewood serves as sub-adviser of the RP Focused Large Cap Growth ETF. Pursuant to Sub-Advisory Agreements between the Manager and RP (with respect to the RP Growth ETF, RP Technology ETF and RP Financials ETF) and among the Manager, RP and Wedgewood (with respect to the RP Focused Large Cap Growth ETF) the Sub-Advisers will be responsible for the day-to-day management of their respective Funds, subject to the supervision of the Manager and the oversight of the Board. In this regard, the Sub-Advisers will be responsible for implementing the investment strategy for each Fund. The Sub-Advisers may waive all or a portion of their respective fees.
The Bank of New York Mellon Corp. serves as the Administrator, Custodian and Fund Accounting and Transfer Agent for each Fund.
4. CREATION AND REDEMPTION TRANSACTIONS AND TRANSACTION FEES
Each Fund issues and redeems Shares on a continuous basis at NAV only in large blocks of Shares called "Creation Units." A Creation Unit consists of 50,000 Shares. Creation Units of the Funds are issued and redeemed for cash. Investors such as market makers, large investors and institutions who wish to deal in Creation Units directly with a Fund must have entered into an authorized participant agreement with the principal underwriter and the transfer agent, or purchase through a dealer that has entered into such an agreement.
28
NOTES TO FINANCIAL STATEMENTS (continued)
OCTOBER 31, 2009
Transaction fees payable to the Trust are imposed to compensate the Trust for the transfer and other transaction costs of a Fund associated with the issuance and redemption of Creation Units of Shares. There is a fixed and a variable component to the total transaction fee. A fixed transaction fee is applicable to each creation or redemption transaction, regardless of the number of Creation Units purchased or redeemed. In addition, a variable transaction fee equal to a percentage of the value of each Creation Unit purchased or redeemed may be applicable to each creation or redemption transaction.
5. FAIR VALUE MEASUREMENT
Fair value measurements are determined within a framework that has established a fair value hierarchy based upon the various data inputs utilized in determining the value of the Funds' investments. These inputs are summarized in the three broad levels as follows:
Level 1Quoted prices in active markets for identical securities
Level 2Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)
Level 3Significant unobservable inputs (including the Funds' own assumptions in determining the fair value of investments)
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Funds' investments at October 31, 2009:
|
|
Grail American Beacon
Large Cap Value ETF
|
|
RP Growth ETF
|
|
Valuation Inputs
|
|
Investments
in Securities
|
|
Investments
in Securities
|
|
Level 1Quoted Prices
|
|
Common Stocks
|
|
$
|
2,948,116
|
|
|
$
|
2,478,375
|
|
|
Total
|
|
$
|
2,948,116
|
|
|
$
|
2,478,375
|
|
|
|
|
RP Focused Large Cap
Growth ETF
|
|
RP Technology ETF
|
|
Valuation Inputs
|
|
Investments
in Securities
|
|
Investments
in Securities
|
|
Level 1Quoted Prices
|
|
Common Stocks
|
|
$
|
2,275,541
|
|
|
$
|
2,338,182
|
|
|
Money Market Fund
|
|
|
231,761
|
|
|
|
127,831
|
|
|
Total
|
|
$
|
2,507,302
|
|
|
$
|
2,466,013
|
|
|
29
NOTES TO FINANCIAL STATEMENTS (continued)
OCTOBER 31, 2009
|
|
RP Financials ETF
|
|
Valuation Inputs
|
|
Investments
in Securities
|
|
Level 1Quoted Prices
|
|
Common Stocks
|
|
$
|
2,407,604
|
|
|
Money Market Fund
|
|
|
79,186
|
|
|
Total
|
|
$
|
2,486,790
|
|
|
The Funds did not hold any Level 2 or Level 3 securities during the period reported.
6. INVESTMENT TRANSACTIONS
During the period ended October 31, 2009, the aggregate purchases and sales of investments (excluding short-term investments, and in-kind transactions) were:
Fund
|
|
Purchases
|
|
Sales
|
|
Grail American Beacon Large Cap Value ETF
|
|
$
|
3,042,130
|
|
|
$
|
603,037
|
|
|
RP
Growth ETF
|
|
|
2,736,732
|
|
|
|
270,898
|
|
|
RP Focused Large Cap Growth ETF
|
|
|
2,395,500
|
|
|
|
129,005
|
|
|
RP
Technology ETF
|
|
|
2,486,967
|
|
|
|
160,963
|
|
|
RP
Financials ETF
|
|
|
2,441,965
|
|
|
|
35,553
|
|
|
For the period ended October 31, 2009, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund
|
|
Purchases
|
|
Sales
|
|
Grail American Beacon Large Cap Value ETF
|
|
$
|
2,833,464
|
|
|
$
|
2,939,711
|
|
|
RP
Growth ETF
|
|
|
|
|
|
|
|
|
|
RP Focused Large Cap Growth ETF
|
|
|
|
|
|
|
|
|
|
RP
Technology ETF
|
|
|
|
|
|
|
|
|
|
RP
Financials ETF
|
|
|
|
|
|
|
|
|
|
7. FEDERAL INCOME TAX
Each Fund intends to qualify as a "regulated investment company" under Sub-chapter M of the Internal Revenue Code of 1986, as amended. If so qualified, the Funds will not be subject to federal income tax to the extent they distribute substantially all of their net investment income and net capital gains to shareholders.
30
NOTES TO FINANCIAL STATEMENTS (continued)
OCTOBER 31, 2009
At October 31, 2009, the cost of investments and aggregate gross unrealized appreciation and depreciation of investments for Federal income tax purposes were as follows:
Fund
|
|
Cost
|
|
Gross
Unrealized
Appreciation
|
|
Gross
Unrealized
(Depreciation)
|
|
Net
Unrealized
Appreciation
(Depreciation)
|
|
Grail American Beacon Large Cap
Value ETF
|
|
$
|
2,804,848
|
|
|
$
|
179,626
|
|
|
$
|
(36,358
|
)
|
|
$
|
143,268
|
|
|
RP
Growth ETF
|
|
|
2,474,498
|
|
|
|
71,485
|
|
|
|
(67,608
|
)
|
|
|
3,877
|
|
|
RP Focused Large Cap Growth ETF
|
|
|
2,507,903
|
|
|
|
52,981
|
|
|
|
(53,582
|
)
|
|
|
(601
|
)
|
|
RP
Technology ETF
|
|
|
2,446,377
|
|
|
|
65,528
|
|
|
|
(45,892
|
)
|
|
|
19,636
|
|
|
RP
Financials ETF
|
|
|
2,486,361
|
|
|
|
68,509
|
|
|
|
(68,080
|
)
|
|
|
429
|
|
|
Accounting for Uncertainty in Income Taxes provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements, and requires the evaluation of tax positions taken or expected to be taken in the course of preparing each Fund's tax returns to determine whether the tax positions are "more-likely-than-not" of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year.
Management has analyzed all open tax years as defined by IRS statute of limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during the period ended October 31, 2009, the Funds did not have a liability for any unrecognized tax benefits.
The differences between book basis and tax basis components of net assets are primarily attributable to tax deferral of losses on wash sales. At October 31, 2009, the components of accumulated earnings/loss on a tax-basis were as follows:
Fund
|
|
Undistributed
Ordinary
Income
|
|
Accumulated
Capital and
Other Losses
|
|
Net Unrealized
Appreciation
(Depreciation)
|
|
Total
Accumulated
Earnings
(Losses)
|
|
Grail American Beacon Large Cap
Value ETF
|
|
$
|
116,895
|
|
|
$
|
|
|
|
$
|
143,268
|
|
|
$
|
260,163
|
|
|
RP
Growth ETF
|
|
|
10,700
|
|
|
|
|
|
|
|
3,877
|
|
|
|
14,577
|
|
|
RP Focused Large Cap Growth ETF
|
|
|
11,740
|
|
|
|
|
|
|
|
(601
|
)
|
|
|
11,139
|
|
|
RP
Technology ETF
|
|
|
3,324
|
|
|
|
(7,458
|
)
|
|
|
19,636
|
|
|
|
15,502
|
|
|
RP
Financials ETF
|
|
|
2,133
|
|
|
|
|
|
|
|
429
|
|
|
|
2,562
|
|
|
At October 31, 2009, the Fund listed below had net capital loss carryforwards for federal income tax purposes which are available for offset against future taxable net capital gains. The amounts were determined after adjustments for certain differences between financial reporting and tax purposes, such as wash sale losses. Accordingly, no capital
31
NOTES TO FINANCIAL STATEMENTS (continued)
OCTOBER 31, 2009
gain distributions are expected to be paid to shareholders of this Fund until future net capital gains have been realized in excess of the available capital loss carryforwards. There is no assurance that any Fund will be able to utilize all of its capital loss carryforwards before they expire. These loss carryforwards expire in amounts and fiscal years as follows:
Fiscal Year
|
|
Grail
American
Beacon
Large Cap
Value ETF
|
|
RP Growth
ETF
|
|
RP Focused
Large Cap
Growth ETF
|
|
RP
Technology
ETF
|
|
RP
Financials
ETF
|
|
2017
|
|
$
|
|
|
|
$
|
|
|
|
$
|
|
|
|
$
|
7,458
|
|
|
$
|
|
|
|
For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to tax treatment of redemptions in kind. Results of operations and net assets were not affected by these reclassifications. At October 31, 2009, the effect of permanent book/tax reclassifications resulted in increases (decreases) to the components of net assets as follows:
Fund
|
|
Undistributed
Net Investment
Income
|
|
Accumulated
Net Realized
(Loss)
on Investments
|
|
Paid-in Capital
|
|
Grail American Beacon Large Cap Value ETF
|
|
$
|
18,288
|
|
|
$
|
(399,390
|
)
|
|
$
|
381,102
|
|
|
RP
Growth ETF
|
|
|
2,252
|
|
|
|
|
|
|
|
(2,252
|
)
|
|
RP Focused Large Cap Growth ETF
|
|
|
2,252
|
|
|
|
|
|
|
|
(2,252
|
)
|
|
RP
Technology ETF
|
|
|
2,252
|
|
|
|
|
|
|
|
(2,252
|
)
|
|
RP
Financials ETF
|
|
|
2,445
|
|
|
|
|
|
|
|
(2,445
|
)
|
|
8. RISK
Foreign Investing Risk
Foreign investing, including investments in ADRs, carries potential risks not associated with domestic investments. Such risks include, but are not limited to: (1) currency exchange rate fluctuations; (2) social, political and financial instability; (3) less liquidity; (4) lack of uniform accounting, auditing and financial reporting standards; (5) less government regulation and supervision of foreign stock exchanges, brokers and listed companies; (6) increased price volatility; and (7) less availability of information for an investment sub-adviser to determine a company's financial condition.
Industry Concentration Risk
Certain Funds may focus their investments in a particular industry or group of industries. Securities of companies in the same industry or group of industries may decline in price at the same time due to industry-specific developments since these companies may share common characteristics and are more likely to react similarly to industry-specific market or economic developments. The ETF's
32
NOTES TO FINANCIAL STATEMENTS (continued)
OCTOBER 31, 2009
investments in multiple companies in a particular industry increase the ETF's exposure to risks of the particular industry and may increase the ETF's volatility.
9. SUBSEQUENT EVENTS
Management has evaluated the possibility of subsequent events existing in the Funds' financial statements through December 24, 2009.
On December 23, 2009, certain Funds declared income distributions with an ex-date of December 24, 2009 and payable date of December 31, 2009. The income distributions per share for each Fund were as follows:
Fund
|
|
Income
Distribution
Per Share
|
|
Grail American Beacon Large Cap Value ETF
|
|
$
|
1.66573
|
|
|
RP
Growth ETF
|
|
|
0.14354
|
|
|
RP Focused Large Cap Growth ETF
|
|
|
0.13381
|
|
|
RP
Technology ETF
|
|
|
0.03324
|
|
|
RP
Financials ETF
|
|
|
0.05886
|
|
|
33
REPORT OF INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Board of Trustees and Shareholders of
Grail Advisors ETF Trust:
We have audited the accompanying statements of assets and liabilities, including the schedule of investments, of the Grail Advisors American Beacon Large Cap Value ETF, RP Growth ETF, RP Focused Large Cap Growth ETF, RP Technology ETF, and RP Financials ETF, (collectively, the "Funds"), five of the Funds constituting the Grail Advisors ETF Trust, as of October 31, 2009, and the related statements of operations, the statements of changes in net assets, and the financial highlights for the period May 1, 2009 (inception date) to October 31, 2009 for the Grail Advisors American Beacon Large Cap Value ETF and for the period October 2, 2009 (inception date) to October 31, 2009 for the RP Growth ETF, RP Focused Large Cap Growth ETF, RP Technology ETF and RP Financials ETF. These financial statements and financial highlights are the responsibility of the Funds' 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of October 31, 2009, by correspondence with the custodian and brokers or other appropriate auditing procedures. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. 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 each of the aforementioned Funds of the Grail Advisors ETF Trust as of October 31, 2009, and the results of their operations, changes in net assets and financial highlights for the periods indicated in the first paragraph above, in conformity with U.S generally accepted accounting principles.
/s/ KPMG LLP
Philadelphia, Pennsylvania
December 24, 2009
34
BOARD REVIEW AND APPROVAL OF ADVISORY AGREEMENTS (UNAUDITED)
The Board ("Board") of Trustees of Grail Advisors ETF Trust (the "Trust"), including those Trustees who are neither "interested persons" (as that term is defined in the Investment Company Act of 1940, as amended) of the Trust ("Independent Trustees") nor parties to the Agreements (as defined below) or interested persons of such parties, unanimously approved the Investment Management Agreement with Grail Advisors, LLC ("Grail" or the "Manager") (the "Management Agreement"), the Primary Investment Sub-Advisory Agreements between the Manager and each of American Beacon Advisors, Inc. ("ABA" or "Sub-Adviser") and RiverPark Advisors, LLC ("RiverPark" or "Sub-Adviser") (each, a "Primary Sub-Advisory Agreement") and the Investment Sub-Advisory Agreements with the investment sub-advisers (each, a "Sub-Adviser" and together with ABA and RiverPark, the "Sub-Advisers") (each, a "Sub-Advisory Agreement," and together with the Management Agreement and Primary Sub-Advisory Agreements, the "Agreements") as shown in the table below.
Fund
|
|
Agreements Approved by the Trust's Board
of Trustees with respect to a Fund
|
|
Grail American Beacon Large Cap Value ETF ("ABA Large Cap Value ETF")
|
|
Management Agreement with Grail
|
|
|
|
|
Primary Sub-Advisory Agreement between Grail and ABA
|
|
|
|
|
Sub-Advisory Agreement among Grail, ABA and Brandywine Global Investment Management, LLC
|
|
|
|
|
Sub-Advisory Agreement among Grail, ABA and Hotchkis and Wiley Capital Management
|
|
|
|
|
Sub-Advisory Agreement among Grail, ABA and Metropolitan West Capital Management
|
|
|
RP
Growth ETF
|
|
Management Agreement with Grail
|
|
|
|
|
Sub-Advisory Agreement between Grail and RiverPark
|
|
|
RP Focused Large Cap Growth ETF ("RP Focused ETF")
|
|
Management Agreement with Grail
|
|
|
|
|
Primary Sub-Advisory Agreement between Grail and RiverPark
|
|
|
|
|
Sub-Advisory Agreement among Grail, RiverPark and Wedgewood Partners, Inc. ("Wedgewood")
|
|
|
RP
Technology ETF
|
|
Management Agreement with Grail
|
|
|
|
|
Sub-Advisory Agreement between Grail and RiverPark
|
|
|
RP
Financials ETF
|
|
Management Agreement with Grail
|
|
|
|
|
Sub-Advisory Agreement between Grail and RiverPark
|
|
|
With respect to the ABA Large Cap Value ETF, the Board considered the approval of Agreements at a meeting on March 18, 2009 and, with respect to the RP Growth ETF, RP Focused ETF, RP Technology ETF and RP Financials ETF (the "RP Funds" and,
35
together with the ABA Large Cap Value ETF, the "Funds"), the Board considered the approval of Agreements at a meeting on June 16, 2009. In reaching its decision to approve each Agreement, the Board considered the overall fairness of the Agreement and whether the Agreement was in the best interests of the affected Fund. The Board further considered factors it deemed relevant with respect to each Fund, including, as applicable: (1) the nature, quality and extent of the services to be provided to the Fund by the Manager and the Sub-Adviser(s); (2) the personnel and operations of the Manager and the Sub-Adviser(s); (3) the financial condition of the Manager and the Sub-Adviser(s); (4) where available, the performance of a comparable fund or similar investment strategy managed by the Sub-Adviser(s); (5) the level and method of computing the Fund's proposed management and subadvisory fees and expense ratios; (6) the costs of the services to be provided and anticipated profits to be realized by the Manager and, where available, the Sub-adviser(s) from its relationship with the Fund; (7) the anticipated effect of growth and size on the Fund's expenses; and (8) any "fall out" benefits to be realized by the Manager, the Sub-Adviser(s) and their respective affiliates (
i.e.
, any direct or indirect benefits to be derived by the Manager, the Sub-Adviser(s) and their respective affiliates from their relationships with the Trust). In considering each Agreement, the Board did not identify any single factor or information as all-important or controlling, and each Trustee may have contributed different weight to each factor. At the time that the Board considered the Agreements with respect to each Fund, it noted that the Fund had not yet announced operations and accordingly, primarily reviewed the services to be provided under the relevant Agreements, the proposed fee rates and overall anticipated Fund expenses.
In connection with its deliberations, the Board, among other things, received information in advance of and during the meetings from the Manager and Sub-Advisers regarding the factors set forth above, and met with and interviewed representatives of the Manager and certain Sub-Advisers during the meetings to discuss the Agreements. The Trustees also received materials discussing the legal standards applicable to their consideration of the Agreements. The Independent Trustees met in executive session during the meetings to review and discuss the information provided.
While the Agreements for certain Funds were considered at the same Board meeting, the Board dealt with each Fund separately. In approving the relevant Agreements with respect to each Fund, the Board, including the Independent Trustees, determined that the proposed management and subadvisory fee structure was fair and reasonable and that approval of each Agreement was in the best interests of the Fund and its shareholders. While attention was given to all information furnished, the following discusses some of the primary factors relevant to the Board's decision.
Nature, Quality and Extent of Services.
The Board reviewed the nature, quality and extent of the overall services to be provided by the Manager and the Sub-Advisers to the Funds. In this connection, the Board considered the responsibilities of the Manager and each Sub-Adviser to each Fund. With respect to the Manager, the Board considered that the Manager had invested significant time and effort in structuring the Trust and the Funds, obtaining the necessary exemptive relief from the Securities and Exchange Commission and arranging service providers for the Funds. In addition, the Board
36
considered that, going forward, the Manager would be responsible for providing investment management services to each Fund, contracting with investment sub-advisers for portfolio management services for each Fund, monitoring (through ABA with respect to the ABA Large Cap Value ETF and through RiverPark with respect to the RP Focused ETF) a Sub-Adviser's compliance with each Fund's objectives, policies and restrictions, and carrying out directives of the Board. The Board also considered the services to be provided by the Manager in the oversight of the Trust's administrator, transfer agent and custodian as well as the financial stability of the Manger and its ability to honor any contractual fee waivers.
With respect to ABA regarding the ABA Large Cap Value ETF and RiverPark regarding the RP Focused ETF, the Board considered that each of ABA and RiverPark would be responsible for monitoring and overseeing the investment programs of the relevant Sub-Adviser(s) (other than itself), including advising the Manager as to the performance of the Sub-Adviser(s) as well as making recommendations as to the allocation of assets of the relevant Fund among its Sub-Advisers (if applicable), whether any Sub-Adviser(s) should be replaced and whether a new sub-adviser should be considered for an allocation of Fund assets. With respect to the Sub-Advisers (excluding ABA and including RiverPark with respect to the RP Growth, RP Technology and RP Financials ETFs), the Board considered that each Sub-Adviser would be responsible for making investment decisions on behalf of the relevant Fund and performing certain limited administrative functions. The Board also considered, where applicable, each Sub-Adviser's experience in serving as an investment adviser for other funds, including those similar to the relevant Fund, as well as each Sub-Adviser's operational capabilities and financial condition. In addition, the Board reviewed information regarding each Sub-Adviser's investment process, the background of the personnel of each Sub-Adviser who would provide services to the relevant Fund, including the portfolio managers, and the general method of compensation for the portfolio managers.
Based on their review and other considerations, the Board determined, in the exercise of its business judgment, that it was satisfied with the nature and quality of the services to be provided under the Agreements.
Performance.
The Board noted that, as each Fund had not yet commenced investment operations at the time of the relevant meeting, it had no investment performance. The Board also noted that the Manager had recently commenced operations and that its sole business was to provide services to the Trust. The Board further noted that RiverPark had also recently commenced operations. With respect to the ABA Large Cap Value ETF, the Board considered the long-term investment performance of a mutual fund advised by ABA that has a substantially similar investment objective as the ABA Large Cap Value ETF and for which ABA provides substantially similar investment services. In this connection, the Board noted the favorable long-term performance of the fund as compared to a relevant benchmark. With respect to the RP Focused ETF, the Board considered the short-, medium- and long-term performance of Wedgewood in managing an investment strategy substantially similar to that to be employed on behalf of the Fund. In this connection, the Board noted the favorable performance of Wedgewood as compared to the applicable benchmark. Based on its
37
review, the Board determined, in its business judgment, that engaging the Manager and each Sub-Adviser could benefit the relevant Fund and its shareholders.
Comparative Fees and Expenses.
In considering the proposed management and subadvisory fees, the Board reviewed and considered the fees in light of the nature, quality and extent of the services expected to be provided by the Manager and each Sub-Adviser, respectively. With respect to the proposed management fee and estimated expense ratio for each Fund, the Board also considered the proposed fee and expense ratio versus the fees and expenses charged to mutual funds with comparable strategies as well as other index-based and actively managed exchange-traded funds ("ETFs"). The Board noted that the Manager did not manage any comparable funds and that the Funds were among the first of their kindactively-managed ETFs using traditional active management strategiesand thus, it was difficult to compare a Fund's proposed management fee and estimated expenses with the fees and expenses of mutual funds and other ETFs. The Board noted the Manager's representation, however, that the proposed management fees and expenses were generally higher than those of index-based ETFs, but generally lower than those of mutual funds with comparable strategies. In this connection, the Board observed, with respect to the ABA Large Cap Value ETF, that each of the proposed management fee and estimated expense ratio was lower than that of a comparable mutual fund. The Board also observed, with respect to the RP Funds, that the estimated expense ratio of each Fund was lower than the relevant median expense ratio for mutual funds with a similar investment strategy (as determined by Strategic Insight Simfund). In addition, with respect to each Fund, the Board observed that the proposed management fee was lower than, and the estimated expense ratio was comparable to, the management fees and expense ratios of other actively managed ETFs with different investment strategies.
The Board reviewed the method of computing the proposed management and subadvisory fees and noted that the Manager, not the Funds, would be responsible for paying the subadvisory fees to the Sub-Advisers. With respect to the Subadvisory Agreements, the Board also reviewed the advisory fees charged by each Sub-adviser (as applicable) to provide advisory services for other funds and investment vehicles. The Board then noted that the proposed subadvisory fee rates for the ABA Large Cap Growth ETF (other than the rate to be paid to ABA) included breakpoints, which would reduce the subadvisory fees as the assets of the ABA Large Cap Growth ETF increase and that these breakpoint levels would take into account all of the assets (including proprietary and other accounts) allocated to the relevant Sub-Advisers by or through ABA. The Board also considered each Fund's anticipated expense ratio and noted that the Manager had agreed to waive all or a portion of its management fee and make payments so that each Fund's expense ratio (excluding certain enumerated expenses) did not exceed a certain level. The Board further noted that, with respect to the Funds for which RiverPark would provide subadvisory services, RiverPark had agreed to assist the Manager in maintaining these expense limits by waiving an amount of its subadvisory fees under certain circumstances. Based on these and other considerations, the Board, in the exercise of its business judgment, determined that the fees and expenses of each Fund would be fair and reasonable.
38
Costs and Profitability.
The Board then considered the estimated profits to be realized by the Manager and, where available, the Sub-Advisers in connection with providing services to the Funds. The Board noted that since each Fund had not yet launched at the time of the relevant meeting, it was difficult to estimate how profitable the Fund would be to the Manager or Sub-adviser(s). The Board, however, reviewed estimated profit and loss information provided by the Manager and certain Sub-advisers with respect to the Funds. In this connection, the Board also noted the Manager's representation of its long-term commitment to the success of the Funds and its undertaking to make payments or waive all or a portion of its management fee so that each Fund's expense ratio (excluding certain enumerated expenses) did not exceed a certain level. The Board also considered, with respect to the Funds for which RiverPark would provide subadvisory services, RiverPark's agreement to assist the Manager in maintaining these expense limits. The Board further considered the costs associated with the personnel, systems and equipment necessary to manage each Fund and to meet the regulatory and compliance requirements adopted by the SEC and other regulatory bodies as well as other expenses the Manager would agree to pay in accordance with the Management Agreement. Under the totality of the circumstances, the Board concluded in the exercise of its business judgment that the estimated profits to be realized by the Manager and the Sub-adviser(s) (as applicable) with respect to each Fund would not be excessive in view of the nature, extent and quality of the services to be provided.
Other Benefits.
The Board then considered the extent to which the Manager, Sub-Advisers and their affiliates might derive ancillary benefits from Fund operations. For example, each Sub-Adviser, through its position as a sub-adviser to a Fund, may engage in soft dollar transactions. In this connection, the Board received information (as applicable) regarding each Sub-Adviser's procedures for executing portfolio transactions for the relevant Fund (or its portion thereof) and each Sub-Adviser's policies and procedures for the selection of brokers and dealers and obtaining research from those brokers and dealers. Based on these and other considerations, the Board determined that other benefits were not a material factor to consider in approving the Agreements.
Economies of Scale.
The Board also considered whether economies of scale would be realized by each Fund as its assets grow larger, including the extent to which this is reflected in the level of fees to be charged. The Board noted that the proposed management and subadvisory fees for each Fund (except for certain proposed subadvisory fees for the ABA Large Cap Value ETF) do not include breakpoints. With respect to the ABA Large Cap Value ETF, the Board noted, however, that the proposed subadvisory fees (other than those to be paid to ABA) include breakpoints and observed that the Manager is assuming a certain amount of risk in this regard because such breakpoints may rise or fall while the Manager's fee would remain stable; thus, any increase in fees based on a subadvisory fee breakpoint schedule would effectively be paid by the Manager. Based on these and other considerations, including that each Fund was newly organized, the Board generally concluded that it was premature to consider economies of scale.
39
TRUSTEES AND OFFICERS OF THE GRAIL ADVISORS ETF TRUST
Name,
Address
(1)
,
Age
|
|
Position(s)
Held with
the Trust
|
|
Term of
Office
(2)
and Length
of Time
Served
|
|
Principal Occupation(s)
During Past 5 Years
|
|
Number of
Portfolios
in the Trust
Complex
(3)
Overseen
by Trustee
|
|
Other Directorships
Held by Trustee
|
|
Independent Trustees
Bradford K. Gallagher
Age: 65
|
|
Chairman of the Board
|
|
Since 2009
|
|
Founder, Spyglass Investments LLC (a private investment vehicle) (since 2001).
|
|
|
5
|
|
|
Trustee, The Common Fund (since 2005); Trustee, Nicholas Applegate Institutional Funds (since 2007); Director, Shielding Technology Inc. (since 2006).
|
|
|
Charles H. Salisbury, Jr.
Age: 68
|
|
Trustee
|
|
Since 2009
|
|
Private investor.
|
|
|
5
|
|
|
Hobart & William Smith Colleges, Investment Committee Chair (since 2006); Maryland Institute, College of Art, Chair of Investment Committee (since 1994); Trustee, Johns Hopkins Hospital (since 2000); Trustee, Guadalupe Center of Immokalee (since 2007); Director, CeraTech, Inc. (since 2003).
|
|
|
Dennis G. Schmal
Age: 62
|
|
Trustee
|
|
Since 2009
|
|
Self-employed consultant (since 2003).
|
|
|
5
|
|
|
Trustee, AssetMark Funds (since 2007); Director/ Chairman, Pacific Metrics Corp. (educational services) (since 2005); Director, Varian Semiconductor Equipment Associates, Inc. (since 2004); Director, MCF Corp. (financial services) (since 2003); Trustee, Wells Fargo Multi-Strategy 100 Hedge Fund (since 2008).
|
|
|
Interested Trustee
William M. Thomas
Age: 46
(4)
|
|
Chief Executive Officer
|
|
Since 2008
|
|
Chief Executive Officer, Grail Advisors, LLC (since 2008); Senior Vice President, Charles Schwab (2000-2008).
|
|
|
5
|
|
|
None
|
|
|
40
Officers
Name, Address, Age
|
|
Position(s)
Held with
the Trust
|
|
Term of
Office and
Length of
Time Served
|
|
Principal Occupation(s) During Past 5 Years
|
|
Chester G. Chappell
Age: 44
|
|
Assistant Secretary
|
|
Since 2008
|
|
Head of Distribution, Grail Advisors, LLC (since 2008); Vice President, National Sales Manager, Charles Schwab (2003-2008).
|
|
|
Bryan M. Hiser
Age: 36
|
|
Chief Financial Officer
|
|
Since 2008
|
|
Director of Investment Research, Grail Advisors, LLC (since 2008); Assistant Vice President Fund Administration, Citi Fund Services (2007-2008); Financial Analyst, Harbor Capital Advisors (1999-2007).
|
|
|
(1)
Each Trustee or Officer may be contacted by writing to the Trustee or Officer c/o Grail Advisors, LLC, One Ferry Building, Suite 255, San Francisco, CA 94111. The Fund's Statement of Additional Information ("SAI") has additional information about the Funds' Trustees and Officers and is available without charge upon request. Contact your financial representative for a free prospectus or SAI.
(2)
Each Trustee holds office for an indefinite term.
(3)
The Trust Complex currently consists of five ETFs.
(4)
Mr. Thomas is considered an "interested person" of the Trust, as defined in the Investment Company Act of 1940, as amended, by virtue of his position with Grail Advisors, LLC, the Funds' Manager.
41
SUPPLEMENTAL INFORMATION
PROXY VOTING POLICIES, PROCEDURES AND RECORD
A description of the Trust's proxy voting policies and procedures that the Trust uses to determine how to vote proxies relating to portfolio securities, and each Fund's proxy voting record for the most recent twelve-month period ended June 30 is available, without charge upon request, by calling (415) 677-5870. This information is also available on the Securities and Exchange Commission's ("SEC") website at www.sec.gov.
SHAREHOLDER REPORTS AND QUARTERLY PORTFOLIO DISCLOSURE
The Funds are required to file their complete schedule of portfolio holdings with the SEC for their first and third quarters on Form N-Q. Copies of the filings are available without charge, upon request on the SEC's website at www.sec.gov. You can also obtain copies of Form N-Q by (i) visiting the SEC's Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330); (ii) sending your request and a duplicating fee to the SEC's Public Reference Room, Washington, DC 20549-0102; or (iii) sending your request electronically to publicinfosec.gov.
42
(This page intentionally left blank)
Investment Adviser
Grail Advisors, LLC
One Ferry Building
Suite 255
San Francisco, CA 94111
Sub-Advisers
American Beacon Advisors, Inc.
4151 Amon Carter Boulevard
Fort Worth, TX 76155
RiverPark Advisors, LLC
156 West 56
th
Street
17
th
Floor
New York, NY 10019
Wedgewood Partners Inc.
9909 Clayton Road
Suite 103
St. Louis, MO 63124
Brandywine Global Investment Management, LLC
2929 Arch Street
8
th
Floor
Philadelphia, PA 19104
Hotchkis and Wiley Capital Managenent, LLC
725 South Figueroa Street
39
th
Floor
Los Angeles, CA 90017
Metropolitan West Capital Management, LLC
610 Newport Center Drive
Suite 1000
Newport Beach, CA 92660
Distributor
ALPS Distributors, Inc.
1290 Broadway
Suite 1100
Denver, CO 80203
Custodian
The Bank of New York Mellon Corp.
One Wall Street
New York, NY 10286
Legal Counsel
K&L Gates LLP
1601 K Street, NW
Washington, DC 20006
Transfer Agent
The Bank of New York Mellon Corp.
One Wall Street
New York, NY 10286
Independent Registered Public Accounting Firm
KPMG LLP
1601 Market Street
Philadelphia, Pennsylvania 19103
This report is submitted for the general information of the Funds' shareholders. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus, which includes information regarding the Funds' objectives and policies, experience of its management, marketability of shares, and other information.
Call: 1-415-677-5870
Write: Grail Advisors ETF Trust
c/o Grail Advisors, LLC
One Ferry Building, Suite 255
San Francisco, CA 94111
Visit: www.grailadvisors.com
Item 2. Code of Ethics.
a).
The Registrant has adopted a code of ethics that applies to the Registrants
Principal Executive Officer, Principal Financial Officer or persons performing
similar functions (Code of Ethics).
b
). Not Applicable
c).
There has been no amendment to the Code of Ethics during the fiscal year ending
October 31, 2009 (reporting period).
d). Registrant granted no waivers from the
provisions of the Code of Ethics during the reporting period.
e). Not Applicable
f). Attached
Item 3.
Audit Committee Financial Expert.
a). The Registrants
Board of Trustees has determined that its Audit Committee has one audit
committee financial expert, as that term is defined under Items 3(b) and
3(c), serving on its audit committee. That Audit Committee member, Dennis G.
Schmal, is an independent Trustee, as that term is defined under Item 3(a)(2).
Item 4.
Principal Accountant Fees and Services.
The
principal accountant fees disclosed in Items 4(a)-(d) are for the five
funds of the Registrant that had a fiscal year ending October 31, 2009 and
whose financial statements are reported in Item 1.
a).
Audit
Fees:
the aggregate fees
billed in each of the last two fiscal years for professional services rendered
by the
principal accountant for
the audit
are as follows:
b).
Audit-Related
Fees:
the aggregate fees billed in each of the last two fiscal years for
assurance and related services by the principal accountant that are reasonably
related to the performance of the audit of the Registrants financial
statements and are not reported under paragraph (a) of this item are as
follows:
c).
Tax
Fees
: the aggregate fees billed in each of the previous last two fiscal
years for professional services rendered by the principal accountant for tax
compliance, tax advice, and tax planning are as follows:
d).
All
Other Fees
: the aggregate fees billed in each of the last two fiscal years
for products and services provided by the principal accountant, other than the
services reported in paragraphs (a) and (c) of this Item are as
follows:
e)
Audit
Committee Pre-Approval Policies and Procedures
.
(i)
Per
Rule 2-01(c)(7)(A) and the charter of the Registrants Audit
Committee, the Audit Committee approves and recommends the principal accountant
for the Registrant, pre-approves the principal accountants provision of all of
Audit, Audit-Related, Tax and Other Services to the Registrant, the Advisor and
its affiliates, if the engagement relates directly to the operations of the
financial reporting of the Trust.
(ii)
100%
of services described in each of Items 4(b) through (d) were approved
by the Audit Committee pursuant to paragraph (c)(7)(A) of Rule 2-01
of Regulation S-X.
(f)
Less
than 50% of the hours expended on the principal accountants engagement to
audit Registrants financial statements were attributed to work performed by
persons other than the accountants full-time, permanent employees.
(g)
The
aggregate non-audit fees billed by the accountant for services rendered to the
Registrant, the Advisor and any entity controlling, controlled by, or under
common control with the Advisor that provides ongoing services to the
Registrant (except for any sub-advisor whose role is primarily portfolio
management and is subcontracted with or overseen by another investment advisor)
for the last two fiscal years is as following:
(h)
Not
Applicable
Item 5.
Audit Committee of Listed Registrants.
(a) The Registrant is an issuer as defined in Section 10A-3
of the Securities Exchange Act of 1934 and has a separately-designated standing
Audit Committee in accordance with Section 3(a)(58)(A) of such Act.
All of the Boards independent Trustees, Bradford K. Gallagher, Charles H. Salisbury, Jr.
and Dennis G. Schmal, are members of Audit Committee.
(b) Not Applicable.
Item 6. Schedule of Investments.
(a) The Schedule of Investments is included as part of the report
to shareholders filed under Item 1.
(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 & Affiliated Purchasers.
Not Applicable.
Item 10.
Submission of Matters to a Vote of Security Holders.
Not Applicable.
Item 11. Controls and Procedures.
(a) Based on their evaluation of the controls and
procedures (as defined in Rule 30a-3(c) under the Investment Company
Act of 1940 (Act)) as of a date within 90 days of the filing of this report,
the Principal Executive Officer and Principal Financial Officer have concluded
that these controls and procedures are effective.
(b) There was no change in the Registrants
internal control over financial reporting (as defined in Rule 30a-3(d) under
the Act) that occurred during the second fiscal quarter of the reporting period
that has materially affected, or is reasonably likely to materially affect,
Registrants internal control over financial reporting.
Item
12. Exhibits.
(a)
Any code of ethics, or amendment thereto, that is the subject of the disclosure
required by Item 2, to the extent that the Registrant intends to satisfy the
Item 2 requirements through filing of an exhibit: Attached.
(b) Separate
certifications for each Principal Executive Officer and Principal Financial
Officer of the Registrant as required by Rule 30a-2(a) under the 1940
Act (17CFR 270.30a-(a)).
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.
Registrant:
|
Grail
Advisors ETF Trust
|
|
|
|
By:
|
/s/
William M. Thomas
|
|
|
William
M. Thomas, Chief Executive Officer
|
|
Date:
|
December 24,
2009
|
|
|
|
|
|
|
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.
Registrant:
|
Grail
Advisors ETF Trust
|
|
|
|
|
|
|
|
By:
|
/s/
William M. Thomas
|
|
|
William
M. Thomas, Chief Executive Officer
|
|
|
|
Date:
|
December 24,
2009
|
|
|
|
|
|
|
By:
|
/s/
Bryan M. Hiser
|
|
|
|
|
Bryan
M. Hiser, Chief Financial Officer
|
|
|
|
|
Date:
|
December 24, 2009
|
|
|
|
|
|
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