UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22310
FactorShares Trust
(Exact name of registrant as specified in charter)
615 East Michigan Street
Milwaukee, WI 53202
(Address of principal executive offices) (Zip code)
SR Services, LLC
300 Delaware Ave, Suite 800
Wilmington, DE 19801
(Name and address of agent for service)
(877) 756-PURE
Registrant's telephone number, including area code
Date of fiscal year end: September 30, 2015
Date of reporting period: September 30, 2015
Item 1. Reports to Stockholders.
Annual Report
September 30, 2015
PureFunds™ ISE Junior Silver
(Small Cap Miners/Explorers) ETF
Ticker: SILJ
PureFunds™ ISE Cyber Security ETF
Ticker: HACK
PureFunds™ ISE Big Data ETF
Ticker: BDAT
PureFunds™ ISE Mobile Payments ETF
Ticker: IPAY
The Funds are series of FactorShares Trust.
PureFunds™ ETFs
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1
PureFunds™ ETFs
2015 has been a banner year for PureFunds. With our most recent ETFs launched in July 2015, PureFunds has continued to expand its leadership role in the thematic ETF space. PureFunds ISE Big Data ETF (NYSE Arca Ticker: BDAT) and PureFunds ISE Mobile Payments ETF (NYSE Arca Ticker: IPAY) now join our PureFunds ISE Cyber Security ETF (NYSE Arca Ticker: HACK) and PureFunds ISE Junior Silver ETF (NYSE Arca Ticker: SILJ) in this thematic advancement of the ETF industry. PureFunds strives to continue its endeavor of providing first-to-market thematic investments in the form of ETFs and are thrilled to now provide access to the in-demand markets of big data & analytics and mobile payments. Cyber security has been a frequent headline grabber and investors have noticed. The timeliness and popularity of HACK has propelled a growth in total Assets Under Management for PureFunds which stood at $1.05 billion (as of September 30, 2015).
Not only has 2015 been a strong year for asset growth and product development for PureFunds ETFs, but we are also extremely proud to have won the following awards announced in 2015:
Most Innovative ETP of 2014 - Capital Link ETP/ETF Awards Most Innovative ETF of 2014 (Americas) - Global ETF Awards Most Marketable Ticker of 2014 (Americas) - Global ETF Awards Ticker of the Year 2014 - ETF.com Awards
PureFunds has also participated in cross-listing HACK on the Bolsa Mexicana de Valores. We are extremely proud of the many accomplishments PureFunds has achieved with its partners to date and strive to continue providing investors with access to in- demand investment themes and strategies.
Although HACK has received the lion’s share of PureFunds’ media related attention in 2015, we are still excited to see what the rest of the year (and years to come) will bring for the silver, big data and mobile payment markets. Silver prices continue to remain weak which has put pressure on many of the larger primary silver producers. PureFunds Junior Silver ETF (SILJ) focuses on a different area: companies exploring for silver and small-cap silver producers. We believe that if the now depressed silver market sees a recovery it could benefit companies held by our Junior Silver ETF, SILJ.
On behalf of PureFunds and our industry leading partners, I would like to thank you for your continued interest in PureFunds and our unique suite of ETFs. We endeavor to provide our investors with new and innovative products and look forward to continuing this for years to come.
You can find further details about BDAT, HACK, IPAY and SILJ by visiting www.purefunds.com, or by calling 1-877-756-PURE.
Sincerely,
Samuel Masucci III
Chief Executive Officer
2
PureFunds™ ETFs
Opinions expressed are subject to change at any time, are not guaranteed and should not be considered investment advice.
Must be preceded or accompanied by a prospectus.
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Narrowly focused investments typically exhibit higher volatility.
The Annual ETF Global Awards brings together some of the most innovative and progressive industry experts within the ETP space. The awards are determined by statistical ranking information conducted by expert ETF analysts and votes sent to industry participants worldwide. The results are a representation of global industry views and a testament to the leaders and emerging players in the ETP space. For more information on the Annual ETF Global Awards, visit www.globaletfawards.com. Capital Link is the host of the Annual Closed End Fund & ETP Awards, which aim to identify and recognize those fund sponsors and executives who consistently apply high standards of financial disclosure, investor and shareholder relations and innovation. The CEF & ETP Awards are based on nominations by a committee of analysts and industry specialists who actively follow CEFs and ETFs. For a complete list of award recipients, visit www.capitallink.com
BDAT, HACK, IPAY and SILJ ETFs are distributed by Quasar Distributors, LLC.
3
PureFunds™ ISE Junior Silver
(Small Cap Miners/Explorers) ETF
Growth of $10,000
Average Annual Returns Period Ended September 30, 2015 | 1 Year Return | Since Inception (11/29/12) | ||||
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF (NAV) | -47.20 | % | -37.43 | % | ||
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF (Market) | -45.52 | % | -36.67 | % | ||
S&P 500 Index | -0.61 | % | 13.85 | % | ||
ISE Junior Silver (Small Cap Miners/Explorers) Index | -46.13 | % | -36.71 | % |
The chart illustrates the performance of a hypothetical $10,000 investment made on November 29, 2012, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends, if any.
4
PureFunds™ ETFs
PureFunds™ ISE Cyber Security ETF
Growth of $10,000
Cumulative Returns Period Ended September 30, 2015 | Since Inception (11/11/14) | |||
PureFunds™ ISE Cyber Security ETF (NAV) | 1.11 | % | ||
PureFunds™ ISE Cyber Security ETF (Market) | 1.00 | % | ||
S&P 500 Index | -4.03 | % | ||
ISE Cyber Security Index | 2.98 | % |
The chart illustrates the performance of a hypothetical $10,000 investment made on November 11, 2014, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends, if any.
5
PureFunds™ ETFs
PureFunds™ ISE Big Data ETF
Growth of $10,000
Cumulative Returns Period Ended September 30, 2015 | Since Inception (7/15/15) | |||
PureFunds™ ISE Big Data ETF (NAV) | -10.89 | % | ||
PureFunds™ ISE Big Data ETF (Market) | -12.12 | % | ||
S&P 500 Index | -8.53 | % | ||
ISE Big DataTM Index | -10.77 | % |
The chart illustrates the performance of a hypothetical $10,000 investment made on July 15, 2015, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends, if any.
6
PureFunds™ ETFs
PureFunds™ ISE Mobile Payments ETF
Growth of $10,000
Cumulative Returns Period Ended September 30, 2015 | Since Inception (7/15/15) | |||
PureFunds™ ISE Mobile Payments ETF (NAV) | -5.86 | % | ||
PureFunds™ ISE Mobile Payments ETF (Market) | -6.68 | % | ||
S&P 500 Index | -8.53 | % | ||
ISE Mobile PaymentsTM Index | -5.74 | % |
The chart illustrates the performance of a hypothetical $10,000 investment made on July 15, 2015, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends, if any.
7
PureFunds™ ETFs
As of September 30, 2015 |
PureFundsTM ISE Junior Silver (Small Cap Miners/Explorers) ETF | PureFundsTM ISE Cyber Security ETF | PureFundsTM ISE Big Data ETF | PureFundsTM ISE Mobile Payments ETF | |||||||||||||
As a percent of Net Assets: | ||||||||||||||||
Canada | 90.2 | % | 1.4 | % | 3.2 | % | — | |||||||||
Cayman Islands | — | — | 3.0 | — | ||||||||||||
Cyprus | — | — | — | 1.6 | ||||||||||||
Finland | — | 2.5 | — | — | ||||||||||||
France | — | — | — | 4.0 | ||||||||||||
Germany | — | — | 7.2 | 4.2 | ||||||||||||
Hong Kong | — | — | — | 1.6 | ||||||||||||
Israel | — | 11.5 | 3.3 | — | ||||||||||||
Japan | — | 3.9 | — | — | ||||||||||||
Jersey | — | — | 0.5 | — | ||||||||||||
Netherlands | — | 5.0 | — | — | ||||||||||||
Poland | — | 0.3 | — | — | ||||||||||||
Puerto Rico | — | — | — | 2.0 | ||||||||||||
Republic of Korea | — | 2.7 | — | — | ||||||||||||
United Kingdom | 6.8 | 3.3 | — | 1.9 | ||||||||||||
United States | 1.0 | 69.8 | 82.8 | 83.7 | ||||||||||||
Short-Term and other Net Assets (Liabilities) | 2.0 | (0.4 | ) | — | 1.0 | |||||||||||
100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % |
8
PureFunds™ ETFs
PureFunds ISE Junior Silver (Small Cap Miners/Explorers) ETF |
September 30, 2015 |
Shares | Market Value | |||||||
COMMON STOCKS - 98.0% | ||||||||
Metals & Mining - 98.0% | ||||||||
Canada - 90.2% | ||||||||
Alexco Resource Corporation (a) | 137,384 | $ | 54,967 | |||||
Americas Silver Corporation (a) | 988,119 | 114,768 | ||||||
Aurcana Corporation (a) | 219,739 | 23,052 | ||||||
Bear Creek Mining Corporation (a) | 247,208 | 133,376 | ||||||
Endeavour Silver Corporation (a) | 103,727 | 160,777 | ||||||
Excellon Resources, Inc. (a) | 129,441 | 34,434 | ||||||
First Majestic Silver Corporation (a) | 110,462 | 353,478 | ||||||
Fortuna Silver Mines, Inc. (a) | 143,428 | 314,907 | ||||||
Great Panther Silver Ltd. (a) | 410,488 | 161,486 | ||||||
IMPACT Silver Corporation (a) | 134,836 | 14,145 | ||||||
Kootenay Silver, Inc. (a) | 180,245 | 30,390 | ||||||
MAG Silver Corporation (a) | 70,097 | 499,004 | ||||||
Mandalay Resources Corporation | 521,871 | 273,743 | ||||||
Minco Silver Corporation (a) | 141,084 | 40,174 | ||||||
Mirasol Resources, Ltd. (a) | 81,835 | 50,898 | ||||||
Sabina Gold & Silver Corporation (a) | 585,975 | 166,857 | ||||||
Santacruz Silver Mining, Ltd. (a) | 179,790 | 14,820 | ||||||
Sierra Metals, Inc. (a) | 196,365 | 148,616 | ||||||
Silver Standard Resources, Inc. (a) | 27,233 | 177,540 | ||||||
Silvercorp Metals, Inc. | 169,520 | 107,975 | ||||||
SilverCrest Mines, Inc. (a) | 181,155 | 160,182 | ||||||
Trevali Mining Corporation (a) | 252,473 | 60,541 | ||||||
3,096,130 | ||||||||
United Kingdom - 6.8% | ||||||||
Hochschild Mining PLC (a) | 220,385 | 233,370 | ||||||
United States - 1.0% | ||||||||
Golden Minerals Company (a) | 120,575 | 32,194 | ||||||
Total Metals & Mining | 3,361,694 | |||||||
TOTAL COMMON STOCKS (Cost $6,276,244) | 3,361,694 | |||||||
Total Investments (Cost $6,276,244) - 98.0% | 3,361,694 | |||||||
Other Assets in Excess of Liabilities - 2.0% | 70,047 | |||||||
TOTAL NET ASSETS - 100.0% | $ | 3,431,741 |
Percentages are stated as a percent of net assets.
(a) Non-income producing security.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
9
PureFunds™ ETFs
PureFundsTM ISE Cyber Security ETF |
Schedule of Investments |
September 30, 2015 |
Shares | Market Value | |||||||
COMMON STOCKS - 100.4% | ||||||||
Canada - 1.4% | ||||||||
Software - 1.4% | ||||||||
Absolute Software Corporation + | 2,439,332 | $ | 14,550,081 | |||||
Finland - 2.5% | ||||||||
Software - 2.5% | ||||||||
F-Secure OYJ *+ | 9,766,867 | 26,956,479 | ||||||
Israel - 11.5% | ||||||||
Communications Equipment - 3.5% | ||||||||
Radware, Ltd. (a) + | 2,336,508 | 37,991,620 | ||||||
Software - 8.0% | ||||||||
Check Point Software Technologies, Ltd. (a) | 523,191 | 41,504,742 | ||||||
CyberArk Software, Ltd. (a) | 854,504 | 42,844,831 | ||||||
Total Software | 84,349,573 | |||||||
Total Israel | 122,341,193 | |||||||
Japan - 3.9% | ||||||||
Software - 3.9% | ||||||||
Trend Micro, Inc. | 1,171,515 | 41,161,470 | ||||||
Netherlands - 5.0% | ||||||||
Software - 5.0% | ||||||||
AVG Technologies NV (a) | 1,754,609 | 38,162,746 | ||||||
Gemalto NV | 222,740 | 14,438,165 | ||||||
Total Software | 52,600,911 | |||||||
Poland - 0.3% | ||||||||
IT Services - 0.3% | ||||||||
Comp S.A. * | 189,284 | 2,739,528 | ||||||
Republic of Korea - 2.7% | ||||||||
Internet Software & Services - 2.7% | ||||||||
Ahnlab, Inc. + | 781,693 | 28,094,256 | ||||||
United Kingdom - 3.3% | ||||||||
Software - 3.3% | ||||||||
Sophos Group PLC (a) | 9,976,107 | 35,238,196 | ||||||
United States - 69.8% | ||||||||
Aerospace & Defense - 1.8% | ||||||||
The KEYW Holding Corporation (a) + | 3,163,201 | 19,453,686 | ||||||
Communications Equipment - 13.1% | ||||||||
Cisco Systems, Inc. | 1,592,095 | 41,792,494 | ||||||
F5 Networks, Inc. (a) | 126,647 | 14,665,723 | ||||||
Juniper Networks, Inc. | 1,639,996 | 42,164,297 | ||||||
Palo Alto Networks, Inc. (a) | 233,534 | 40,167,848 | ||||||
Total Communications Equipment | 138,790,362 |
The accompanying notes are an integral part of these financial statements.
10
PureFunds™ ETFs
PureFundsTM ISE Cyber Security ETF |
Schedule of Investments |
September 30, 2015 - (Continued) |
Shares | Market Value | |||||||
Internet Software & Services - 6.1% | ||||||||
IntraLinks Holdings, Inc. (a) + | 4,290,158 | $ | 35,565,410 | |||||
VeriSign, Inc. (a) | 216,391 | 15,268,549 | ||||||
Zix Corporation (a) + | 3,204,568 | 13,491,231 | ||||||
Total Internet Software & Services | 64,325,190 | |||||||
IT Services - 7.9% | ||||||||
Booz Allen Hamilton Holding Corporation | 549,357 | 14,398,647 | ||||||
Leidos Holdings, Inc. (a) | 344,106 | 14,215,019 | ||||||
ManTech International Corporation | 564,735 | 14,513,689 | ||||||
Science Applications International Corporation | 998,706 | 40,157,968 | ||||||
Total IT Services | 83,285,323 | |||||||
Software - 40.9% | ||||||||
Barracuda Networks, Inc. (a) | 1,508,898 | 23,508,631 | ||||||
FireEye, Inc. (a) | 1,106,768 | 35,217,358 | ||||||
Fortinet, Inc. (a) | 934,500 | 39,697,560 | ||||||
Guidance Software, Inc. (a) + | 2,131,824 | 12,833,580 | ||||||
Imperva, Inc. (a) | 635,373 | 41,604,224 | ||||||
Infoblox, Inc. (a) | 2,320,936 | 37,088,557 | ||||||
Proofpoint, Inc. (a) | 699,887 | 42,217,184 | ||||||
Qualys, Inc. (a) | 1,325,641 | 37,727,743 | ||||||
Rapid7, Inc. (a) | 1,901,633 | 43,262,151 | ||||||
Splunk, Inc. (a) | 694,491 | 38,440,077 | ||||||
Symantec Corporation | 2,072,351 | 40,348,674 | ||||||
VASCO Data Security International, Inc. (a) + | 2,448,262 | 41,718,384 | ||||||
Total Software | 433,664,123 | |||||||
Total United States | 739,518,684 | |||||||
TOTAL COMMON STOCKS (Cost $1,275,678,912) | 1,063,200,798 | |||||||
Total Investments (Cost $1,275,678,912) - 100.4% | 1,063,200,798 | |||||||
Liabilities in Excess of Other Assets - (0.4)% | (4,075,754 | ) | ||||||
TOTAL NET ASSETS - 100.0% | $ | 1,059,125,044 |
Percentages are stated as a percent of net assets.
(a) | Non-income producing security. |
* | Illiquid Security - At September 30, 2015, the value of these securities amounted to $29,696,007 or 2.8% of net assets. |
+ | Affiliated company as defined by the Investment Company Act of 1940. See Note 9 of the Notes to Financial Statements. |
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
11
PureFunds™ ETFs
PureFundsTM ISE Big Data ETF |
Schedule of Investments |
September 30, 2015 |
Shares | Market Value | |||||||
COMMON STOCKS - 100.0% | ||||||||
Canada - 3.2% | ||||||||
Media - 3.2% | ||||||||
Thomson Reuters Corporation | 1,753 | $ | 70,576 | |||||
Cayman Islands - 3.0% | ||||||||
Internet Software & Services - 3.0% | ||||||||
Baidu, Inc. - ADR (a) | 485 | 66,644 | ||||||
Germany - 7.2% | ||||||||
Software - 7.2% | ||||||||
SAP SE | 1,202 | 77,834 | ||||||
Software AG | 2,730 | 79,589 | ||||||
Total Software | 157,423 | |||||||
Total Germany | 157,423 | |||||||
Israel - 3.3% | ||||||||
Software - 3.3% | ||||||||
NICE-Systems Ltd. - ADR | 1,300 | 73,229 | ||||||
Jersey - 0.5% | ||||||||
Software - 0.5% | ||||||||
Fusionex International PLC | 1,032 | 5,347 | ||||||
WANdisco PLC (a) | 3,821 | 7,370 | ||||||
Total Software | 12,717 | |||||||
Total Jersey | 12,717 | |||||||
United States - 82.8% | ||||||||
Internet Software & Services - 28.7% | ||||||||
Facebook, Inc. (a) | 759 | 68,234 | ||||||
Google, Inc. (a) | 106 | 67,667 | ||||||
Hortonworks, Inc. (a) | 3,208 | 70,223 | ||||||
LinkedIn Corporation (a) | 357 | 67,876 | ||||||
Marketo, Inc. (a) | 2,658 | 75,540 | ||||||
New Relic, Inc. (a) | 2,188 | 83,385 | ||||||
OPOWER, Inc. (a) | 7,446 | 66,344 | ||||||
Twitter, Inc. (a) | 2,552 | 68,751 | ||||||
Yahoo!, Inc. (a) | 2,503 | 72,362 | ||||||
Total Internet Software & Services | 640,382 | |||||||
IT Services - 11.1% | ||||||||
Acxiom Corporation (a) | 3,876 | 76,590 | ||||||
International Business Machines Corporation | 533 | 77,268 |
The accompanying notes are an integral part of these financial statements.
12
PureFunds™ ETFs
PureFundsTM ISE Big Data ETF |
Schedule of Investments |
September 30, 2015 - (Continued) |
Shares | Market Value | |||||||
Mattersight Corporation (a) | 2,259 | $ | 17,417 | |||||
Teradata Corporation (a) | 2,657 | 76,947 | ||||||
Total IT Services | 248,222 | |||||||
Professional Services - 10.1% | ||||||||
Dun & Bradstreet Corporation | 746 | 78,330 | ||||||
Nielsen Holdings PLC | 1,514 | 67,328 | ||||||
Verisk Analytics, Inc. (a) | 1,064 | 78,640 | ||||||
Total Professional Services | 224,298 | |||||||
Software - 32.9% | ||||||||
FactSet Research Systems, Inc. | 424 | 67,759 | ||||||
Fair Isaac Corporation | 932 | 78,755 | ||||||
HubSpot, Inc. (a) | 1,640 | 76,047 | ||||||
MicroStrategy, Inc. (a) | 388 | 76,230 | ||||||
Oracle Corporation | 2,075 | 74,949 | ||||||
Qlik Technologies, Inc. (a) | 2,001 | 72,936 | ||||||
Splunk, Inc. (a) | 1,315 | 72,785 | ||||||
Tableau Software, Inc. (a) | 835 | 66,616 | ||||||
Verint Systems, Inc. (a) | 1,695 | 73,139 | ||||||
Workiva, Inc. (a) | 4,902 | 74,461 | ||||||
Total Software | 733,677 | |||||||
Total United States | 1,846,579 | |||||||
TOTAL COMMON STOCKS (Cost $2,479,109) | 2,227,168 | |||||||
Total Investments (Cost $2,479,109) - 100.0% | 2,227,168 | |||||||
Other Assets in Excess of Liabilities - 0.0% | 519 | |||||||
TOTAL NET ASSETS - 100.0% | $ | 2,227,687 |
Percentages are stated as a percent of net assets.
ADR American Depositary Receipt
(a) Non-income producing security.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
13
PureFunds™ ETFs
PureFundsTM ISE Mobile Payments ETF |
Schedule of Investments |
September 30, 2015 |
Shares | Market Value | |||||||
COMMON STOCKS - 99.0% | ||||||||
Cyprus - 1.6% | ||||||||
IT Services - 1.6% | ||||||||
QIWI PLC - ADR | 4,597 | $ | 74,104 | |||||
France - 4.0% | ||||||||
Electronic Equipment, Instruments & Components - 4.0% | ||||||||
Ingenico Group | 1,586 | 191,043 | ||||||
Germany - 4.2% | ||||||||
IT Services - 4.2% | ||||||||
Wirecard AG | 4,150 | 198,033 | ||||||
Hong Kong - 1.6% | ||||||||
Electronic Equipment, Instruments & Components - 1.6% | ||||||||
PAX Global Technologies, Inc. | 72,000 | 74,694 | ||||||
Puerto Rico - 2.0% | ||||||||
IT Services - 2.0% | ||||||||
EVERTEC, Inc. | 5,258 | 95,012 | ||||||
United Kingdom - 1.9% | ||||||||
Commercial Services & Supplies - 1.4% | ||||||||
PayPoint PLC | 4,280 | 66,170 | ||||||
IT Services - 0.5% | ||||||||
Earthport PLC (a) | 41,597 | 25,170 | ||||||
Total United Kingdom | 91,340 | |||||||
United States - 83.7% | ||||||||
Consumer Finance - 12.5% | ||||||||
American Express Co. | 3,688 | 273,391 | ||||||
Discover Financial Services | 4,927 | 256,155 | ||||||
Green Dot Corporation (a) | 3,238 | 56,989 | ||||||
Total Consumer Finance | 586,535 | |||||||
IT Services - 65.7% | ||||||||
Blackhawk Network Holdings, Inc. (a) | 2,766 | 117,251 | ||||||
Euronet Worldwide, Inc. (a) | 2,060 | 152,625 | ||||||
Everi Holdings, Inc. (a) | 3,825 | 19,622 | ||||||
Fidelity National Information Services, Inc. | 3,448 | 231,292 | ||||||
Fiserv, Inc. (a) | 2,901 | 251,256 | ||||||
FleetCor Technologies, Inc. (a) | 1,513 | 208,219 | ||||||
Global Payments, Inc. | 1,684 | 193,205 |
The accompanying notes are an integral part of these financial statements.
14
PureFunds™ ETFs
PureFundsTM ISE Mobile Payments ETF |
Schedule of Investments |
September 30, 2015 - (Continued) |
Shares | Market Value | |||||||
Heartland Payment Systems, Inc. | 1,735 | $ | 109,322 | |||||
Higher One Holdings, Inc. (a) | 4,833 | 9,521 | ||||||
MasterCard, Inc. | 3,154 | 284,238 | ||||||
MoneyGram International, Inc. (a) | 4,369 | 35,039 | ||||||
Net 1 UEPS Technologies, Inc. (a) | 2,594 | 43,424 | ||||||
PayPal Holdings, Inc. (a) | 8,014 | 248,755 | ||||||
Total System Services, Inc. | 4,321 | 196,303 | ||||||
Vantiv, Inc (a) | 4,669 | 209,731 | ||||||
VeriFone Systems, Inc. (a) | 4,570 | 126,726 | ||||||
Visa, Inc. | 4,207 | 293,061 | ||||||
Western Union Co. | 12,061 | 221,440 | ||||||
WEX, Inc. (a) | 1,601 | 139,031 | ||||||
Total IT Services | 3,090,061 | |||||||
Software - 2.6% | ||||||||
ACI Worldwide, Inc. (a) | 5,795 | 122,390 | ||||||
Technology Hardware, Storage & Peripherals - 2.9% | ||||||||
NCR Corporation (a) | 5,993 | 136,341 | ||||||
Total United States | 3,935,327 | |||||||
TOTAL COMMON STOCKS (Cost $4,859,939) | 4,659,553 | |||||||
Total Investments (Cost $4,859,939) - 99.0% | 4,659,553 | |||||||
Other Assets in Excess of Liabilities - 1.0% | 47,384 | |||||||
TOTAL NET ASSETS - 100.0% | $ | 4,706,937 |
Percentages are stated as a percent of net assets.
ADR American Depositary Receipt
(a) Non-income producing security.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
15
PureFundsTM ISE Junior Silver (Small Cap Miners/ Explorers) ETF | PureFundsTM ISE Cyber Security ETF | PureFundsTM ISE Big Data ETF | PureFundsTM ISE Mobile Payments ETF | |||||||||||||
ASSETS | ||||||||||||||||
Investments in unaffiliated securities, at value* | $ | 3,361,694 | $ | 832,546,071 | $ | 2,227,168 | $ | 4,659,553 | ||||||||
Investments in affiliated securities, at value* | — | 230,654,727 | — | — | ||||||||||||
Total investments, at value | 3,361,694 | 1,063,200,798 | 2,227,168 | 4,659,553 | ||||||||||||
Cash | 80,959 | 583,814 | 1,828 | 49,792 | ||||||||||||
Dividends and interest receivable | — | 1,632 | 105 | 539 | ||||||||||||
Receivable for investments sold | 23 | 16,252,641 | — | — | ||||||||||||
Total Assets | 3,442,676 | 1,080,038,885 | 2,229,101 | 4,709,884 | ||||||||||||
LIABILITIES | ||||||||||||||||
Payable for investments purchased | 8,959 | 11,301,738 | — | — | ||||||||||||
Payable for fund shares redeemed | — | 8,911,470 | — | — | ||||||||||||
Management fees payable | 1,976 | 700,633 | 1,414 | 2,947 | ||||||||||||
Total Liabilities | 10,935 | 20,913,841 | 1,414 | 2,947 | ||||||||||||
Net Assets | $ | 3,431,741 | $ | 1,059,125,044 | $ | 2,227,687 | $ | 4,706,937 | ||||||||
NET ASSETS CONSIST OF: | ||||||||||||||||
Paid-in Capital | $ | 9,513,933 | $ | 1,297,919,292 | $ | 2,499,403 | $ | 4,930,926 | ||||||||
Undistributed (accumulated) net investment income (loss) | (16,838 | ) | (1,193,419 | ) | — | — | ||||||||||
Accumulated net realized gain (loss) on investments | (3,150,795 | ) | (25,120,039 | ) | (19,775 | ) | (23,603 | ) | ||||||||
Net unrealized appreciation (depreciation) on: | ||||||||||||||||
Investments in securities | (2,914,550 | ) | (212,478,114 | ) | (251,941 | ) | (200,386 | ) | ||||||||
Foreign currency and translation of other assets and liabilities in foreign currency | (9 | ) | (2,676 | ) | — | — | ||||||||||
Net Assets | $ | 3,431,741 | $ | 1,059,125,044 | $ | 2,227,687 | $ | 4,706,937 | ||||||||
*Identified Cost: | ||||||||||||||||
Investments in unaffiliated securities | $ | 6,276,244 | $ | 965,421,663 | $ | 2,479,109 | $ | 4,859,939 | ||||||||
Investments in affiliated securities | — | 310,257,249 | — | — | ||||||||||||
Shares Outstanding^ | 650,000 | 41,900,000 | 100,000 | 200,000 | ||||||||||||
Net Asset Value, Offering and Redemption Price per Share | $ | 5.28 | $ | 25.28 | $ | 22.28 | $ | 23.53 |
^ No par value, unlimited number of shares authorized
The accompanying notes are an integral part of these financial statements.
16
PureFundsTM ISE Junior Silver (Small Cap Miners/ Explorers) ETF | PureFundsTM ISE Cyber Security ETF1 | PureFundsTM ISE Big Data ETF2 | PureFundsTM ISE Mobile Payments ETF2 | |||||||||||||
INVESTMENT INCOME | ||||||||||||||||
Income: | ||||||||||||||||
Dividends from unaffiliated securities (net of foreign withholding tax of $2,626, $29,363, $183, $0) | $ | 14,881 | $ | 2,311,593 | $ | 3,343 | $ | 4,201 | ||||||||
Dividends from Affiliated Securities (net of foreign withholding tax of $0, $140,317, $0, $0) | — | 935,444 | — | — | ||||||||||||
Total Investment Income | 14,881 | 3,247,037 | 3,343 | 4,201 | ||||||||||||
Expenses: | ||||||||||||||||
Management fees | 34,035 | 4,363,012 | 3,735 | 6,100 | ||||||||||||
Total Expenses | 34,035 | 4,363,012 | 3,735 | 6,100 | ||||||||||||
Net Investment Income (Loss) | (19,154 | ) | (1,115,975 | ) | (392 | ) | (1,899 | ) | ||||||||
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||||||||||||||
Net Realized Gain (Loss) on: | ||||||||||||||||
Unaffiliated investments | (2,166,977 | ) | (16,292,881 | ) | (19,775 | ) | (23,603 | ) | ||||||||
Affiliated investments | — | (9,023,239 | ) | — | — | |||||||||||
In-Kind redemptions | (114,075 | ) | 28,692,615 | — | — | |||||||||||
Affiliated In-Kind redemptions | — | 1,629,703 | — | — | ||||||||||||
Foreign currency | (6,789 | ) | (412,543 | ) | (205 | ) | 5 | |||||||||
Net Change in Unrealized Appreciation (Depreciation) of: | ||||||||||||||||
Unaffiliated Investments in securities and foreign currency | (853,397 | ) | (132,875,592 | ) | (251,941 | ) | (200,386 | ) | ||||||||
Affiliated investments | — | (79,602,522 | ) | — | — | |||||||||||
Foreign currency | (2 | ) | (2,676 | ) | — | — | ||||||||||
Net Realized and Unrealized Gain (Loss) on Investments | (3,141,240 | ) | (207,887,135 | ) | (271,921 | ) | (223,984 | ) | ||||||||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | (3,160,394 | ) | $ | (209,003,110 | ) | $ | (272,313 | ) | $ | (225,883 | ) |
1 Fund commenced operations on November 11, 2014. The information presented is for the period from November 11, 2014 to September 30, 2015.
2 Fund commenced operations on July 15, 2015. The information presented is for the period from July 15, 2015 to September 30, 2015.
The accompanying notes are an integral part of these financial statements.
17
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF |
Year Ended September 30, 2015 | Year Ended September 30, 2014 | |||||||||||||||
OPERATIONS | ||||||||||||||||
Net investment income (loss) | $ | (19,154 | ) | $ | (22,591 | ) | ||||||||||
Net realized gain (loss) on investments and In-Kind Redemptions | (2,287,841 | ) | (455,854 | ) | ||||||||||||
Net change in unrealized appreciation (depreciation) of investments | (853,399 | ) | (1,393,197 | ) | ||||||||||||
Net increase (decrease) in net assets resulting from operations | (3,160,394 | ) | (1,871,642 | ) | ||||||||||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||||||||||
From net investment income | — | (1,356 | ) | |||||||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||||||
Net increase (decrease) in net assets derived from net change in outstanding shares (a) | (405,000 | ) | 7,113,000 | |||||||||||||
Net increase (decrease) in net assets | $ | (3,565,394 | ) | 5,240,002 | ||||||||||||
NET ASSETS | ||||||||||||||||
Beginning of Year | 6,997,135 | 1,757,133 | ||||||||||||||
End of Year | $ | 3,431,741 | $ | 6,997,135 | ||||||||||||
Undistributed net investment income (loss) | $ | (16,838 | ) | $ | (22,188 | ) | ||||||||||
(a) Summary of share transactions is as follows: | ||||||||||||||||
Year Ended September 30, 2015 | Year Ended September 30, 2014 | |||||||||||||||
Shares | Amount | Shares | Amount | |||||||||||||
Shares Sold | — | $ | — | 600,000 | $ | 7,658,000 | ||||||||||
Reinvested Dividends | — | — | — | — | ||||||||||||
Shares Redeemed | (50,000 | ) | (405,000 | ) | (50,000 | ) | (545,000 | ) | ||||||||
(50,000 | ) | (405,000 | ) | 550,000 | $ | 7,113,000 | ||||||||||
Beginning Shares | 700,000 | 150,000 | ||||||||||||||
Ending Shares | 650,000 | 700,000 |
The accompanying notes are an integral part of these financial statements.
18
PureFunds™ ISE Cyber Security ETF |
STATEMENT OF CHANGES IN NET ASSETS |
Period Ended September 30, 2015* | ||||||||
OPERATIONS | ||||||||
Net investment income (loss) | $ | (1,115,975 | ) | |||||
Net realized gain (loss) on investments and In-Kind Redemptions | 4,593,655 | |||||||
Net change in unrealized appreciation (depreciation) of investments | (212,480,790 | ) | ||||||
Net increase (decrease) in net assets resulting from operations | (209,003,110 | ) | ||||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From net investment income | — | |||||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Net increase (decrease) in net assets derived from net change in outstanding shares (a) | 1,268,128,154 | |||||||
Net increase (decrease) in net assets | $ | 1,059,125,044 | ||||||
NET ASSETS | ||||||||
Beginning of Period | — | |||||||
End of Period | $ | 1,059,125,044 | ||||||
Undistributed net investment income (loss) | $ | (1,193,419 | ) | |||||
(a) Summary of share transactions is as follows: | ||||||||
Period Ended September 30, 2015* | ||||||||
Shares | Amount | |||||||
Shares Sold | 49,000,000 | $ | 1,473,110,885 | |||||
Transaction Fees | — | 48,459 | ||||||
Shares Redeemed | (7,100,000 | ) | (205,031,190 | ) | ||||
41,900,000 | 1,268,128,154 | |||||||
Beginning Shares | — | |||||||
Ending Shares | 41,900,000 |
*Fund commenced operations on November 11, 2014. The information presented is for the period from November 11, 2014 to September 30, 2015.
The accompanying notes are an integral part of these financial statements.
19
PureFunds™ ISE Big Data ETF |
STATEMENT OF CHANGES IN NET ASSETS |
Period Ended September 30, 2015* | ||||||||
OPERATIONS | ||||||||
Net investment income (loss) | $ | (392 | ) | |||||
Net realized gain (loss) on investments and In-Kind Redemptions | (19,980 | ) | ||||||
Net change in unrealized appreciation (depreciation) of investments | (251,941 | ) | ||||||
Net increase (decrease) in net assets resulting from operations | (272,313 | ) | ||||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From net investment income | — | |||||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Net increase (decrease) in net assets derived from net change in outstanding shares (a) | 2,500,000 | |||||||
Net increase (decrease) in net assets | $ | 2,227,687 | ||||||
NET ASSETS | ||||||||
Beginning of Period | — | |||||||
End of Period | $ | 2,227,687 | ||||||
Undistributed net investment income (loss) | $ | — | ||||||
(a) Summary of share transactions is as follows: | ||||||||
Period Ended September 30, 2015* | ||||||||
Shares | Amount | |||||||
Shares Sold | 100,000 | $ | 2,500,000 | |||||
Transaction Fees | — | — | ||||||
Shares Redeemed | — | — | ||||||
100,000 | $ | 2,500,000 | ||||||
Beginning Shares | — | |||||||
Ending Shares | 100,000 |
*Fund commenced operations on July 15, 2015. The information presented is for the period from July 15, 2015 to September 30, 2015.
The accompanying notes are an integral part of these financial statements.
20
PureFunds™ ISE Mobile Payments ETF |
STATEMENT OF CHANGES IN NET ASSETS |
Period Ended September 30, 2015* | ||||||||
OPERATIONS | ||||||||
Net investment income (loss) | $ | (1,899 | ) | |||||
Net realized gain (loss) on investments and In-Kind Redemptions | (23,598 | ) | ||||||
Net change in unrealized appreciation (depreciation) of investments | (200,386 | ) | ||||||
Net increase (decrease) in net assets resulting from operations | (225,883 | ) | ||||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From net investment income | — | |||||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Net increase (decrease) in net assets derived from net change in outstanding shares (a) | 4,932,820 | |||||||
Net increase (decrease) in net assets | $ | 4,706,937 | ||||||
NET ASSETS | ||||||||
Beginning of Period | — | |||||||
End of Period | $ | 4,706,937 | ||||||
Undistributed net investment income (loss) | $ | — | ||||||
(a) Summary of share transactions is as follows: | ||||||||
Period Ended September 30, 2015* | ||||||||
Shares | Amount | |||||||
Shares Sold | 200,000 | $ | 4,932,820 | |||||
Transaction Fees | — | — | ||||||
Shares Redeemed | — | — | ||||||
200,000 | 4,932,820 | |||||||
Beginning Shares | — | |||||||
Ending Shares | 200,000 |
*Fund commenced operations on July 15, 2015. The information presented is for the period from July 15, 2015 to September 30, 2015.
The accompanying notes are an integral part of these financial statements.
21
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF |
For a capital share outstanding throughout the period |
Year Ended September 30, 2015 | Year Ended September 30, 2014 | Period Ended September 30, 20131 | ||||||||||
Net Asset Value, Beginning of Period | $ | 10.00 | $ | 11.71 | $ | 20.00 | ||||||
Income (Loss) from Investment Operations: | ||||||||||||
Net investment income (loss) 2 | (0.03 | ) | (0.06 | ) | (0.02 | ) | ||||||
Net realized and unrealized gain (loss) on investments | (4.69 | ) | (1.64 | ) | (8.27 | ) | ||||||
Total from investment operations | (4.72 | ) | (1.70 | ) | (8.29 | ) | ||||||
Less Distributions: | ||||||||||||
Distributions from net investment income | — | (0.01 | ) | — | ||||||||
Total distributions | — | (0.01 | ) | — | ||||||||
Net asset value, end of period | $ | 5.28 | $ | 10.00 | $ | 11.71 | ||||||
Total Return | -47.20 | % | -14.52 | % | -41.45 | %3 | ||||||
Ratios/Supplemental Data: | ||||||||||||
Net assets at end of period (000’s) | $ | 3,432 | $ | 6,997 | $ | 1,757 | ||||||
Expenses to Average Net Assets | 0.69 | % | 0.69 | % | 0.69 | %4 | ||||||
Net Investment Income (Loss) to Average Net Assets | -0.39 | % | -0.52 | % | -0.21 | %4 | ||||||
Portfolio Turnover Rate | 55 | % | 44 | % | 69 | %3 |
1 | Commencement of operations on November 29, 2012. |
2 | Calculated based on average shares outstanding during the period. |
3 | Not annualized. |
4 | Annualized. |
The accompanying notes are an integral part of these financial statements.
22
PureFundsTM ISE Cyber Security ETF |
FINANCIAL HIGHLIGHTS |
For a capital share outstanding throughout the period |
Period Ended September 30, 20151 | ||||
Net Asset Value, Beginning of Period | $ | 25.00 | ||
Income (Loss) from Investment Operations: | ||||
Net investment income (loss) 2 | (0.05 | ) | ||
Net realized and unrealized gain (loss) on investments | 0.33 | |||
Total from investment operations | 0.28 | |||
Less Distributions: | ||||
Distributions from net investment income | — | |||
Total distributions | — | |||
Net asset value, end of period | $ | 25.28 | ||
Total Return | 1.11 | %3 | ||
Ratios/Supplemental Data: | ||||
Net assets at end of period (000’s) | $ | 1,059,125 | ||
Expenses to Average Net Assets | 0.75 | %4 | ||
Net Investment Income (Loss) to Average Net Assets | -0.19 | %4 | ||
Portfolio Turnover Rate | 31 | %3 |
1 | Commencement of operations on November 11, 2014. |
2 | Calculated based on average shares outstanding during the period. |
3 | Not annualized. |
4 | Annualized. |
The accompanying notes are an integral part of these financial statements.
23
PureFundsTM ISE Big Data ETF |
FINANCIAL HIGHLIGHTS |
For a capital share outstanding throughout the period |
Period Ended September 30, 20151 | ||||
Net Asset Value, Beginning of Period | $ | 25.00 | ||
Income (Loss) from Investment Operations: | ||||
Net investment income (loss) 2 | — | 5 | ||
Net realized and unrealized gain (loss) on investments | (2.72 | ) | ||
Total from investment operations | (2.72 | ) | ||
Less Distributions: | ||||
Distributions from net investment income | — | |||
Total distributions | — | |||
Net asset value, end of period | $ | 22.28 | ||
Total Return | -10.89 | %3 | ||
Ratios/Supplemental Data: | ||||
Net assets at end of period (000’s) | $ | 2,228 | ||
Expenses to Average Net Assets | 0.75 | %4 | ||
Net Investment Income (Loss) to Average Net Assets | -0.08 | %4 | ||
Portfolio Turnover Rate | 25 | %3 |
1 | Commencement of operations on July 15, 2015. |
2 | Calculated based on average shares outstanding during the period. |
3 | Not annualized. |
4 | Annualized. |
5 | Amount is less than $0.005 per share. |
The accompanying notes are an integral part of these financial statements.
24
PureFundsTM ISE Mobile Payments ETF |
FINANCIAL HIGHLIGHTS |
For a capital share outstanding throughout the period |
Period Ended September 30, 20151 | ||||
Net Asset Value, Beginning of Period | $ | 25.00 | ||
Income (Loss) from Investment Operations: | ||||
Net investment income (loss) 2 | (0.01 | ) | ||
Net realized and unrealized gain (loss) on investments | (1.46 | ) | ||
Total from investment operations | (1.47 | ) | ||
Less Distributions: | ||||
Distributions from net investment income | — | |||
Total distributions | — | |||
Net asset value, end of period | $ | 23.53 | ||
Total Return | -5.86 | %3 | ||
Ratios/Supplemental Data: | ||||
Net assets at end of period (000’s) | $ | 4,707 | ||
Expenses to Average Net Assets | 0.75 | %4 | ||
Net Investment Income (Loss) to Average Net Assets | -0.23 | %4 | ||
Portfolio Turnover Rate | 8 | %3 |
1 | Commencement of operations on July 15, 2015. |
2 | Calculated based on average shares outstanding during the period. |
3 | Not annualized. |
4 | Annualized. |
The accompanying notes are an integral part of these financial statements.
25
PureFunds™ ETFs |
NOTES TO FINANCIAL STATEMENTS September 30, 2015 |
NOTE 1 – ORGANIZATION |
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF, PureFunds™ ISE Cyber Security ETF, PureFunds™ ISE Big Data ETF and PureFunds™ ISE Mobile Payments ETF (each a “Fund”, or collectively the “Funds”) are series of FactorShares Trust (the “Trust”), an open-end management investment company consisting of multiple investment series, organized as a Delaware statutory trust on July 1, 2009. The Trust is registered with the SEC under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company and the offering of the Funds’ shares (“Shares”) is registered under the Securities Act of 1933, as amended (the “Securities Act”). PureFunds™ Junior Silver (Small Cap Miners/Explorers) ETF seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the ISE Junior Silver (Small Cap Miners/Explorers)™ Index. The PureFunds™ ISE Cyber Security ETF seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield of the ISE Cyber Security™ Index. The PureFunds™ ISE Big Data ETF seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the ISE Big Data™ Index. The PureFunds ISE Mobile Payments ETF seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the ISE Mobile Payments™ Index. PureFunds™ Junior Silver (Small Cap Miners/Explorers) ETF commenced operations on November 29, 2012, PureFunds™ ISE Cyber Security ETF commenced operations on November 11, 2014, and PureFunds™ ISE Big Data ETF and PureFunds™ ISE Mobile Payments ETF commenced operations on July 15, 2015.
The Funds each currently offer one class of shares, which have no front end sales load, no deferred sales charges, and no redemption fees. The Funds may issue an unlimited number of shares of beneficial interest, with no par value. All shares of each Fund have equal rights and privileges.
Shares of the Funds are listed and traded on the NYSE Arca, Inc. Market prices for the Shares may be different from their net asset value (“NAV”). Each Fund issues and redeems Shares on a continuous basis at NAV only in blocks of 50,000 shares, called “Creation Units.” Creation Units are issued and redeemed principally in-kind for securities included in a specified Index. Once created, Shares generally trade in the secondary market at market prices that change throughout the day in quantities less than a Creation Unit. Except when aggregated in Creation Units, Shares are not redeemable securities of a Fund. Shares of a Fund may only be purchased or redeemed by certain financial institutions (“Authorized Participants”). An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a DTC participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors do not qualify as Authorized Participants nor have the resources to buy and sell whole Creation Units. Therefore, they are unable to purchase or redeem the Shares directly from a Fund. Rather, most retail investors may purchase Shares in the secondary market with the assistance of a broker and are subject to customary brokerage commissions or fees.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Funds. These policies are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
26
PureFunds™ ETFs |
NOTES TO FINANCIAL STATEMENTS September 30, 2015 |
A. | Security Valuation. Securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on NASDAQ), including securities traded over the counter, are valued at the last quoted sale price on the primary exchange or market (foreign or domestic) on which they are traded on the valuation date (or at approximately 4:00 pm Eastern Time if a security’s primary exchange is normally open at that time), or, if there is no such reported sale on the valuation date, at the most recent quoted bid price. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. |
Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by the Board of Trustees (the “Board”). When a security is “fair valued,” consideration is given to the facts and circumstances relevant to the particular situation, including a review of various factors set forth in the pricing procedures adopted by the Funds’ Board. The use of fair value pricing by a fund may cause the net asset value of its shares to differ significantly from the net asset value that would be calculated without regard to such considerations. As of September 30, 2015, the Funds did not hold any fair valued securities. | |
As described above, the Funds utilize various methods to measure the fair value of their investments on a recurring basis. U.S. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are: |
Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities that the Funds have the ability to access. | |
Level 2 | Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. | |
Level 3 | Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Funds’ own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. | |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. | ||
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety. | ||
The following is a summary of the inputs used to value the Funds’ investments as of September 30, 2015: |
27
PureFunds™ ETFs |
NOTES TO FINANCIAL STATEMENTS September 30, 2015 |
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF
Assets^ | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 3,167,868 | $ | 193,826 | $ | — | $ | 3,361,694 | ||||||||
Total Investments in Securities | $ | 3,167,868 | $ | 193,826 | $ | — | $ | 3,361,694 | ||||||||
PureFunds™ ISE Cyber Security ETF | ||||||||||||||||
Assets^ | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 1,063,200,798 | $ | — | $ | — | $ | 1,063,200,798 | ||||||||
Total Investments in Securities | $ | 1,063,200,798 | $ | — | $ | — | $ | 1,063,200,798 | ||||||||
PureFunds™ ISE Big Data ETF | ||||||||||||||||
Assets^ | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 2,227,168 | $ | — | $ | — | $ | 2,227,168 | ||||||||
Total Investments in Securities | $ | 2,227,168 | $ | — | $ | — | $ | 2,227,168 | ||||||||
PureFunds™ ISE Mobile Payments ETF | ||||||||||||||||
Assets^ | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 4,659,553 | $ | — | $ | — | $ | 4,659,553 | ||||||||
Total Investments in Securities | $ | 4,659,553 | $ | — | $ | — | $ | 4,659,553 |
^ | See Schedule of Investment for classifications by sector or country. |
Below are the transfers into or out of Levels 1 and 2 during the year ended September 30, 2015:
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF
Transfers into Level 1 | $ | — | ||
Transfers out of Level 1 | 193,826 | |||
Net Transfers in and/(out) of Level 1 | $ | (193,826 | ) | |
Transfers into Level 2 | $ | 193,826 | ||
Transfers out of Level 2 | — | |||
Net Transfers in and/(out) of Level 2 | $ | 193,826 |
The transfers from Level 1 to Level 2 are due to the lack of trading activity on September 30, 2015. Transfers between levels are recognized at the end of the reporting period.
Each of PureFunds™ ISE Cyber Security ETF, PureFunds™ ISE Big Data ETF, and PureFunds™ ISE Mobile Payments ETF did not have any transfers between Levels 1 and 2 during the period ended September 30, 2015.
28
PureFunds™ ETFs |
NOTES TO FINANCIAL STATEMENTS September 30, 2015 |
The Funds did not have any transfers into or out of Level 3 during the year ended September 30, 2015.
B. | Federal Income Taxes. The Funds have each elected to be taxed as a “regulated investment company” and intend to distribute substantially all taxable income to their shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Therefore, no provisions for federal income taxes or excise taxes have been made. |
To avoid imposition of the excise tax applicable to regulated investment companies, each Fund intends to declare each year as dividends, in each calendar year, at least 98.0% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts, if any, from prior years. | |
Net capital losses incurred after October 31, within the taxable year are deemed to arise on the first business day of each Fund’s next taxable year. | |
Each Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Each Fund has analyzed its tax position and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions expected to be taken in the Funds’ 2015 tax returns. The Funds identify their major tax jurisdictions as U.S. Federal, the State of New Jersey, and the State of Delaware; however the Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. | |
C. | Security Transactions and Investment Income. Investment securities transactions are accounted for on the trade date. Gains and losses realized on sales of securities are determined on a specific identification basis. Discounts/premiums on debt securities purchased are accreted/amortized over the life of the respective securities using the effective interest method. Dividend income is recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Income, including gains, from investments in foreign securities received by the Funds may be subject to income, withholding or other taxes imposed by foreign countries. |
D. | Foreign Currency Translations and Transactions. The Funds may engage in foreign currency transactions. Foreign currency transactions are translated into U.S. dollars on the following basis: (i) market value of investment securities, assets and liabilities at the daily rates of exchange, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. For financial reporting purposes, the Funds do not isolate changes in the exchange rate of investment securities from the fluctuations arising from changes in the market prices of securities for unrealized gains and losses. However, for federal income tax purposes, the Funds do isolate and treat as ordinary income the effect of changes in foreign exchange rates on realized gains or losses from the sale of investment securities and payables and receivables arising from trade-date and settlement-date differences. |
29
PureFunds™ ETFs |
NOTES TO FINANCIAL STATEMENTS September 30, 2015 |
E. | Distributions to Shareholders. Distributions to shareholders from net investment income are declared and paid for each of PureFunds™ ISE Cyber Security ETF, PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF, PureFunds™ ISE Big Data ETF and PureFunds™ ISE Mobile Payments ETF on a quarterly basis. Net realized gains on securities for each Fund normally are declared and paid on an annual basis. Distributions are recorded on the ex-dividend date. |
F. | Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. |
G. | Share Valuation. The net asset value (“NAV”) per share of each Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding for the Fund, rounded to the nearest cent. The Funds’ shares will not be priced on the days on which the NYSE is closed for trading. The offering and redemption price per share for the Funds are equal to the Funds’ respective net asset value per share. |
H. | Guarantees and Indemnifications. In the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. |
I. | Recent Accounting Pronouncement. In May 2015, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2015-07 “Disclosure for Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent)”. The amendments in ASU No. 2015-07 remove the requirement to categorize within the fair value hierarchy investments measured using the NAV practical expedient. The ASU also removes certain disclosure requirements for investments that qualify, but do not utilize, the NAV practical expedient. The amendments in the ASU are effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. Management is currently evaluating the impact these changes will have on the Funds’ financial statements and related disclosures. |
NOTE 3 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The “Derivatives and Hedging” Topic of the Codification (Accounting Standards Codification 815, formerly Statement of Financial Accounting Standards (“SFAS”) 133 and SFAS 161) requires enhanced disclosures about the Funds’ derivative and hedging activities, including how such activities are accounted for and their effect on the Funds’ financial position, performance and cash flows. The Funds did not use derivatives during the period ended September 30, 2015.
NOTE 4 – COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS.
Factor Advisors, LLC (the “Advisor”), serves as the investment advisor to the Funds. Pursuant to an Investment Advisory Agreement (“Advisory Agreement”) between the Trust, on behalf of the Funds, and the Advisor, the Advisor provides investment advice to the Funds and oversees the day-to-day operations of the Funds, subject to the direction and control of the Board and the officers of the
30
PureFunds™ ETFs |
NOTES TO FINANCIAL STATEMENTS September 30, 2015 |
Trust. Under the Advisory Agreement, the Advisor is also responsible for arranging, in consultation with Esposito Partners, LLC (the “Sub-Advisor” to PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF) and Penserra Capital Management, LLC (the “Sub-Advisor” to PureFunds™ ISE Cyber Security ETF, PureFunds™ ISE Big Data ETF, and PureFunds™ ISE Mobile Payments ETF), transfer agency, custody, fund administration and accounting, and other non-distribution related services necessary for the Funds to operate.
The Trust, on behalf of the PureFunds™ Junior Silver (Small Cap Miners/Explorers) ETF, has contracted with PureShares, LLC (the “Business Manager”) to manage the business affairs and provide office facilities and equipment and certain clerical, bookkeeping and administrative services for PureFunds™ Junior Silver (Small Cap Miners/Explorers) ETF. The Business Manager bears the costs of all advisory and non-advisory services required to operate the Fund, in exchange for a single unitary fee. For services provided the Fund pays the Business Manager at an annual rate of 0.69% of the Fund’s average daily net assets. The Business Manager has an agreement with, and is dependent on, a third party to pay the Fund’s expenses in excess of 0.69% of the Fund’s average daily net assets. Pursuant to this agreement, the Business Manager is subject to certain requirements that, if not met by the Business Manager or waived by the third party, would permit the third party to terminate the agreement. If the agreement is terminated, the Business Manager may not be able to perform its obligations under the Business Management Agreement.
Under the Investment Advisory Agreement with PureFunds™ ISE Cyber Security ETF, PureFunds™ ISE Big Data ETF, and PureFunds™ ISE Mobile Payments ETF, the Advisor has overall responsibility for the general management and administration of the Funds and arranges for sub-advisory, transfer agency, custody, fund administration, securities lending, and all other non-distribution related services necessary for the Funds to operate. The Advisor bears the costs of all advisory and non-advisory services required to operate the Funds, in exchange for a single unitary fee. For services provided the Funds pay the Advisor at an annual rate of 0.75% of the Funds’ average daily net assets. The Advisor has an agreement with, and is dependent on, a third party to pay the Funds’ expenses in excess of 0.75% of the Funds’ average daily net assets. Additionally, under the Investment Advisory Agreement, the Advisor has agreed to pay all expenses of the Funds, except for: the fee paid to the Advisor pursuant to the Investment Advisory Agreement, interest charges on any borrowings, taxes, brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, accrued deferred tax liability, extraordinary expenses, and distribution (12b-1) fees and expenses (collectively, “Excluded Expenses”). The Advisor has entered into an Agreement with PureShares, LLC (the “Sponsor”), under which the Sponsor agrees to sublicense the use of the Underlying Index to the Advisor. The Sponsor also provides marketing support for the Funds, including distributing marketing materials related to the Funds. PureShares, LLC is a privately held business focused on bringing exchange-traded investment products to investors in the U.S. The Sponsor does not make investment decisions, provide investment advice, or otherwise act in the capacity of an investment adviser to the Funds. Additionally, the Sponsor is not involved in the maintenance of the Underlying Index and does not otherwise act in the capacity of an index provider.
US Bancorp Fund Services, LLC (the “Administrator”) provides fund accounting, fund administration, and transfer agency services to the Funds. The Advisor compensates the Administrator for these services under an administration agreement between the two entities.
31
PureFunds™ ETFs |
NOTES TO FINANCIAL STATEMENTS September 30, 2015 |
The Advisor pays each independent Trustee a quarterly meeting fee for service to the Funds. Each Trustee is also reimbursed by the Advisor for all reasonable out-of-pocket expenses incurred in connection with his duties as Trustee, including travel and related expenses incurred in attending Board meetings.
NOTE 5 – DISTRIBUTION PLAN
PureFunds™ ISE Cyber Security ETF, PureFunds™ ISE Big Data ETF, and PureFunds™ ISE Mobile Payments ETF have each adopted a Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, each Fund may pay compensation to the Distributor or any other distributor or financial institution with which the Trust has an agreement with respect to each Fund, with the amount of such compensation not to exceed an annual rate of 0.25% of each Fund’s daily average net assets. For the period ended September 30, 2015, the Funds did not incur any 12b-1 expenses.
NOTE 6 - PURCHASES AND SALES OF SECURITIES
The costs of purchases and sales of securities, excluding short-term securities and in-kind transactions, for the period ended September 30, 2015:
Purchases | Sales | |||||||
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | $ | 2,670,511 | $ | 2,774,197 | ||||
PureFunds™ ISE Cyber Security ETF | 333,362,554 | 212,862,413 | ||||||
PureFunds™ ISE Big Data ETF | 731,627 | 589,446 | ||||||
PureFunds™ ISE Mobile Payments ETF | 357,401 | 336,642 |
The costs of purchases and sales of in-kind transactions associated with creations and redemptions for the period ended September 30, 2015:
Purchases In- | Sales In- | |||||||
Kind | Kind | |||||||
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | $ | — | $ | 406,625 | ||||
PureFunds™ ISE Cyber Security ETF | 1,352,742,275 | 197,881,451 | ||||||
PureFunds™ ISE Big Data ETF | 2,438,069 | — | ||||||
PureFunds™ ISE Mobile Payments ETF | 4,862,313 | — |
Purchases in-kind are the aggregate of all in-kind purchases and sales in-kind are the aggregate of all proceeds from in-kind sales. Net capital gains or losses resulting from in-kind redemptions are excluded from the Funds’ taxable gains and are not distributed to shareholders.
There were no purchases or sales of U.S. Government obligations for the period ended September 30, 2015.
NOTE 7 – FEDERAL INCOME TAXES
The components of distributable earnings (losses) and cost basis of investments for federal income tax purposes at September 30, 2015 were as follows:
32
PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS | ||||
September 30, 2015 | ||||
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | ||||
Cost of investments | $ | 6,470,632 | ||
Gross tax unrealized appreciation | 6,904 | |||
Gross tax unrealized depreciation | (3,115,842 | ) | ||
Net tax unrealized depreciation | (3,108,938 | ) | ||
Undistributed ordinary income | — | |||
Undistributed long-term gain | — | |||
Total distributable earnings | — | |||
Other accumulated (loss) | (2,973,254 | ) | ||
Total Accumulated (loss) | $ | (6,082,192 | ) | |
PureFunds™ ISE Cyber Security ETF | ||||
Cost of investments | $ | 1,279,605,241 | ||
Gross tax unrealized appreciation | 26,700,109 | |||
Gross tax unrealized depreciation | (243,104,552 | ) | ||
Net tax unrealized depreciation | (216,404,443 | ) | ||
Undistributed ordinary income | 6,938 | |||
Undistributed long-term gain | — | |||
Total distributable earnings | 6,938 | |||
Other accumulated (loss) | (22,396,743 | ) | ||
Total Accumulated (loss) | $ | (238,794,248 | ) | |
PureFunds™ ISE Big Data ETF | ||||
Cost of investments | $ | 2,479,444 | ||
Gross tax unrealized appreciation | 28,854 | |||
Gross tax unrealized depreciation | (281,130 | ) | ||
Net tax unrealized depreciation | (252,276 | ) | ||
Undistributed ordinary income | — | |||
Undistributed long-term gain | — | |||
Total distributable earnings | — | |||
Other accumulated (loss) | (19,440 | ) | ||
Total Accumulated (loss) | $ | (271,716 | ) |
33
PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS | ||||
September 30, 2015 | ||||
PureFunds™ ISE Mobile Payments ETF | ||||
Cost of investments | $ | 4,874,520 | ||
Gross tax unrealized appreciation | 114,372 | |||
Gross tax unrealized depreciation | (329,339 | ) | ||
Net tax unrealized depreciation | (214,967 | ) | ||
Undistributed ordinary income | — | |||
Undistributed long-term gain | — | |||
Total distributable earnings | — | |||
Other accumulated (loss) | (9,022 | ) | ||
Total Accumulated (loss) | $ | (223,989 | ) |
The difference between the tax cost of investments and the cost of investments for GAAP purposes is primarily due to the tax treatment of wash sale losses.
As of September 30, 2015, the Funds had accumulated capital loss carryovers of:
Capital Loss Carryover | Expires | ||||||
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | $ | 552,980 | Indefinite | ||||
PureFunds™ ISE Cyber Security ETF | — | Indefinite | |||||
PureFunds™ ISE Big Data ETF | 19,440 | Indefinite | |||||
PureFunds™ ISE Mobile Payments ETF | 9,022 | Indefinite |
Under current tax law, capital and currency losses realized after October 31 of a Fund’s fiscal year may be deferred and treated as occurring on the first business day of the following fiscal year for tax purposes. The following Funds had deferred post-October capital and currency losses, which will be treated as arising on the first business day of the year ended September 30, 2016.
Late Year Ordinary Loss | Post- October Capital Loss | ||||||
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | $ | 13,200 | $ | 2,407,065 | |||
PureFunds™ ISE Cyber Security ETF | 1,113,629 | 21,280,438 | |||||
PureFunds™ ISE Big Data ETF | — | — | |||||
PureFunds™ ISE Mobile Payments ETF | — | — |
NOTE 8 – DISTRIBUTIONS TO SHAREHOLDERS
PureFunds ISE Junior Silver (Small Cap Miners/Explorers) ETF did not pay any distributions from ordinary income or capital gains for the year ended September 30, 2015, and paid $1,356 from ordinary income for the year ended September 30, 2014.
Each of PureFunds™ ISE Cyber Security ETF, PureFunds™ ISE Big Data ETF, and PureFunds™ ISE Mobile Payments ETF has paid no distributions to shareholders for the period ended September 30, 2015.
34
PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS |
September 30, 2015 |
NOTE 9 – INVESTMENTS IN AFFILIATES |
PureFunds ISE Cyber Security ETF
PureFunds™ Cyber Security ETF owned 5% or more of the voting securities of the following companies during the period ended September 30, 2015. As a result, these companies are deemed to be affiliates of the Fund as defined by the Investment Company Act of 1940. Transactions during the period in these securities of affiliated companies were as follows:
Share Activity | ||||||||||||||||||||||||||||
Security Name | Balance November 11, 20141 | Purchases | Sales | Balance September 30, 2015 | Realized Gains (Losses)2 | Dividend Income | Value September 30, 2015 | |||||||||||||||||||||
Absolute Software Corporation | — | 2,760,011 | (320,679 | ) | 2,439,332 | $ | (50,682 | ) | $ | 178,768 | $ | 14,550,081 | ||||||||||||||||
AhnLab, Inc. | — | 1,151,180 | (369,487 | ) | 781,693 | (2,498,923 | ) | — | 28,094,256 | |||||||||||||||||||
F-Secure OYJ | — | 11,848,189 | (2,081,322 | ) | 9,766,867 | (684,174 | ) | 756,676 | 26,956,479 | |||||||||||||||||||
Guidance Software, Inc. | — | 2,414,159 | (282,335 | ) | 2,131,824 | 427,831 | — | 12,833,580 | ||||||||||||||||||||
IntraLinks Holdings, Inc. | — | 5,584,956 | (1,294,798 | ) | 4,290,158 | (1,890,359 | ) | — | 35,565,410 | |||||||||||||||||||
The KEYW Holding Corporation | — | 5,087,919 | (1,924,718 | ) | 3,163,201 | (1,616,010 | ) | — | 19,453,686 | |||||||||||||||||||
Radware Ltd. | — | 2,677,149 | (340,641 | ) | 2,336,508 | (503,470 | ) | — | 37,991,620 | |||||||||||||||||||
VASCO Data Security International, Inc. | — | 2,799,279 | (351,017 | ) | 2,448,262 | (948,154 | ) | — | 41,718,384 | |||||||||||||||||||
Zix Corporation | — | 3,651,889 | (447,321 | ) | 3,204,568 | 370,405 | — | 13,491,231 | ||||||||||||||||||||
$ | (7,393,536 | ) | $ | 935,444 | $ | 230,654,727 |
1 Commencement of operations
2 Realized Gains (Losses) includes transactions in affiliated investments and affiliated in-kind redemptions
35
PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS |
September 30, 2015 |
NOTE 10 – SUBSEQUENT EVENTS |
In preparing these financial statements, the Funds have evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.
At a meeting of the Board held on September 10, 2015, the Trust, on behalf of the PureFunds™ Junior Silver (Small Cap Miners/Explorers) ETF, did not renew its Business Management Agreement with PureShares, LLC to manage the business affairs and provide office facilities and equipment and certain clerical, bookkeeping and administrative services for PureFunds™ Junior Silver (Small Cap Miners/Explorers) ETF upon the expiration of its term on October 18, 2015. Beginning October 19, 2015, the Advisor will assume the management responsibilities with respect to PureFunds™ Junior Silver (Small Cap Miners/Explorers) ETF.
At a meeting of the Board held on September 30, 2015, the Board ratified the change in Distributor whereby ALPS Distributors, Inc. would become Distributor of the Funds effective in December 2015.
36
PureFunds™ ETFs
To the Board of Trustees of FactorShares Trust
and the Shareholders of PureFunds ISE Junior Silver (Small Cap Miners/Explorers) ETF,
PureFunds ISE Cyber Security ETF, PureFunds ISE Big Data ETF
and PureFunds ISE Mobile Payments ETF
We have audited the accompanying statements of assets and liabilities of the FactorShares Trust, which includes the PureFunds ISE Junior Silver (Small Cap Miners/Explorers) ETF, PureFunds ISE Cyber Security ETF, PureFunds ISE Big Data ETF and PureFunds ISE Mobile Payments ETF (collectively the “Funds”) including the schedule of investments, as of September 30, 2015, and the related statements each of their operations, the changes in each of their net assets and financial highlights for each of the periods indicated. 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. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion. 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 September 30, 2015 by correspondence with the custodian. 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 the FactorShares Trust, which includes PureFunds ISE Junior Silver (Small Cap Miners/Explorers) ETF, PureFunds ISE Cyber Security ETF, PureFunds ISE Big Data ETF and PureFunds ISE Mobile Payments ETF as of September 30, 2015, and the results of their operations and changes in their net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America.
/s/ WithumSmith+Brown, PC
New York, NY
November 30, 2015
37
PureFunds™ ETFs
PureFunds™ ETFs Closing Price vs. NAV |
The following Frequency Distribution of Premiums and Discounts chart is provided to show the frequency at which the closing price for each Fund is at a premium or discount to its daily net asset value (NAV). The chart presented represents past performance and cannot be used to predict future results.
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | October 1, 2014 through September 30, 2015 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.50% | 21 | 8.3 | ||||||
Greater than or equal to 1.25% And Less Than 1.50% | 12 | 4.8 | ||||||
Greater Than or Equal to 1.00% And Less Than 1.25% | 20 | 7.9 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 24 | 9.5 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 27 | 10.7 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 20 | 7.9 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 27 | 10.7 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 16 | 6.4 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 28 | 11.1 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 18 | 7.2 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 19 | 7.5 | ||||||
Less Than or Equal to -1.00% And Greater Than -1.25% | 8 | 3.2 | ||||||
Less Than or Equal to -1.25% And Greater Than -1.50% | 5 | 2.0 | ||||||
Less than -1.50% | 7 | 2.8 |
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | October 1, 2013 through September 30, 2014 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.50% | 28 | 11.1 | ||||||
Greater than or equal to 1.25% And Less Than 1.50% | 8 | 3.2 | ||||||
Greater Than or Equal to 1.00% And Less Than 1.25% | 20 | 7.9 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 17 | 6.7 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 30 | 11.9 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 32 | 12.7 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 35 | 13.9 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 25 | 9.9 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 28 | 11.1 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 12 | 4.8 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 9 | 3.6 | ||||||
Less Than or Equal to -1.00% And Greater Than -1.25% | 3 | 1.2 | ||||||
Less Than or Equal to -1.25% And Greater Than -1.50% | 4 | 1.6 | ||||||
Less than -1.50% | 1 | 0.4 |
38
PureFunds™ ETFs
FREQUENCY DISTRIBUTION OF PREMIUMS AND DISCOUNTS (Unaudited) | ||||||||
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | November 29, 2012* through September 30, 2013 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 2.50% | 22 | 10.6 | ||||||
Greater Than or Equal to 2.50% And Less Than 1.50% | 20 | 9.5 | ||||||
Greater Than or Equal to 1.50% And Less Than 0.75% | 30 | 14.4 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 26 | 12.4 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 17 | 8.2 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 18 | 8.6 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.50% | 22 | 10.6 | ||||||
Less Than or Equal to -0.50% And Greater Than -1.25% | 20 | 9.5 | ||||||
Less Than or Equal to -1.25% And Greater Than -2.0% | 24 | 11.4 | ||||||
Less than -2.0% | 10 | 4.8 |
*First day of secondary market trading
PureFunds™ ISE Cyber Security ETF | November 11, 2014* through September 30, 2015 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.50% | 0 | 0.0 | ||||||
Greater than or equal to 1.25% And Less Than 1.50% | 0 | 0.0 | ||||||
Greater Than or Equal to 1.00% And Less Than 1.25% | 1 | 0.4 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 0 | 0.0 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 4 | 1.8 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 17 | 7.6 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 162 | 72.7 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 33 | 14.8 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 6 | 2.7 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 0 | 0.0 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 0 | 0.0 | ||||||
Less Than or Equal to -1.00% And Greater Than -1.25% | 0 | 0.0 | ||||||
Less Than or Equal to -1.25% And Greater Than -1.50% | 0 | 0.0 | ||||||
Less than -1.50% | 0 | 0.0 |
39
PureFunds™ ETFs
FREQUENCY DISTRIBUTION OF PREMIUMS AND DISCOUNTS (Unaudited) | ||||||||
PureFunds™ ISE Big Data ETF | July 15, 2015* through September 30, 2015 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.50% | 3 | 5.4 | ||||||
Greater than or equal to 1.25% And Less Than 1.50% | 0 | 0.0 | ||||||
Greater Than or Equal to 1.00% And Less Than 1.25% | 1 | 1.8 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 3 | 5.5 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 2 | 3.6 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 7 | 12.7 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 18 | 32.7 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 8 | 14.6 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 3 | 5.5 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 1 | 1.8 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 3 | 5.5 | ||||||
Less Than or Equal to -1.00% And Greater Than -1.25% | 2 | 3.6 | ||||||
Less Than or Equal to -1.25% And Greater Than -1.50% | 3 | 5.5 | ||||||
Less than -1.50% | 1 | 1.8 |
*First day of secondary market trading
PureFunds™ ISE Mobile Payments ETF | July 15, 2015* through September 30, 2015 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.50% | 1 | 1.8 | ||||||
Greater than or equal to 1.25% And Less Than 1.50% | 1 | 1.8 | ||||||
Greater Than or Equal to 1.00% And Less Than 1.25% | 0 | 0.0 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 1 | 1.8 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 1 | 1.8 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 4 | 7.3 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 27 | 49.1 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 14 | 25.5 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 3 | 5.5 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 1 | 1.8 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 2 | 3.6 | ||||||
Less Than or Equal to -1.00% And Greater Than -1.25% | 0 | 0.0 | ||||||
Less Than or Equal to -1.25% And Greater Than -1.50% | 0 | 0.0 | ||||||
Less than -1.50% | 0 | 0.0 |
*First day of secondary market trading
40
PureFunds™ ETFs
For the Year Ended September 30, 2015 (Unaudited) |
Pursuant to Section 15(c) of the Investment Company Act of 1940 (the “1940 Act”), at a meeting held on June 5, 2015 the Board of Trustees (the “Board”) of FactorShares Trust (the “Trust”) considered the approval of the following agreements (collectively, the “Agreements”):
● | the Advisory Agreement between Factor Advisors, LLC (the “Advisor”) and the Trust, on behalf of PureFunds ISE Big Data ETF and PureFunds ISE Mobile Payments ETF (the “Funds”); and |
● | the Sub-Advisory Agreement between the Advisor, the Trust and Penserra Capital Management LLC (the “Sub-Adviser”) with respect to the Funds. |
The Agreements must be approved: (i) by the vote of the Trustees or by a vote of the shareholders of the Funds; and (ii) by the vote of a majority of the Trustees who are not parties to the Agreements or “interested persons” of any party thereto, as defined in the 1940 Act (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval. Each year after the initial two-year term, the Board will call and hold a meeting to decide whether to renew the Agreements for an additional one-year term. In preparation for such meetings, the Board requests and reviews a wide variety of information from the Advisor and the Sub-Adviser.
Prior to the meeting held on June 5, 2015 the Board, including the Independent Trustees, reviewed written materials from the Advisor and the Sub-Adviser regarding, among other things: (i) the nature, extent and quality of the services to be provided to the Funds’ shareholders by the Advisor and the Sub-Adviser; (ii) the Advisor and the Sub-Adviser’s cost and profits they will realize in providing their services, including any fall-out benefits enjoyed by the Advisor and the Sub-Adviser; (iii) comparative fee and expense data for the Funds and other investment companies with similar investment objectives; (iv) the extent to which economies of scale would be realized as the Funds proposed to be managed by the Advisor and Sub-Adviser grow and whether the proposed advisory fee for the Funds reflects these economies of scale for the benefit of the Funds; and (v) other financial benefits to the Advisor and Sub-Adviser and their affiliates resulting from services rendered to the Funds.
41
PureFunds™ ETFs
APPROVAL OF ADVISORY AGREEMENTS AND BOARD CONSIDERATIONS |
For the Year Ended September 30, 2015 (Unaudited) (continued) |
Prior to and at the meeting held on June 5, 2015 representatives from the Advisor and the Sub-Adviser, along with other service providers of the Funds, presented additional oral and written information to help the Board evaluate the Advisor’s and the Sub-Adviser’s fees and other aspects of the Agreements. Among other things, representatives from the Advisor and the Sub-Adviser provided overviews of their advisory businesses, including investment personnel and investment processes. The Advisor and Sub-Adviser each discussed its experience with exchange-traded funds. The representatives discussed the services to be provided by the Sub-Adviser, which would be responsible for executing purchase and sale transactions in the Funds. The representatives also discussed the rationale for launching the Funds, the Fund’s fees and fee structures of comparable investment companies. The Board then discussed the written materials that it received before the meeting and the Advisor and Sub-Adviser’s oral presentations and any other information that the Board received at the meeting, and deliberated on the approval of the Agreements in light of this information. In its deliberations, the Board did not identify any single piece of information discussed below that was all-important or controlling.
Nature, Extent and Quality of Services Provided by the Advisor and the Sub-Adviser
The Trustees considered the scope of services to be provided under the Advisory Agreement between the Trust and Factor Advisors noting that Factor Advisors will be providing investment management services to the Funds.
In considering the nature, extent and quality of the services to be provided by the Advisor, the Board reviewed the qualifications of the Advisor’s Chief Compliance Officer and the firm’s compliance history. The Board also considered the Advisor’s experience working with exchange-traded funds. The Advisor’s registration form (“Form ADV”) was provided to the Board, as was the response of the Advisor to a detailed series of questions which included, among other things, information about the background and experience of the portfolio managers primarily responsible for the day-to-day management of the Funds.
The Board also considered other services to be provided to the Funds by the Advisor, such as monitoring adherence to the Funds’ investment restrictions and monitoring compliance with various Fund policies and procedures and with applicable securities regulations.
42
PureFunds™ ETFs
APPROVAL OF ADVISORY AGREEMENTS AND BOARD CONSIDERATIONS |
For the Year Ended September 30, 2015 (Unaudited) (continued) |
The Trustees then considered the scope of services to be provided under the Investment Sub-Advisory Agreement, noting that Sub-Adviser will be providing investment management services to the Fund. The Board noted the responsibilities that the Sub-Adviser has as the Fund’s investment sub-adviser, including: responsibility for the general management of the day-to-day investment and reinvestment of the assets of the Fund; reviewing the daily baskets of deposit securities and cash components; executing portfolio security trades for purchases and redemptions of Fund shares conducted on a cash-in-lieu basis; daily monitoring of tracking error and quarterly reporting to the Board; and implementation of Board directives as they relate to the Funds.
Based on the factors above, as well as those discussed below, the Board concluded that it was satisfied with the nature, extent and quality of the services to be provided to the Funds by the Advisor and the Sub-Adviser.
Cost of Services Provided and Economies of Scale
The Board reviewed the Fund’s estimated expense ratio and the advisory fee to be paid by the Fund, considered the expense ratios of comparable funds, and concluded that the advisory fee was reasonable and the result of arm’s length negotiations. Additionally, the Board took into consideration that the advisory fees, along with most of the Fund’s other operating expenses, would be paid by the Advisor. The Board also evaluated the compensation and benefits expected to be received by the Advisor from its relationship with the Fund.
The Board determined that the Advisor is likely to realize economies of scale in managing the Fund as assets grow in size. The Board further determined that such economies of scale are currently shared with Fund shareholders through the Advisor’s low advisory fee, although the Board intends to monitor fees as the Fund grows in size and assess whether fee breakpoints may be warranted.
The Board then reviewed the advisory fee to be paid by the Advisor to the Sub-Adviser for its services as Sub-Adviser to the Funds. The Board considered that the fees paid to the Sub-Adviser would be paid by the Advisor from the advisory fee the Advisor will receive and noted that the fee reflected an arms-length negotiation between the Advisor and the Sub-Adviser. The Board concluded that the sub-advisory fees were reasonable.
Based on the Board’s deliberations and its evaluation of the information described above, the Board, including the Independent Trustees, unanimously: (a) concluded that the terms of the Agreements are fair and reasonable; (b) concluded that the Advisor’s and Sub-Adviser’s fees are reasonable in light of the services that the Advisor and Sub-Adviser will provide to the Funds; and (c) agreed to approve the Advisory Agreement for an initial term of two years and the Sub-Adviser Agreement for an initial term of one year.
43
PureFunds™ ETFs
For the Period Ended September 30, 2015 (Unaudited) |
As a shareholder of PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF, PureFunds™ ISE Cyber Security ETF, PureFunds™ ISE Big Data ETF, and PureFunds™ ISE Mobile Payments ETF (the “Funds”) you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares, and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Funds 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 for the entire period (April 1, 2015 to September 30, 2015) for PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF and PureFunds™ ISE Cyber Security ETF or the period since inception (July 15, 2015 to September 30, 2015) for PureFunds™ ISE Big Data ETF and PureFunds™ ISE Mobile Payments ETF.
Actual Expenses
The first line of the table provides information about actual account values based on actual returns 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 under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account values based on a hypothetical return and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. 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 of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
44
PureFunds™ ETFs
EXPENSE EXAMPLES |
For the Period Ended September 30, 2015 (Unaudited) |
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF
Beginning Account Value April 1, 2015 | Ending Account Value September 30, 2015 | Expenses Paid During the Period^ | ||||||||||
Actual | $ | 1,000.00 | $ | 748.50 | $ | 3.02 | ||||||
Hypothetical (5% annual) | $ | 1,000.00 | $ | 1,021.61 | $ | 3.50 | ||||||
PureFunds™ ISE Cyber Security ETF |
Beginning Account Value April 1, 2015 | Ending Account Value September 30, 2015 | Expenses Paid During the Period^ | ||||||||||
Actual | $ | 1,000.00 | $ | 904.80 | $ | 3.58 | ||||||
Hypothetical (5% annual) | $ | 1,000.00 | $ | 1,021.31 | $ | 3.80 | ||||||
PureFunds™ ISE Big Data ETF |
Beginning Account Value July 15, 2015 | Ending Account Value September 30, 2015 | Expenses Paid During the Period^ | ||||||||||
Actual | $ | 1,000.00 | $ | 891.10 | $ | 1.52 | ||||||
Hypothetical (5% annual) | $ | 1,000.00 | $ | 1,009.08 | $ | 1.61 | ||||||
PureFunds™ ISE Mobile Payments ETF |
Beginning Account Value July 15, 2015 | Ending Account Value September 30, 2015 | Expenses Paid During the Period^ | ||||||||||
Actual | $ | 1,000.00 | $ | 941.40 | $ | 1.56 | ||||||
Hypothetical (5% annual) | $ | 1,000.00 | $ | 1,009.08 | $ | 1.61 |
^ The dollar amounts shown as expenses paid during the period are equal to the annualized six-month expense ratio multiplied by the average account value during the period, multiplied by 183/365 (to reflect the one-half year period in the case of PureFundsTM ISE Junior Silver (Small Cap Miners/Explorers) ETF and PureFundsTM ISE Cyber Security ETF) and 77/365 (to reflect the period from July 15, 2015 to September 30, 2015 in the case of PureFundsTM ISE Big Data ETF and PureFundsTM ISE Mobile Payments ETF).
45
PureFunds™ ETFs
Set forth below are the names, birth years, positions with the Trust, length of term of office, and the principal occupations and other directorships held during at least the last five years of each of the persons currently serving as a Trustee of the Trust, as well as information about each officer. The business address of each Trustee and officer is 35 Beechwood Road, Suite 2B, Summit, New Jersey 07901. The Trust’s Statement of Additional Information includes additional information about the Trustees and is available, without charge, by calling 1-877-756-7873 or visiting www.pureetfs.com.
Name and Year of Birth | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen By Trustee | Other Directorships Held by Trustee During Past 5 Years | |||||
Interested Trustee* and Officers | |||||||||
Samuel Masucci, III (1962) | Trustee, Chairman of the Board and President (since 2012); Secretary (since 2014) | Chief Executive Officer, Exchange Traded Managers Group, LLC (since 2013); Chief Executive Officer and Chief Compliance Officer, Factor Advisors, LLC (since 2012); President and Chief Executive Officer, Factor Capital Management LLC (since 2012); President and Chief Executive Officer, GENCAP Ventures, LLC (holding company) (2012–2013); Chief Executive Officer, MacroMarkets LLC (exchange traded funds) (2005– 2011); President, Chief Executive and Chief Compliance Officer, Macro Financial (financial services) (2005–2011). | 8 | None | |||||
David Weissman (1954) | Chief Compliance Officer (since 2014) | Chief Operating Officer and Chief Compliance Officer, Exchange Traded Managers Group, LLC (since 2014); Chief Administrative Officer and Chief Compliance Officer, ARK Investment Management, LLC (2014); Chief Compliance Officer, Factor Advisors, LLC (2012–2014); Chief Operating Officer and Chief Compliance Officer, FocusShares LLC (2007–2012). | n/a | n/a | |||||
John A. Flanagan (1946) | Treasurer (since 2015) | President, John A. Flanagan CPA, LLC (accounting services) (since 2010); Treasurer, FactorShares Trust (since 2015); Principal Financial Officer, ETF Managers Capital, LLC (commodity pool operator) (since 2014); Chief Financial Officer, Macromarkets LLC (exchange traded funds) (2007–2010) | n/a | n/a |
* Mr. Masucci is an interested Trustee by virtue of his role as the Chief Executive Officer of the Adviser.
46
PureFunds™ ETFs
Board of Trustees |
Name and Year of Birth | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen By Trustee | Other Directorships Held by Trustee During Past 5 Years | |||||
Independent Trustees | |||||||||
John W. Southard (1969) | Trustee (since 2012) | Director and Co-Founder, T2 Capital Management, 2010 to present; Co-Founder and Head of Research and Trading, PowerShares Capital Management, 2002 to 2009. | 8 | None | |||||
Terry Loebs (1963) | Trustee (since 2014) | Founder and Managing Member, Pulsenomics LLC (index product development and consulting firm) (since 2011); Managing Director, MacroMarkets, LLC (exchange-traded products firm) (2006–2011). | 8 | None |
47
PureFunds™ ETFs
(Unaudited) |
During the year ended September 30, 2015, the Funds did not declare any long-term realized gains distributions or ordinary income distributions.
For the year ended September 30, 2015, certain dividends paid by the Funds may be subject to a maximum tax rate of 15%. The percentage of dividends declared from ordinary income reported as qualified dividend income was 0%.
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the year ended September 30, 2015 was 0%.
(Unaudited) |
Each Fund files its complete schedule of portfolio holdings for its first and third fiscal quarters with the Securities and Exchange Commission (“SEC”) on Form N-Q. The Funds’ Form N-Q is available without charge, upon request, by calling toll-free at (877) 756-7873. Furthermore, you may obtain the Form N-Q on the SEC’s website at www.sec.gov. The Funds’ portfolio holdings are posted on the Funds’ website at www.pureetfs.com daily.
(Unaudited) |
A description of the polices and procedures the Funds use to determine how to vote proxies relating to portfolio securities is provided in the Statement of Additional Information (“SAI”). The SAI is available without charge upon request by calling toll-free at (877) 756-7873, by accessing the SEC’s website at www.sec.gov, or by accessing the Funds’ website at www.pureetfs.com.
Information regarding how the Funds voted proxies relating to portfolio securities during the period ending June 30 is available by calling toll-free at (877) 756-7873 or by accessing the SEC’s website at www.sec.gov.
48
PureFunds™ ETFs
(Unaudited) |
The Funds collect non-public information about you from the following sources:
● | Information we receive about you on applications or other forms; | |
● | Information you give us orally; and | |
● | Information about your transactions with us or others. |
The Funds do not disclose any non-public personal information about its customers or former customers without the customer’s authorization, except as permitted by law or in response to inquiries from governmental authorities. The Funds may share information with affiliated parties and unaffiliated third parties with whom we have contracts for servicing the Funds. The Funds will provide unaffiliated third parties with only the information necessary to carry out their assigned responsibility. The Funds maintain physical, electronic and procedural safeguards to guard your non-public personal information and require third parties to treat your non-public information with the same high degree of confidentially.
In the event that you hold shares of a Fund through a financial intermediary, including, but not limited to, a broker-dealer, bank, or trust company, the privacy policy of your financial intermediary would govern how your nonpublic personal information would be shared by those entities with unaffiliated third parties.
49
Advisor
Factor Advisors, LLC
35 Beechwood Rd, Suite 2B, Summit, NJ 07901
Sub-Adviser - SILJ
Esposito Partners, LLC
300 Crescent Court, Suite 650, Dallas, Texas 75201
Sub-Adviser – HACK, BDAT and IPAY
Penserra Capital Management, LLC
4 Orinda Way, Suite 100-A, Orinda, CA 94563
Business Manager - SILJ
PureShares, LLC
2 Central Avenue, Suite 2B, Madison, NJ 07940
Index Provider
International Securities Exchange, LLC
60 Broad Street, New York, NY 10004
Distributor
Quasar Distributors, LLC
615 East Michigan Street, 4th Floor, Milwaukee, Wisconsin 53202
Custodian
U.S. Bank National Association
Custody Operations
1555 North River Center Drive, Suite 302, Milwaukee, Wisconsin 53212
Transfer Agent
U.S. Bancorp Fund Services, LLC
615 East Michigan Street, Milwaukee, Wisconsin 53202
Independent Registered Public Accounting Firm
WithumSmith + Brown, PC
1411 Broadway, 9th Floor, New York, NY 10018
Legal Counsel
Reed Smith LLP
1301 K Street NW, Suite 1000, Washington, DC 20006-1806
50
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.
A copy of the registrant’s Code of Ethics is filed herewith
Item 3. Audit Committee Financial Expert.
The Board believes that the collective knowledge and experience of the members of the audit committee enable the committee to provide appropriate oversight given the Trust's level of financial complexity. In addition, the Board notes that the audit committee has the authority to retain any experts necessary to carry out its duties.
Item 4. Principal Accountant Fees and Services.
The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past fiscal year. “Audit services” refer to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. “Audit-related services” refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. “Tax services” refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. There were no “Other services” provided by the principal accountant. The following table details the aggregate fees billed or expected to be billed for the last fiscal year for audit fees, audit-related fees, tax fees and other fees by the principal accountant.
FYE 9/30/2015 | FYE 9/30/2014 | |
Audit Fees | $90,000 | $10,000 |
Audit-Related Fees | N/A | N/A |
Tax Fees | $10,000 | $2,000 |
All Other Fees | N/A | N/A |
The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.
The percentage of fees billed by WithumSmith+Brown, PC applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:
FYE 9/30/2015 | FYE 9/30/2014 | |
Audit-Related Fees | 0% | 0% |
Tax Fees | 0% | 0% |
All Other Fees | 0% | 0% |
All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full-time permanent employees of the principal accountant.
The following table indicates the non-audit fees billed or expected to be billed by the registrant’s accountant for services to the registrant and to the registrant’s investment adviser (and any other controlling entity, etc.—not sub-adviser) for the past year. The audit committee of the board of trustees/directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant’s independence.
Non-Audit Related Fees | FYE 9/30/2015 | FYE 9/30/2014 |
Registrant | N/A | N/A |
Registrant’s Investment Adviser | N/A | N/A |
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
Item 6. Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. Controls and Procedures.
(a) | The Registrant’s Principal Executive Officer and Treasurer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
(b) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Exhibits.
(a) | (1) 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 Item 2 requirements through filing an exhibit. Filed herewith. |
(2) A separate certification for each principal executive and Treasurer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. |
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) FactorShares Trust
By (Signature and Title) /s/ Samuel Masucci III
Samuel Masucci III, Principal Executive Officer
Date December 3, 2015
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* /s/ Samuel Masucci III
Samuel Masucci III, Principal Executive Officer
Date December 3, 2015
By (Signature and Title)* /s/ John Flanagan
John Flanagan, Principal Financial Officer
Date December 4, 2015
* Print the name and title of each signing officer under his or her signature.