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 811-22001
db-X Exchange-Traded Funds Inc.
(Exact name of registrant as specified in charter)
60 Wall Street
New York, New York 10005
(Address of principal executive offices) (Zip code)
Alex Depetris
db-X Exchange-Traded Funds Inc.
60 Wall Street
New York, New York 10005
(Name and address of agent for service)
Registrant’s telephone number, including area code: (212) 250-4352
Date of fiscal year end: May 31
Date of reporting period: May 31, 2014
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
The Report to Shareholders is attached herewith.
ANNUAL REPORT
May 31, 2014
db-X Exchange-Traded Funds Inc.
db X-trackers 2010 Target Date Fund (TDD)
db X-trackers 2020 Target Date Fund (TDH)
db X-trackers 2030 Target Date Fund (TDN)
db X-trackers 2040 Target Date Fund (TDV)
db X-trackers In-Target Date Fund (TDX)
db-X Exchange-Traded Funds Inc.
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TO OUR SHAREHOLDERS: (Unaudited)
Dear Shareholder,
We are pleased to present this annual report which covers the 12-month period ended May 31, 2014.
In the second quarter of 2014, global equities rallied as investors anticipated a snapback in the U.S. economy from its weather-related malaise in the first quarter, while the accommodative monetary policies of global central banks overshadowed geopolitical risk in Iraq and Ukraine. Although a revising down of first-quarter U.S. GDP caused the U.S. Federal Reserve Board (the Fed) to reduce their 2014 GDP forecast, relatively strong U.S. manufacturing data, improving consumer confidence and a better employment picture had many forecasters looking for an acceleration in economic growth going forward. In the past year, market interest rates reacted strongly to expectations regarding the economy and the potential for the U.S. Federal Reserve Board (Fed) to begin unwinding its extremely accommodative monetary policy. Early in the period, some funds began to experience significant outflows as investors found the historically low yields on offer unappealing and sought to minimize exposure to rising interest rates. Entering 2014, markets appeared to become more comfortable with the likely pace of Fed tightening, and bond market rates generally began to drift downward. But, it’s important to note that the recent interest-rate declines that have supported bond prices may have been influenced in part by the extreme weather of this past winter, so the markets will closely monitor economic data and the direction and effectiveness of monetary policy. In addition, the European Central Bank (ECB) stepped up monetary easing by lowering its three main interest rates, and the ECB became the first major central bank in the world to cut a key policy rate to a level below zero.
We believe that these funds provide convenient, efficient and transparent access to a sophisticated target-date investment strategy. A strengthening economy boosted the domestic equity market (as measured by the S&P 500) during the 12-month period ended May 31, 2014, contributing to solid NAV returns of 18.15% and 16.14%, respectively, for the db X-trackers 2040 Target Date Fund and the db X-trackers 2030 Target Date Fund, which have the greatest percentage allocations to equities, The db X-trackers 2020 Target Date Fund, which has a more balanced allocation between equity and fixed-income securities, experienced a NAV return of 9.79%. For investors with a shorter investment horizon, the db-X-trackers 2010 Target Date Fund and the db X-trackers In-Target Date Fund, which allocate a large percentage of assets to fixed-income securities, experienced NAV returns of 3.84% and 6.12%, respectively.
Deutsche Bank, a leading global banking institution, has managed and operated a successful and growing platform of exchange-traded products since 2006. We appreciate your trust and look forward to serving your investment needs with these innovative index-driven strategies.
Sincerely,
/s/ Alex Depetris
Alex Depetris
Chairman, President and Chief Executive Officer
July 25, 2014
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* Past performance is no guarantee of future results. Fund performance assumes reinvestment of dividends and capital gains distributions. A Fund’s net asset value (“NAV”) return is based on the changes in the Fund’s NAV per share for the period indicated. A Fund’s NAV per share is calculated by dividing the value of the Fund’s total assets less total liabilities by the number of shares outstanding. Current Fund performance may be higher or lower than the performance quoted. The most recent month end performance may be obtained by visiting www.dbxus.com.
1
An index is a statistical measure of a specified financial market or sector. An index is unmanaged and one cannot invest directly in an index. An index does not actually hold a portfolio of securities, incur expenses, or pay any transaction costs. Therefore, index returns do not reflect deductions for fees or expenses. In comparison, a Fund’s performance is negatively impacted by these deductions. Fund returns do not reflect brokerage commissions or taxes that a shareholder would pay on Fund distributions or on transactions in Fund shares.
The views expressed in this report reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team’s views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Current and future portfolio holdings are subject to risk. Investment in the Funds poses investment risk, including possible loss of principal. The investment return and principal value of an investment will fluctuate, so that shares, when sold or redeemed, may be worth more or less than their original cost.
2
db-X Exchange-Traded Funds Inc.
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (Unaudited)
The db X-trackers 2010 Target Date Fund
The db X-trackers 2010 Target Date Fund (“TDD”) seeks to track the performance, before fees and expenses, of the Zacks 2010 Lifecycle Index (“TDD Index”). TDD employs a representative sampling indexing strategy by holding equity and fixed income securities that in the aggregate are intended to approximate the characteristics of the TDD Index. Accordingly, TDD did not hold all of the securities in the TDD Index.
For the 12-month period ended May 31, 2014, TDD’s net asset value increased 3.84%, compared to an increase of 4.51% for the TDD Index and 6.45% for the Dow Jones Target 2010 Index. TDD’s performance benefited from positive return contributions from fixed income securities, both corporate and U.S. Government issued, which comprised over three-quarters of TDD’s average weight during the period. TDD further benefitted from favorable results in several equity sectors, in particular Information Technology, Health Care and Financials, which was partially offset by the TDD’s heavier weighting to fixed income securities, in particular short-term U.S. Treasuries.
The db X-trackers 2020 Target Date Fund
The db X-trackers 2020 Target Date Fund (“TDH”) seeks to track the performance, before fees and expenses, of the Zacks 2020 Lifecycle Index (“TDH Index”). TDH employs a representative sampling indexing strategy by holding equity and fixed income securities that in the aggregate are intended to approximate the characteristics of the TDH Index.
For the 12-month period ended May 31, 2014, TDH’s net asset value was 9.79%, compared to 10.54% for the TDH Index and 9.30% for the Dow Jones Target 2020 Index. TDH’s performance benefitted from favorable results in several equity sectors, which averaged approximately 53% of assets during the period, in particular Information Technology, Health Care and Financials, as well as strong performance in intermediate-term U.S. Treasuries.
The db X-trackers 2030 Target Date Fund
The db X-trackers 2030 Target Date Fund (“TDN”) seeks to track the performance, before fees and expenses, of the Zacks 2030 Lifecycle Index (“TDN Index”). TDN employs a representative sampling indexing strategy by holding equity and fixed income securities that in the aggregate are intended to approximate the characteristics of the TDN Index. Accordingly, TDN did not hold all of the securities in the TDN Index.
For the 12-month period ended May 31, 2014, TDN’s net asset value was 16.14%, compared to 16.83% for TDN Index and 12.85% for the Dow Jones Target 2030 Index. TDN’s performance benefitted from holding approximately 75% of its total assets in equities, with favorable results in several sectors, in particular Information Technology, Health Care and Financials. TDN’s 25% allocation to long-term corporate fixed income securities made a small positive contribution to returns.
The db X-trackers 2040 Target Date Fund
The db X-trackers 2040 Target Date Fund (“TDV”) seeks to track the performance, before fees and expenses, of the Zacks 2040 Lifecycle Index (“TDV Index”). TDV employs a representative sampling indexing strategy by holding equity and fixed income securities that in the aggregate are intended to approximate the characteristics of the TDV Index. Accordingly, TDV did not hold all of the securities in the TDV Index.
For the 12-month period ended May 31, 2014, TDV’s net asset value was 18.15%, compared to 18.67% for the TDV Index and 15.47% for the Dow Jones Target 2040 Index. TDV’s performance benefitted from allocating 94% of its assets to equities, with favorable results in several sectors, in particular Information Technology, Health Care and Financials. TDV’s 6% allocation to long-term corporate fixed income securities made a small positive contribution to returns as well.
The db X-trackers In-Target Date Fund
The db X-trackers In-Target Date Fund ( “TDX”) seeks to track the performance, before fees and expenses, of the Zacks In-Target Lifecycle Index (“TDX Index”). TDX employs a representative sampling indexing strategy by holding equity and fixed income securities that in the aggregate are intended to approximate the characteristics of the TDX Index. Accordingly, TDX did not hold all of the securities in the TDX Index.
For the 12-month period ended May 31, 2014, TDX’s net asset value was 6.12%, compared to 6.73% for the TDX Index and 5.56% for the Dow Jones Target Today Index. During the period TDX allocated approximately 34% of its assets to equities and 66% to fixed income securities. TDX’s performance benefited from favorable results in several equity sectors, in particular Information Technology, Health Care and Financials. TDX’s fixed Income allocation, also contributed positive returns as both corporate and U.S. Government issues performed well.
3
db-X Exchange-Traded Funds Inc.
MANAGEMENT’S DISCUSSION OF FUND PERFORMANCE (Unaudited) (Continued)
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Performance quoted above represents past performance, assumes reinvestment of all dividends and capital gains distributions at net asset value (“NAV”), and does not guarantee future results. A Fund’s NAV return is based on the changes in the Fund’s NAV per share for the period indicated. A Fund’s NAV per share is calculated by dividing the value of the Fund’s total assets less total liabilities by the number of shares outstanding. Current Fund performance may be higher or lower than the performance quoted. Fund performance data current to the most recent month end may be obtained by visiting www.dbxus.com. See pages 5-14 of this report for additional performance information, including performance data based on market value.
An index is a statistical measure of a specified financial market or sector. An index does not actually hold a portfolio of securities, incur expenses, or pay any transaction costs. Therefore, index returns do not reflect deductions for fees or expenses and are not available for direct investment. In comparison, a Fund’s performance is negatively impacted by these deductions. Fund returns do not reflect brokerage commissions or taxes that a shareholder would pay on Fund distributions or on transactions in Fund shares.
The views expressed in this report reflect those of the portfolio management team only through the end of the period of the report as stated on the cover. The management team’s views are subject to change at any time based on market and other conditions and should not be construed as a recommendation. Current and future portfolio holdings are subject to risk. Investment in the Funds poses investment risk, including possible loss of principal. The investment return and principal value of an investment will fluctuate, so that shares, when sold or redeemed, may be worth more or less than their original cost.
4
This Page is Intentionally Left Blank
db-X Exchange-Traded Funds Inc.
db X-trackers 2010 Target Date Fund (TDD) (Unaudited)
The db X-trackers 2010 Target Date Fund (the “Fund”) commenced investment operations and its shares began trading on NYSE Arca, Inc. (“NYSE Arca”) on October 1, 2007. The Fund seeks to track the performance, before fees and expenses, of the Zacks 2010 Lifecycle Index. Both the Fund’s equity and bond portfolios held fewer securities than the Zacks 2010 Lifecycle Index, a constraint imposed by the relatively small size of the Fund.
For the year ended May 31, 2014, the Fund’s net asset value increased 3.84%, compared to an increase of 4.51% for the Zacks 2010 Lifecycle Index and an increase of 6.45% for the Dow Jones Target 2010 Index. The fund’s performance benefited from favorable results in short-term fixed income securities, though the bulk of the returns were the result of the fund’s exposure to domestic and international equities.
Performance as of 5/31/14
| Average Annual Total Returns | ||||||||
| Net Asset Value | Market Price | Zacks 2010 Lifecycle Index |
Dow Jones Target 2010 Index | |||||
| One Year |
3.84% | 5.45% | 4.51% | 6.45% | ||||
| Five Year |
4.17% | 3.12% | 4.62% | 7.57% | ||||
| Since Inception1 |
1.70% | 1.29% | 2.05% | 4.55% | ||||
| Cumulative Total Returns | ||||||||
| Net Asset Value | Market Price | Zacks 2010 Lifecycle Index |
Dow Jones Target 2010 Index | |||||
| One Year |
3.84% | 5.45% | 4.51% | 6.45% | ||||
| Five Year |
22.68% | 16.63% | 25.36% | 44.00% | ||||
| Since Inception1 |
11.91% | 8.91% | 14.50% | 34.53% | ||||
1 Total returns are calculated based on the commencement of operations, 10/1/07 (“Inception”).
Performance quoted represents past performance, assumes reinvestment of all dividends and capital gain distributions, and does not guarantee future results. Current performance may be higher or lower than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.dbxus.com. Investment in the fund poses investment risk including possible loss of principal. The investment return and principal value of an investment will fluctuate, so that shares, when sold or redeemed, may be worth more or less than their original cost. The gross expense ratio for the fiscal year ended May 31, 2013, as disclosed in the most recent prospectus dated October 1, 2013, was 1.53%. DBX Strategic Advisors LLC, the advisor to the Fund, has agreed to cap its fees and/or pay certain Fund operating expenses in order to limit Fund net annual operating expenses for shares of the Fund to 0.65% of the Fund’s average net assets until 9/30/14.
The preceding performance chart is provided for comparative purposes and represents the period(s) noted. The net asset value return is based on the changes in the Fund’s net asset value per share (“NAV”). The Fund’s NAV is calculated by dividing the value of the Fund’s total assets less total liabilities by the number of shares outstanding. The market price return is based on the change in the market price on the NYSE Arca of a share of the Fund for the period(s) indicated. The price used to calculate market price returns is the midpoint of the bid/ask spread for Fund shares at 4 p.m. Eastern Time on the NYSE Arca. NAV and market returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV and market price, respectively. The Dow Jones Target Date Indexes are indexes whose allocations are automatically adjusted to reduce potential risk over time. The Dow Jones Target Date Indexes are designed to measure the performance of multi-asset class portfolios that allocate among U.S. and global stock, bond and cash sub indexes on a monthly basis. The indexes automatically adjust their asset allocation over time to reflect reductions in potential risk as the investor’s target date approaches.
An index is a statistical measure of a specified financial market or sector. An index does not actually hold a portfolio of securities, incur expenses or pay any transaction costs. Therefore index returns do not reflect deductions for fees or expenses and are not available for direct investment. In comparison, the Fund’s performance is negatively impacted by these deductions. Fund returns do not reflect brokerage commissions or taxes that a shareholder would pay on Fund distributions or on transactions in Fund shares.
“Target Date” refers to a time in the future, generally a specified year, in which the investor expects to retire or otherwise require the use of the invested funds. Target date funds are generally more aggressive the further the target date is from the present, with an objective of capital appreciation. As the target date approaches, the fund’s objective will generally become more conservative, aiming to achieve a higher level of capital preservation. Upon reaching the target date, the index whose performance the Fund seeks to track will have approximately a 10% allocation to equity securities. Over the next five years, allocations shift from conservative to more moderately-conservative allocations, allowing for a larger exposure to equities than at the target date (“Moderately-Conservative Allocation”).
Investors should note that although target date funds aim to preserve capital as the target date approaches, there is no guarantee that the Fund will achieve this objective.
6
db-X Exchange-Traded Funds Inc.
PERFORMANCE SUMMARY
db X-trackers 2010 Target Date Fund (TDD) (Unaudited) (Continued)
7
db-X Exchange-Traded Funds Inc.
PERFORMANCE SUMMARY
db X-trackers 2020 Target Date Fund (TDH) (Unaudited)
The db X-trackers 2020 Target Date Fund (the “Fund”) commenced investment operations and its shares began trading on NYSE Arca, Inc. (“NYSE Arca”) on October 1, 2007. The Fund seeks to track the performance, before fees and expenses, of the Zacks 2020 Lifecycle Index. Both the Fund’s equity and bond portfolios held fewer securities than the Zacks 2020 Lifecycle Index, a constraint imposed by the relatively small size of the Fund.
For the year ended May 31, 2014, the Fund’s net asset value increased 9.79%, compared to an increase of 10.54% for the Zacks 2020 Lifecycle Index and 9.30% for the Dow Jones Target 2020 Index. The fund’s performance benefited from favorable results in domestic and international equities.
Performance as of 5/31/14
| Average Annual Total Returns | ||||||||
| Net Asset Value | Market Price | Zacks 2020 Lifecycle Index |
Dow Jones Target 2020 Index | |||||
| One Year |
9.79% | 9.88% | 10.54% | 9.30% | ||||
| Five Year |
10.53% | 10.35% | 10.85% | 10.18% | ||||
| Since Inception1 |
3.33% | 2.96% | 3.57% | 4.27% | ||||
| Cumulative Total Returns | ||||||||
| Net Asset Value | Market Price | Zacks 2020 Lifecycle Index |
Dow Jones Target 2020 Index | |||||
| One Year |
9.79% | 9.88% | 10.54% | 9.30% | ||||
| Five Year |
64.95% | 63.61% | 67.37% | 62.39% | ||||
| Since Inception1 |
24.44% | 21.47% | 26.34% | 32.14% | ||||
1 Total returns are calculated based on the commencement of operations, 10/1/07 (“Inception”).
Performance quoted represents past performance, assumes reinvestment of all dividends and capital gain distributions, and does not guarantee future results. Current performance may be higher or lower than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.dbxus.com. Investment in the fund poses investment risk including possible loss of principal. The investment return and principal value of an investment will fluctuate, so that shares, when sold or redeemed, may be worth more or less than their original cost. The gross expense ratio for the fiscal year ended May 31, 2013, as disclosed in the most recent prospectus dated October 1, 2013, was 1.15%. DBX Strategic Advisors LLC, the advisor to the Fund, has agreed to cap its fees and/or pay certain Fund operating expenses in order to limit Fund net annual operating expenses for shares of the Fund to 0.65% of the Fund’s average net assets until 9/30/14.
The preceding performance chart is provided for comparative purposes and represents the period(s) noted. The net asset value return is based on the changes in the Fund’s net asset value per share (“NAV”). The Fund’s NAV is calculated by dividing the value of the Fund’s total assets less total liabilities by the number of shares outstanding. The market price return is based on the change in the market price on the NYSE Arca of a share of the Fund for the period(s) indicated. The price used to calculate market price returns is the midpoint of the bid/ask spread for Fund shares at 4 p.m. Eastern Time on the NYSE Arca. NAV and market returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV and market price, respectively. The Dow Jones Target Date Indexes are indexes whose allocations are automatically adjusted to reduce potential risk over time. The Dow Jones Target Date Indexes are designed to measure the performance of multi-asset class portfolios that allocate among U.S. and global stock, bond and cash subindexes on a monthly basis. The indexes automatically adjust their asset allocation over time to reflect reductions in potential risk as the investor’s target date approaches.
An index is a statistical measure of a specified financial market or sector. An index does not actually hold a portfolio of securities, incur expenses or pay any transaction costs. Therefore index returns do not reflect deductions for fees or expenses and are not available for direct investment. In comparison, the Fund’s performance is negatively impacted by these deductions. Fund returns do not reflect brokerage commissions or taxes that a shareholder would pay on Fund distributions or on transactions in Fund shares.
“Target Date” refers to a time in the future, generally a specified year, in which the investor expects to retire or otherwise require the use of the invested funds. Target date funds are generally more aggressive the further the target date is from the present, with an objective of capital appreciation. As the target date approaches, the fund’s objective will generally become more conservative, aiming to achieve a higher level of capital preservation. Upon reaching the target date, the index whose performance the Fund seeks to track will have approximately a 10% allocation to equity securities. Over the next five years, allocations shift from conservative to more moderately-conservative allocations, allowing for a larger exposure to equities than at the target date (“Moderately-Conservative Allocation”).
Investors should note that although target date funds aim to preserve capital as the target date approaches, there is no guarantee that the Fund will achieve this objective.
8
db-X Exchange-Traded Funds Inc.
PERFORMANCE SUMMARY
db X-trackers 2020 Target Date Fund (TDH) (Unaudited) (Continued)
9
db-X Exchange-Traded Funds Inc.
PERFORMANCE SUMMARY
db X-trackers 2030 Target Date Fund (TDN) (Unaudited)
The db X-trackers 2030 Target Date Fund (the “Fund”) commenced investment operations and its shares began trading on NYSE Arca, Inc. (“NYSE Arca”) on October 1, 2007. The Fund seeks to track the performance, before fees and expenses, of the Zacks 2030 Lifecycle Index. Both the Fund’s equity and bond portfolios held fewer securities than the Zacks 2030 Lifecycle Index, a constraint imposed by the relatively small size of the Fund.
For the year ended May 31, 2014, the Fund’s net asset value increased 16.14%, compared to an increase of 16.83% for the Zacks 2030 Lifecycle Index and 12.85% for the Dow Jones Target 2030 Index. The fund’s performance benefitted from a large exposure to domestic and international equities.
Performance as of 5/31/14
| Average Annual Total Returns | ||||||||
| Net Asset Value | Market Price | Zacks 2030 Lifecycle Index |
Dow Jones Target 2030 Index | |||||
| One Year |
16.14% | 14.28% | 16.83% | 12.85% | ||||
| Five Year |
14.61% | 15.25% | 15.29% | 13.22% | ||||
| Since Inception1 |
3.75% | 3.56% | 4.22% | 4.43% | ||||
| Cumulative Total Returns | ||||||||
| Net Asset Value | Market Price | Zacks 2030 Lifecycle Index |
Dow Jones Target 2030 Index | |||||
| One Year |
16.14% | 14.28% | 16.83% | 12.85% | ||||
| Five Year |
97.76% | 103.29% | 103.72% | 86.01% | ||||
| Since Inception1 |
27.78% | 26.27% | 31.71% | 33.51% | ||||
1 Total returns are calculated based on the commencement of operations, 10/1/07 (“Inception”).
Performance quoted represents past performance, assumes reinvestment of all dividends and capital gain distributions, and does not guarantee future results. Current performance may be higher or lower than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.dbxus.com. Investment in the fund poses investment risk including possible loss of principal. The investment return and principal value of an investment will fluctuate, so that shares, when sold or redeemed, may be worth more or less than their original cost. The gross expense ratio for the fiscal year ended May 31, 2013, as disclosed in the most recent prospectus dated October 1, 2013, was 1.16%. DBX Strategic Advisors LLC, the advisor to the Fund, has agreed to cap its fees and/or pay certain Fund operating expenses in order to limit Fund net annual operating expenses for shares of the Fund to 0.65% of the Fund’s average net assets until 9/30/14.
The preceding performance chart is provided for comparative purposes and represents the period(s) noted. The net asset value return is based on the changes in the Fund’s net asset value per share (“NAV”). The Fund’s NAV is calculated by dividing the value of the Fund’s total assets less total liabilities by the number of shares outstanding. The market price return is based on the change in the market price on the NYSE Arca of a share of the Fund for the period(s) indicated. The price used to calculate market price returns is the midpoint of the bid/ask spread for Fund shares at 4 p.m. Eastern Time on the NYSE Arca. NAV and market returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV and market price, respectively. The Dow Jones Target Date Indexes are indexes whose allocations are automatically adjusted to reduce potential risk over time. The Dow Jones Target Date Indexes are designed to measure the performance of multi-asset class portfolios that allocate among U.S. and global stock, bond and cash subindexes on a monthly basis. The indexes automatically adjust their asset allocation over time to reflect reductions in potential risk as the investor’s target date approaches.
An index is a statistical measure of a specified financial market or sector. An index does not actually hold a portfolio of securities, incur expenses or pay any transaction costs. Therefore index returns do not reflect deductions for fees or expenses and are not available for direct investment. In comparison, the Fund’s performance is negatively impacted by these deductions. Fund returns do not reflect brokerage commissions or taxes that a shareholder would pay on Fund distributions or on transactions in Fund shares.
“Target Date” refers to a time in the future, generally a specified year, in which the investor expects to retire or otherwise require the use of the invested funds. Target date funds are generally more aggressive the further the target date is from the present, with an objective of capital appreciation. As the target date approaches, the fund’s objective will generally become more conservative, aiming to achieve a higher level of capital preservation. Upon reaching the target date, the index whose performance the Fund seeks to track will have approximately a 10% allocation to equity securities. Over the next five years, allocations shift from conservative to more moderately-conservative allocations, allowing for a larger exposure to equities than at the target date (“Moderately-Conservative Allocation”).
Investors should note that although target date funds aim to preserve capital as the target date approaches, there is no guarantee that the Fund will achieve this objective.
10
db-X Exchange-Traded Funds Inc.
PERFORMANCE SUMMARY
db X-trackers 2030 Target Date Fund (TDN) (Unaudited) (Continued)
11
db-X Exchange-Traded Funds Inc.
PERFORMANCE SUMMARY
db X-trackers 2040 Target Date Fund (TDV) (Unaudited)
The db X-trackers 2040 Target Date Fund (the “Fund”) commenced investment operations and its shares began trading on NYSE Arca, Inc. (“NYSE Arca”) on October 1, 2007. The Fund seeks to track the performance, before fees and expenses, of the Zacks 2040 Lifecycle Index. Both the Fund’s equity and bond portfolios held fewer securities than the Zacks 2040 Lifecycle Index, a constraint imposed by the relatively small size of the Fund.
For the year ended May 31, 2014, the Fund’s net asset value increased 18.15%, compared to an increase of 18.67% for the Zacks 2040 Lifecycle Index and 15.47% for the Dow Jones Target 2040 Index. The fund’s performance benefitted from a large exposure to domestic and international equities.
Performance as of 5/31/14
| Average Annual Total Returns | ||||||||
| Net Asset Value | Market Price | Zacks 2040 Lifecycle Index |
Dow Jones Target 2040 Index | |||||
| One Year |
18.15% | 22.74% | 18.67% | 15.47% | ||||
| Five Year |
15.70% | 15.52% | 15.75% | 15.18% | ||||
| Since Inception1 |
3.72% | 3.78% | 3.76% | 4.72% | ||||
| Cumulative Total Returns | ||||||||
| Net Asset Value | Market Price | Zacks 2040 Lifecycle Index |
Dow Jones Target 2040 Index | |||||
| One Year |
18.15% | 22.74% | 18.67% | 15.47% | ||||
| Five Year |
107.37% | 105.72% | 107.78% | 102.67% | ||||
| Since Inception1 |
27.57% | 28.04% | 27.90% | 35.99% | ||||
1 Total returns are calculated based on the commencement of operations, 10/1/07 (“Inception”).
Performance quoted represents past performance, assumes reinvestment of all dividends and capital gain distributions, and does not guarantee future results. Current performance may be higher or lower than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.dbxus.com. Investment in the fund poses investment risk including possible loss of principal. The investment return and principal value of an investment will fluctuate, so that shares, when sold or redeemed, may be worth more or less than their original cost. The gross expense ratio for the fiscal year ended May 31, 2013, as disclosed in the most recent prospectus dated October 1, 2013, was 1.17%. DBX Strategic Advisors LLC, the advisor to the Fund, has agreed to cap its fees and/or pay certain Fund operating expenses in order to limit Fund net annual operating expenses for shares of the Fund to 0.65% of the Fund’s average net assets until 9/30/14.
The preceding performance chart is provided for comparative purposes and represents the period(s) noted. The net asset value return is based on the changes in the Fund’s net asset value per share (“NAV”). The Fund’s NAV is calculated by dividing the value of the Fund’s total assets less total liabilities by the number of shares outstanding. The market price return is based on the change in the market price on the NYSE Arca of a share of the Fund for the period(s) indicated. The price used to calculate market price returns is the midpoint of the bid/ask spread for Fund shares at 4 p.m. Eastern Time on the NYSE Arca. NAV and market returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV and market price, respectively. The Dow Jones Target Date Indexes are indexes whose allocations are automatically adjusted to reduce potential risk over time. The Dow Jones Target Date Indexes are designed to measure the performance of multi-asset class portfolios that allocate among U.S. and global stock, bond and cash subindexes on a monthly basis. The indexes automatically adjust their asset allocation over time to reflect reductions in potential risk as the investor’s target date approaches.
An index is a statistical measure of a specified financial market or sector. An index does not actually hold a portfolio of securities, incur expenses or pay any transaction costs. Therefore index returns do not reflect deductions for fees or expenses and are not available for direct investment. In comparison, the Fund’s performance is negatively impacted by these deductions. Fund returns do not reflect brokerage commissions or taxes that a shareholder would pay on Fund distributions or on transactions in Fund shares.
“Target Date” refers to a time in the future, generally a specified year, in which the investor expects to retire or otherwise require the use of the invested funds. Target date funds are generally more aggressive the further the target date is from the present, with an objective of capital appreciation. As the target date approaches, the fund’s objective will generally become more conservative, aiming to achieve a higher level of capital preservation. Upon reaching the target date, the index whose performance the Fund seeks to track will have approximately a 10% allocation to equity securities. Over the next five years, allocations shift from conservative to more moderately-conservative allocations, allowing for a larger exposure to equities than at the target date (“Moderately-Conservative Allocation”).
Investors should note that although target date funds aim to preserve capital as the target date approaches, there is no guarantee that the Fund will achieve this objective.
12
db-X Exchange-Traded Funds Inc.
PERFORMANCE SUMMARY
db X-trackers 2040 Target Date Fund (TDV) (Unaudited) (Continued)
13
db-X Exchange-Traded Funds Inc.
PERFORMANCE SUMMARY
db X-trackers In-Target Date Fund (TDX) (Unaudited)
The db X-trackers In-Target Date Fund (the “Fund”) commenced investment operations and its shares began trading on NYSE Arca, Inc. (“NYSE Arca”) on October 1, 2007. The Fund seeks to track the performance, before fees and expenses, of the Zacks In-Target Lifecycle Index. Both the Fund’s equity and bond portfolios held fewer securities than the Zacks In-Target Lifecycle Index, a constraint imposed by the relatively small size of the Fund.
For the year ended May 31, 2014, the Fund’s net asset value increased 6.12%, compared to an increase of 6.73% for the Zacks In-Target Lifecycle Index and an increase of 5.56% for the Dow Jones Target Today Index. The fund’s performance benefited from favorable results in domestic and international equities.
Performance as of 5/31/14
| Average Annual Total Returns | ||||||||
| Net Asset Value | Market Price | Zacks In-Target Lifecycle Index |
Dow Jones Target Today Index | |||||
| One Year |
6.12% | 8.86% | 6.73% | 5.56% | ||||
| Five Year |
4.82% | 4.91% | 5.19% | 6.52% | ||||
| Since Inception1 |
3.62% | 3.58% | 3.90% | 4.92% | ||||
| Cumulative Total Returns | ||||||||
| Net Asset Value | Market Price | Zacks In-Target Lifecycle Index |
Dow Jones Target Today Index | |||||
| One Year |
6.12% | 8.86% | 6.73% | 5.56% | ||||
| Five Year |
26.51% | 27.09% | 28.82% | 37.12% | ||||
| Since Inception1 |
26.77% | 26.40% | 29.06% | 37.79% | ||||
1 Total returns are calculated based on the commencement of operations, 10/1/07 (“Inception”).
Performance quoted represents past performance, assumes reinvestment of all dividends and capital gain distributions, and does not guarantee future results. Current performance may be higher or lower than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.dbxus.com. Investment in the fund poses investment risk including possible loss of principal. The investment return and principal value of an investment will fluctuate, so that shares, when sold or redeemed, may be worth more or less than their original cost. The gross expense ratio for the fiscal year ended May 31, 2013, as disclosed in the most recent prospectus dated October 1, 2013, was 1.47%. DBX Strategic Advisors LLC, the advisor to the Fund, has agreed to cap its fees and/or pay certain Fund operating expenses in order to limit Fund net annual operating expenses for shares of the Fund to 0.65% of the Fund’s average net assets until 9/30/14.
The preceding performance chart is provided for comparative purposes and represents the period(s) noted. The net asset value return is based on the changes in the Fund’s net asset value per share (“NAV”). The Fund’s NAV is calculated by dividing the value of the Fund’s total assets less total liabilities by the number of shares outstanding. The market price return is based on the change in the market price on the NYSE Arca of a share of the Fund for the period(s) indicated. The price used to calculate market price returns is the midpoint of the bid/ask spread for Fund shares at 4 p.m. Eastern Time on the NYSE Arca. NAV and market returns assume that dividends and capital gain distributions have been reinvested in the Fund at NAV and market price, respectively. The Dow Jones Target Date Indexes are indexes whose allocations are automatically adjusted to reduce potential risk over time. The Dow Jones Target Date Indexes are designed to measure the performance of multi-asset class portfolios that allocate among U.S. and global stock, bond and cash subindexes on a monthly basis. The indexes automatically adjust their asset allocation over time to reflect reductions in potential risk as the investor’s target date approaches.
An index is a statistical measure of a specified financial market or sector. An index does not actually hold a portfolio of securities, incur expenses or pay any transaction costs. Therefore index returns do not reflect deductions for fees or expenses and are not available for direct investment. In comparison, the Fund’s performance is negatively impacted by these deductions. Fund returns do not reflect brokerage commissions or taxes that a shareholder would pay on Fund distributions or on transactions in Fund shares.
“Target Date” refers to a time in the future, generally a specified year, in which the investor expects to retire or otherwise require the use of the invested funds. Target date funds are generally more aggressive the further the target date is from the present, with an objective of capital appreciation. As the target date approaches, the fund’s objective will generally become more conservative, aiming to achieve a higher level of capital preservation. Upon reaching the target date, the index whose performance the Fund seeks to track will have approximately a 10% allocation to equity securities. Over the next five years, allocations shift from conservative to more moderately-conservative allocations, allowing for a larger exposure to equities than at the target date (“Moderately-Conservative Allocation”).
Investors should note that although target date funds aim to preserve capital as the target date approaches, there is no guarantee that the Fund will achieve this objective.
14
db-X Exchange-Traded Funds Inc.
PERFORMANCE SUMMARY
db X-trackers In-Target Date Fund (TDX) (Unaudited) (Continued)
15
db-X Exchange-Traded Funds Inc.
As a shareholder of one or more of the funds, you incur two types of costs: (1) transaction costs, including brokerage commissions paid on purchases and sales of fund shares, and (2) ongoing costs, including management fees and other Fund expenses. The expense examples below 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. In the most recent six-month period, each Fund limited these expenses; had they not done so, expenses would have been higher.
The examples are based on an investment of $1,000 made at the beginning of the period and held through the six-month period ended May 31, 2014.
ACTUAL EXPENSES
The first line in the following tables provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading “Expenses Paid During the Period” to estimate the expenses you paid on your account during this period.
HYPOTHETICAL EXAMPLE FOR COMPARISON PURPOSES
The second line in the following tables provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses (which is not the Funds’ actual return). The hypothetical account values and expenses may not be used to estimate the actual ending account 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 tables are meant to highlight your ongoing costs only, and do not reflect any transactional costs. Therefore the second line in the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value December 1, 2013 |
Ending Account Value May 31, 2014 |
Annualized Expense Ratio based on the number of days in the period |
Expenses Paid During the Period(1) December 1, 2013 to May 31, 2014 |
|||||||||||||
| db X-trackers 2010 Target Date Fund | ||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 1,011.60 | 0.65 | % | $ | 3.26 | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,021.69 | 0.65 | % | $ | 3.28 | ||||||||
| db X-trackers 2020 Target Date Fund | ||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 1,026.53 | 0.65 | % | $ | 3.28 | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,021.69 | 0.65 | % | $ | 3.28 | ||||||||
| db X-trackers 2030 Target Date Fund | ||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 1,065.06 | 0.65 | % | $ | 3.35 | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,021.69 | 0.65 | % | $ | 3.28 | ||||||||
| db X-trackers 2040 Target Date Fund | ||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 1,054.65 | 0.65 | % | $ | 3.33 | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,021.69 | 0.65 | % | $ | 3.28 | ||||||||
| db X-trackers In-Target Date Fund | ||||||||||||||||
| Actual |
$ | 1,000.00 | $ | 1,017.06 | 0.65 | % | $ | 3.27 | ||||||||
| Hypothetical (5% return before expenses) |
$ | 1,000.00 | $ | 1,021.69 | 0.65 | % | $ | 3.28 | ||||||||
(1) Expenses are calculated using the annualized expense ratio, which represents the ongoing expenses as a percentage of net assets for the period December 1, 2013 to May 31, 2014. Expenses are calculated by multiplying the Fund’s annualized expense ratio by the average account value for the period; then multiplying the result by 182 days and then dividing the result by 365.
16
db-X Exchange-Traded Funds Inc.
db X-trackers 2010 Target Date Fund
May 31, 2014
| See Notes to Financial Statements. | 17 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2010 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 18 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2010 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 19 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2010 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 20 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2010 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 21 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2020 Target Date Fund
May 31, 2014
| See Notes to Financial Statements. | 22 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2020 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 23 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2020 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 24 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2020 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 25 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2020 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 26 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2030 Target Date Fund
May 31, 2014
| See Notes to Financial Statements. | 27 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2030 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 28 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2030 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 29 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2030 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 30 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2030 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 31 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2030 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 32 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2040 Target Date Fund
May 31, 2014
| See Notes to Financial Statements. | 33 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2040 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 34 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2040 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 35 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2040 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 36 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2040 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 37 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers 2040 Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 38 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers In-Target Date Fund
May 31, 2014
| See Notes to Financial Statements. | 39 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers In-Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 40 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers In-Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 41 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers In-Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 42 |
db-X Exchange-Traded Funds Inc.
SCHEDULE OF INVESTMENTS
db X-trackers In-Target Date Fund (Continued)
May 31, 2014
| See Notes to Financial Statements. | 43 |
db-X Exchange-Traded Funds Inc.
STATEMENTS OF ASSETS AND LIABILITIES
May 31, 2014
| db X-trackers 2010 Target Date Fund |
db X-trackers 2020 Target Date Fund |
db X-trackers 2030 Target Date Fund |
||||||||||
| Assets |
||||||||||||
| Investments in non-affiliated securities at fair value |
$ | 10,124,347 | $ | 28,003,111 | $ | 39,973,543 | ||||||
| Investments in affiliated securities at fair value (See Note 5) |
3,767 | 23,494 | 48,405 | |||||||||
| Cash |
14,003 | 25,372 | 42,258 | |||||||||
| Foreign currency at value |
5,233 | 39,069 | 23,182 | |||||||||
| Due from investment advisor |
3,414 | 4,283 | 4,586 | |||||||||
| Receivables: |
||||||||||||
| Investment securities sold |
701,541 | — | — | |||||||||
| Interest and dividends |
53,519 | 143,595 | 175,111 | |||||||||
| Foreign tax reclaim |
1,572 | 29,390 | 42,087 | |||||||||
| Prepaid expenses |
18,582 | 18,881 | 18,863 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Assets |
$ | 10,925,978 | $ | 28,287,195 | $ | 40,328,035 | ||||||
|
|
|
|
|
|
|
|||||||
| Liabilities |
||||||||||||
| Payables: |
||||||||||||
| Investment securities purchased |
$ | 701,594 | $ | — | $ | — | ||||||
| Investment advisory fees |
5,601 | 15,451 | 21,905 | |||||||||
| Accrued expenses and other liabilities |
38,295 | 66,390 | 72,772 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Liabilities |
745,490 | 81,841 | 94,677 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net Assets |
$ | 10,180,488 | $ | 28,205,354 | $ | 40,233,358 | ||||||
|
|
|
|
|
|
|
|||||||
| Net Assets Consist of |
||||||||||||
| Paid-in capital |
$ | 11,140,420 | $ | 27,668,641 | $ | 37,697,804 | ||||||
| Undistributed net investment income |
20,490 | 148,913 | 417,265 | |||||||||
| Accumulated net realized gain (loss) |
(1,493,620 | ) | (3,042,844 | ) | (3,220,493 | ) | ||||||
| Net unrealized appreciation (depreciation) |
513,198 | 3,430,644 | 5,338,782 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net Assets |
$ | 10,180,488 | $ | 28,205,354 | $ | 40,233,358 | ||||||
|
|
|
|
|
|
|
|||||||
| Number of Common Shares outstanding |
400,800 | 1,000,800 | 1,400,800 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net Assets Value |
$ | 25.40 | $ | 28.18 | $ | 28.72 | ||||||
|
|
|
|
|
|
|
|||||||
| Investments in non-affiliated securities at cost |
$ | 9,610,137 | $ | 24,547,575 | $ | 34,599,289 | ||||||
|
|
|
|
|
|
|
|||||||
| Investments in affiliated securities at cost |
$ | 4,875 | $ | 49,463 | $ | 85,217 | ||||||
|
|
|
|
|
|
|
|||||||
| Foreign currency at cost |
$ | 5,238 | $ | 39,206 | $ | 23,217 | ||||||
|
|
|
|
|
|
|
|||||||
| See Notes to Financial Statements. | 44 |
db-X Exchange-Traded Funds Inc.
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
May 31, 2014
| db X-trackers 2040 Target Date Fund |
db X-trackers In-Target Date Fund |
|||||||
| Assets |
||||||||
| Investments in non-affiliated securities at fair value |
$ | 34,826,749 | $ | 11,699,775 | ||||
| Investments in affiliated securities at fair value (See Note 5) |
50,228 | 6,116 | ||||||
| Cash |
24,357 | 12,207 | ||||||
| Foreign currency at value |
26,360 | 8,773 | ||||||
| Due from investment advisor |
5,359 | 3,493 | ||||||
| Receivables: |
||||||||
| Investment securities sold |
— | 524,280 | ||||||
| Interest and dividends |
97,242 | 56,227 | ||||||
| Foreign tax reclaim |
46,755 | 3,600 | ||||||
| Prepaid expenses |
18,848 | 18,596 | ||||||
|
|
|
|
|
|||||
| Total Assets |
$ | 35,095,898 | $ | 12,333,067 | ||||
|
|
|
|
|
|||||
| Liabilities |
||||||||
| Payables: |
||||||||
| Investment securities purchased |
$ | — | $ | 524,465 | ||||
| Investment advisory fees |
19,049 | 6,461 | ||||||
| Accrued expenses and other liabilities |
71,240 | 40,134 | ||||||
|
|
|
|
|
|||||
| Total Liabilities |
90,289 | 571,060 | ||||||
|
|
|
|
|
|||||
| Net Assets |
$ | 35,005,609 | $ | 11,762,007 | ||||
|
|
|
|
|
|||||
| Net Assets Consist of |
||||||||
| Paid-in capital |
$ | 32,518,756 | $ | 10,623,093 | ||||
| Undistributed net investment income |
380,200 | 35,668 | ||||||
| Accumulated net realized gain (loss) |
(5,251,683 | ) | 40,600 | |||||
| Net unrealized appreciation (depreciation) |
7,358,336 | 1,062,646 | ||||||
|
|
|
|
|
|||||
| Net Assets |
$ | 35,005,609 | $ | 11,762,007 | ||||
|
|
|
|
|
|||||
| Number of Common Shares outstanding |
1,200,800 | 400,800 | ||||||
|
|
|
|
|
|||||
| Net Assets Value |
$ | 29.15 | $ | 29.35 | ||||
|
|
|
|
|
|||||
| Investments in non-affiliated securities at cost |
$ | 27,430,500 | $ | 10,636,051 | ||||
|
|
|
|
|
|||||
| Investments in affiliated securities at cost |
$ | 89,601 | $ | 7,310 | ||||
|
|
|
|
|
|||||
| Foreign currency at cost |
$ | 26,297 | $ | 8,808 | ||||
|
|
|
|
|
|||||
| See Notes to Financial Statements. | 45 |
db-X Exchange-Traded Funds Inc.
For the Year Ended May 31, 2014
| db X-trackers 2010 Target Date Fund |
db X-trackers 2020 Target Date Fund |
db X-trackers 2030 Target Date Fund |
||||||||||
| Investment Income |
||||||||||||
| Unaffiliated interest income |
$ | 44,390 | $ | 78,923 | $ | 338,472 | ||||||
| Unaffiliated dividend income* |
61,759 | 376,097 | 678,676 | |||||||||
| Affiliated dividend income** |
95 | 593 | 1,221 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Investment Income |
106,244 | 455,613 | 1,018,369 | |||||||||
|
|
|
|
|
|
|
|||||||
| Expenses |
||||||||||||
| Advisory fees |
65,087 | 180,176 | 221,316 | |||||||||
| Audit and tax fees |
22,126 | 22,126 | 22,126 | |||||||||
| Listing fees |
16,968 | 16,968 | 16,968 | |||||||||
| Insurance |
16,567 | 16,997 | 16,970 | |||||||||
| Directors |
13,639 | 38,808 | 44,815 | |||||||||
| Printing |
8,693 | 24,738 | 28,326 | |||||||||
| Legal fees |
5,149 | 19,747 | 23,499 | |||||||||
| Other |
408 | 373 | 379 | |||||||||
|
|
|
|
|
|
|
|||||||
| Total Expenses |
148,637 | 319,933 | 374,399 | |||||||||
| Less fees waived and expenses reimbursed: (See Note 3) |
(83,224 | ) | (139,432 | ) | (152,758 | ) | ||||||
|
|
|
|
|
|
|
|||||||
| Net Expenses |
65,413 | 180,501 | 221,641 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net Investment Income |
40,831 | 275,112 | 796,728 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net Realized and Unrealized Gain (Loss) |
||||||||||||
| Net realized gain (loss) on: |
||||||||||||
| Investments |
159,529 | 1,209,113 | 1,434,105 | |||||||||
| In-kind redemptions |
— | 690,505 | 872,574 | |||||||||
| Foreign currency related transactions |
187 | (372 | ) | (1,362 | ) | |||||||
|
|
|
|
|
|
|
|||||||
| Net realized gain (loss) |
159,716 | 1,899,246 | 2,305,317 | |||||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||||||
| Investments |
176,259 | 369,404 | 1,971,868 | |||||||||
| Foreign currency translations |
164 | 1,763 | 2,163 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net change in unrealized appreciation (depreciation) |
176,423 | 371,167 | 1,974,031 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net realized and unrealized gain (loss) on investments and foreign currency transactions |
336,139 | 2,270,413 | 4,279,348 | |||||||||
|
|
|
|
|
|
|
|||||||
| Net Increase in Net Assets From Operations |
$ | 376,970 | $ | 2,545,525 | $ | 5,076,076 | ||||||
|
|
|
|
|
|
|
|||||||
| * Unaffiliated foreign tax withheld |
$ | 2,393 | $ | 10,977 | $ | 20,153 | ||||||
| ** Affiliated foreign tax withheld |
$ | 31 | $ | 245 | $ | 183 | ||||||
| See Notes to Financial Statements. | 46 |
db-X Exchange-Traded Funds Inc.
STATEMENTS OF OPERATIONS (Continued)
For the Year Ended May 31, 2014
| db X-trackers 2040 Target Date Fund |
db X-trackers In-Target Date Fund |
|||||||
| Investment Income |
||||||||
| Unaffiliated interest income |
$ | 85,671 | $ | 37,443 | ||||
| Unaffiliated dividend income* |
786,872 | 102,572 | ||||||
| Affiliated dividend income** |
1,267 | 154 | ||||||
|
|
|
|
|
|||||
| Total Investment Income |
873,810 | 140,169 | ||||||
|
|
|
|
|
|||||
| Expenses |
||||||||
| Advisory fees |
211,921 | 74,785 | ||||||
| Audit and tax fees |
22,126 | 22,126 | ||||||
| Listing fees |
16,968 | 16,968 | ||||||
| Insurance |
16,948 | 16,586 | ||||||
| Directors |
43,546 | 15,634 | ||||||
| Printing |
28,032 | 9,346 | ||||||
| Legal fees |
22,555 | 6,549 | ||||||
| Other |
381 | 404 | ||||||
|
|
|
|
|
|||||
| Total Expenses |
362,477 | 162,398 | ||||||
| Less fees waived and expenses reimbursed: (See Note 3) |
(150,231 | ) | (87,287 | ) | ||||
|
|
|
|
|
|||||
| Net Expenses |
212,246 | 75,111 | ||||||
|
|
|
|
|
|||||
| Net Investment Income |
661,564 | 65,058 | ||||||
|
|
|
|
|
|||||
| Net Realized and Unrealized Gain (Loss) |
||||||||
| Net realized gain (loss) on: |
||||||||
| Investments |
1,876,283 | 310,323 | ||||||
| In-kind redemptions |
— | — | ||||||
| Foreign currency related transactions |
517 | (34 | ) | |||||
|
|
|
|
|
|||||
| Net realized gain (loss) |
1,876,800 | 310,289 | ||||||
| Net change in unrealized appreciation (depreciation) on: |
||||||||
| Investments |
2,885,121 | 304,535 | ||||||
| Foreign currency translations |
2,546 | 384 | ||||||
|
|
|
|
|
|||||
| Net change in unrealized appreciation (depreciation) |
2,887,667 | 304,919 | ||||||
|
|
|
|
|
|||||
| Net realized and unrealized gain (loss) on investments and foreign currency transactions |
4,764,467 | 615,208 | ||||||
|
|
|
|
|
|||||
| Net Increase in Net Assets From Operations |
$ | 5,426,031 | $ | 680,266 | ||||
|
|
|
|
|
|||||
| * Unaffiliated foreign tax withheld |
$ | 22,085 | $ | 3,985 | ||||
| ** Affiliated foreign tax withheld |
$ | 190 | $ | 62 | ||||
| See Notes to Financial Statements. | 47 |
db-X Exchange-Traded Funds Inc.
STATEMENTS OF CHANGES IN NET ASSETS
| db X-trackers 2010 Target Date Fund |
db X-trackers 2020 Target Date Fund |
|||||||||||||||
| Year Ended May 31, | Year Ended May 31, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Increase (Decrease) in Net Assets From Operations |
||||||||||||||||
| Net investment income |
$ | 40,831 | $ | 26,010 | $ | 275,112 | $ | 333,644 | ||||||||
| Net realized gain (loss) |
159,716 | 25,221 | 1,899,246 | 345,664 | ||||||||||||
| Net change in unrealized appreciation (depreciation) |
176,423 | 365,842 | 371,167 | 3,726,866 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) resulting from operations |
376,970 | 417,073 | 2,545,525 | 4,406,174 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Distributions to Shareholders from |
|
|||||||||||||||
| Net investment income |
(28,553 | ) | (39,179 | ) | (248,749 | ) | (356,998 | ) | ||||||||
| Net realized gain |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions |
(28,553 | ) | (39,179 | ) | (248,749 | ) | (356,998 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Fund Shares Transactions |
||||||||||||||||
| Proceeds from shares sold |
— | — | — | — | ||||||||||||
| Value of shares redeemed |
— | — | (5,188,581 | ) | (4,870,232 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets resulting from fund share transactions |
— | — | (5,188,581 | ) | (4,870,232 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total increase (decrease) in Net Assets |
348,417 | 377,894 | (2,891,805 | ) | (821,056 | ) | ||||||||||
| Net Assets |
||||||||||||||||
| Beginning of year |
9,832,071 | 9,454,177 | 31,097,159 | 31,918,215 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of year |
$ | 10,180,488 | $ | 9,832,071 | $ | 28,205,354 | $ | 31,097,159 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed net investment income |
$ | 20,490 | $ | 8,025 | $ | 148,913 | $ | 122,922 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Changes in Shares Outstanding |
||||||||||||||||
| Shares outstanding, beginning of year |
400,800 | 400,800 | 1,200,800 | 1,400,800 | ||||||||||||
| Shares sold |
— | — | — | — | ||||||||||||
| Shares redeemed |
— | — | (200,000 | ) | (200,000 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Shares outstanding, end of year |
400,800 | 400,800 | 1,000,800 | 1,200,800 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| See Notes to Financial Statements. | 48 |
db-X Exchange-Traded Funds Inc.
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
| db X-trackers 2030 Target Date Fund |
db X-trackers 2040 Target Date Fund |
|||||||||||||||
| Year Ended May 31, | Year Ended May 31, | |||||||||||||||
| 2014 | 2013 | 2014 | 2013 | |||||||||||||
| Increase (Decrease) in Net Assets From Operations |
||||||||||||||||
| Net investment income |
$ | 796,728 | $ | 676,005 | $ | 661,564 | $ | 547,457 | ||||||||
| Net realized gain (loss) |
2,305,317 | 1,965,365 | 1,876,800 | 632,926 | ||||||||||||
| Net change in unrealized appreciation (depreciation) |
1,974,031 | 3,396,480 | 2,887,667 | 5,562,129 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) resulting from operations |
5,076,076 | 6,037,850 | 5,426,031 | 6,742,512 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Distributions to Shareholders from |
|
|||||||||||||||
| Net investment income |
(620,525 | ) | (721,516 | ) | (482,157 | ) | (587,200 | ) | ||||||||
| Net realized gain |
— | — | — | — | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total distributions |
(620,525 | ) | (721,516 | ) | (482,157 | ) | (587,200 | ) | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Fund Shares Transactions |
||||||||||||||||
| Proceeds from shares sold |
10,760,274 | — | — | — | ||||||||||||
| Value of shares redeemed |
(5,246,577 | ) | (4,886,296 | ) | — | (4,451,251 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Net increase (decrease) in net assets resulting from fund share transactions |
5,513,697 | (4,886,296 | ) | — | (4,451,251 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total increase (decrease) in Net Assets |
9,969,248 | 430,038 | 4,943,874 | 1,704,061 | ||||||||||||
| Net Assets |
||||||||||||||||
| Beginning of year |
30,264,110 | 29,834,072 | 30,061,735 | 28,357,674 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| End of year |
$ | 40,233,358 | $ | 30,264,110 | $ | 35,005,609 | $ | 30,061,735 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Undistributed net investment income |
$ | 417,265 | $ | 242,424 | $ | 380,200 | $ | 200,276 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Changes in Shares Outstanding |
||||||||||||||||
| Shares outstanding, beginning of year |
1,200,800 | 1,400,800 | 1,200,800 | 1,400,800 | ||||||||||||
| Shares sold |
400,000 | — | — | — | ||||||||||||
| Shares redeemed |
(200,000 | ) | (200,000 | ) | — | (200,000 | ) | |||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Shares outstanding, end of year |
1,400,800 | 1,200,800 | 1,200,800 | 1,200,800 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| See Notes to Financial Statements. | 49 |
db-X Exchange-Traded Funds Inc.
STATEMENTS OF CHANGES IN NET ASSETS (Continued)
| db X-trackers In-Target Date Fund |
||||||||
| Year Ended May 31, | ||||||||
| 2014 | 2013 | |||||||
| Increase (Decrease) in Net Assets From Operations |
||||||||
| Net investment income |
$ | 65,058 | $ | 54,828 | ||||
| Net realized gain (loss) |
310,289 | 9,022 | ||||||
| Net change in unrealized appreciation (depreciation) |
304,919 | 803,651 | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) resulting from operations |
680,266 | 867,501 | ||||||
|
|
|
|
|
|||||
| Distributions to Shareholders from |
|
|||||||
| Net investment income |
(51,246 | ) | (56,878 | ) | ||||
| Net realized gain |
(53,935 | ) | — | |||||
|
|
|
|
|
|||||
| Total distributions |
(105,181 | ) | (56,878 | ) | ||||
|
|
|
|
|
|||||
| Fund Shares Transactions |
||||||||
| Proceeds from shares sold |
— | — | ||||||
| Value of shares redeemed |
— | — | ||||||
|
|
|
|
|
|||||
| Net increase (decrease) in net assets resulting from fund share transactions |
— | — | ||||||
|
|
|
|
|
|||||
| Total increase (decrease) in Net Assets |
575,085 | 810,623 | ||||||
| Net Assets |
||||||||
| Beginning of year |
11,186,922 | 10,376,299 | ||||||
|
|
|
|
|
|||||
| End of year |
$ | 11,762,007 | $ | 11,186,922 | ||||
|
|
|
|
|
|||||
| Undistributed net investment income |
$ | 35,668 | $ | 21,890 | ||||
|
|
|
|
|
|||||
| Changes in Shares Outstanding |
||||||||
| Shares outstanding, beginning of year |
400,800 | 400,800 | ||||||
| Shares sold |
— | — | ||||||
| Shares redeemed |
— | — | ||||||
|
|
|
|
|
|||||
| Shares outstanding, end of year |
400,800 | 400,800 | ||||||
|
|
|
|
|
|||||
| See Notes to Financial Statements. | 50 |
db-X Exchange-Traded Funds Inc.
For a Share outstanding throughout each year
| Year Ended May 31, | ||||||||||||||||||||
| db X-trackers 2010 Target Date Fund | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Net Asset Value, beginning of year |
$ | 24.53 | $ | 23.59 | $ | 23.98 | $ | 23.24 | $ | 22.09 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from Investment Operations: |
||||||||||||||||||||
| Net investment income* |
0.10 | 0.06 | 0.16 | 0.37 | 0.55 | |||||||||||||||
| Net realized and unrealized gain (loss) |
0.84 | 0.98 | (0.35 | ) | 0.99 | 1.11 | ||||||||||||||
| Contributions from advisor |
— | — | — | 0.04 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net Increase (decrease) in net asset value from operations |
0.94 | 1.04 | (0.19 | ) | 1.40 | 1.66 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Distributions paid to shareholders from: |
||||||||||||||||||||
| Net investment income |
(0.07 | ) | (0.10 | ) | (0.20 | ) | (0.66 | ) | (0.51 | ) | ||||||||||
| Net realized capital gains |
— | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.07 | ) | (0.10 | ) | (0.20 | ) | (0.66 | ) | (0.51 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net Asset Value, end of year |
$ | 25.40 | $ | 24.53 | $ | 23.59 | $ | 23.98 | $ | 23.24 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
3.84 | % | 4.41 | % | (0.79 | )% | 6.09 | % | 7.51 | % | ||||||||||
| Ratios/Supplemental Data |
||||||||||||||||||||
| Net Assets, end of year (000’s omitted) |
$ | 10,180 | $ | 9,832 | $ | 9,454 | $ | 14,408 | $ | 18,610 | ||||||||||
| Ratios to average net assets: |
||||||||||||||||||||
| Expenses, net of fee waiver and expense reimbursements |
0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | ||||||||||
| Expenses, prior to fee waiver and expense reimbursements |
1.48 | % | 1.53 | % | 1.39 | % | 1.70 | % | 2.10 | % | ||||||||||
| Net investment income |
0.41 | % | 0.27 | % | 0.67 | % | 1.56 | % | 2.32 | % | ||||||||||
| Portfolio turnover rate† |
85 | % | 86 | % | 65 | % | 58 | % | 51 | % | ||||||||||
| Year Ended May 31, | ||||||||||||||||||||
| db X-trackers 2020 Target Date Fund | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Net Asset Value, beginning of year |
$ | 25.90 | $ | 22.79 | $ | 24.00 | $ | 20.69 | $ | 18.56 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from Investment Operations: |
||||||||||||||||||||
| Net investment income* |
0.27 | 0.26 | 0.28 | 0.44 | 0.51 | |||||||||||||||
| Net realized and unrealized gain (loss) |
2.26 | 3.15 | (1.12 | ) | 3.39 | 2.10 | ||||||||||||||
| Contributions from advisor |
— | — | — | 0.01 | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net Increase (decrease) in net asset value from operations |
2.53 | 3.41 | (0.84 | ) | 3.84 | 2.61 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Distributions paid to shareholders from: |
||||||||||||||||||||
| Net investment income |
(0.25 | ) | (0.30 | ) | (0.37 | ) | (0.53 | ) | (0.48 | ) | ||||||||||
| Net realized capital gains |
— | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.25 | ) | (0.30 | ) | (0.37 | ) | (0.53 | ) | (0.48 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net Asset Value, end of year |
$ | 28.18 | $ | 25.90 | $ | 22.79 | $ | 24.00 | $ | 20.69 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
9.79 | % | 15.04 | % | (3.49 | )% | 18.71 | % | 13.99 | % | ||||||||||
| Ratios/Supplemental Data |
||||||||||||||||||||
| Net Assets, end of year (000’s omitted) |
$ | 28,205 | $ | 31,097 | $ | 31,918 | $ | 38,412 | $ | 41,405 | ||||||||||
| Ratios to average net assets: |
||||||||||||||||||||
| Expenses, net of fee waiver and expense reimbursements |
0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | ||||||||||
| Expenses, prior to fee waiver and expense reimbursements |
1.15 | % | 1.15 | % | 1.16 | % | 1.42 | % | 1.90 | % | ||||||||||
| Net investment income |
0.99 | % | 1.08 | % | 1.20 | % | 1.97 | % | 2.43 | % | ||||||||||
| Portfolio turnover rate† |
49 | % | 52 | % | 55 | % | 49 | % | 37 | % | ||||||||||
| * | Based on average shares outstanding. |
| ** | Total Return is calculated assuming an initial investment made at the Net Asset Value at the beginning of the period, reinvestment of all dividends and capital gain distributions at Net Asset Value during the period, and redemption at Net Asset Value on the last day of the period. Total Return calculated for a period of less than one year are not annualized. The Total Return would have been lower if certain fees had not been reimbursed by the investment sub-advisor, Amerivest Investment Management LLC (from October 1, 2007 through October 20, 2010) and the Advisor, DBX Strategic Advisors LLC. |
| † | Portfolio turnover rate is not annualized and does not include securities received or delivered from processing creations or redemptions. |
| See Notes to Financial Statements. | 51 |
db-X Exchange-Traded Funds Inc.
FINANCIAL HIGHLIGHTS (Continued)
For a Share outstanding throughout each year
| Year Ended May 31, | ||||||||||||||||||||
| db X-trackers 2030 Target Date Fund | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Net Asset Value, beginning of year |
$ | 25.20 | $ | 21.30 | $ | 22.06 | $ | 18.18 | $ | 16.07 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from Investment Operations: |
||||||||||||||||||||
| Net investment income* |
0.63 | 0.49 | 0.46 | 0.39 | 0.37 | |||||||||||||||
| Net realized and unrealized gain (loss) |
3.41 | 3.93 | (0.74 | ) | 3.90 | 2.07 | ||||||||||||||
| Contributions from advisor |
— | — | — | 0.00 | (a) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net Increase (decrease) in net asset value from operations |
4.04 | 4.42 | (0.28 | ) | 4.29 | 2.44 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Distributions paid to shareholders from: |
||||||||||||||||||||
| Net investment income |
(0.52 | ) | (0.52 | ) | (0.48 | ) | (0.41 | ) | (0.33 | ) | ||||||||||
| Net realized capital gains |
— | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.52 | ) | (0.52 | ) | (0.48 | ) | (0.41 | ) | (0.33 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net Asset Value, end of year |
$ | 28.72 | $ | 25.20 | $ | 21.30 | $ | 22.06 | $ | 18.18 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
16.14 | % | 20.94 | % | (1.17 | )% | 23.74 | % | 15.13 | % | ||||||||||
| Ratios/Supplemental Data |
||||||||||||||||||||
| Net Assets, end of year (000’s omitted) |
$ | 40,233 | $ | 30,264 | $ | 29,834 | $ | 35,307 | $ | 32,740 | ||||||||||
| Ratios to average net assets: |
||||||||||||||||||||
| Expenses, net of fee waiver and expense reimbursements |
0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | ||||||||||
| Expenses, prior to fee waiver and expense reimbursements |
1.10 | % | 1.16 | % | 1.18 | % | 1.43 | % | 1.95 | % | ||||||||||
| Net investment income |
2.34 | % | 2.11 | % | 2.17 | % | 1.93 | % | 2.01 | % | ||||||||||
| Portfolio turnover rate† |
36 | % | 46 | % | 40 | % | 39 | % | 42 | % | ||||||||||
| Year Ended May 31, | ||||||||||||||||||||
| db X-trackers 2040 Target Date Fund | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Net Asset Value, beginning of year |
$ | 25.03 | $ | 20.24 | $ | 21.69 | $ | 17.48 | $ | 15.35 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from Investment Operations: |
||||||||||||||||||||
| Net investment income* |
0.55 | 0.43 | 0.37 | 0.32 | 0.32 | |||||||||||||||
| Net realized and unrealized gain (loss) |
3.97 | 4.85 | (1.44 | ) | 4.25 | 2.08 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net Increase (decrease) in net asset value from operations |
4.52 | 5.28 | (1.07 | ) | 4.57 | 2.40 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Distributions paid to shareholders from: |
||||||||||||||||||||
| Net investment income |
(0.40 | ) | (0.49 | ) | (0.38 | ) | (0.36 | ) | (0.27 | ) | ||||||||||
| Net realized capital gains |
— | — | — | — | — | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.40 | ) | (0.49 | ) | (0.38 | ) | (0.36 | ) | (0.27 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net Asset Value, end of year |
$ | 29.15 | $ | 25.03 | $ | 20.24 | $ | 21.69 | $ | 17.48 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
18.15 | % | 26.35 | % | (4.86 | )% | 26.32 | % | 15.59 | % | ||||||||||
| Ratios/Supplemental Data |
||||||||||||||||||||
| Net Assets, end of year (000’s omitted) |
$ | 35,006 | $ | 30,062 | $ | 28,358 | $ | 34,723 | $ | 31,477 | ||||||||||
| Ratios to average net assets: |
||||||||||||||||||||
| Expenses, net of fee waiver and expense reimbursements |
0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | ||||||||||
| Expenses, prior to fee waiver and expense reimbursements |
1.11 | % | 1.17 | % | 1.20 | % | 1.43 | % | 1.97 | % | ||||||||||
| Net investment income |
2.03 | % | 1.88 | % | 1.84 | % | 1.64 | % | 1.79 | % | ||||||||||
| Portfolio turnover rate† |
31 | % | 34 | % | 34 | % | 35 | % | 38 | % | ||||||||||
| * | Based on average shares outstanding. |
| ** | Total Return is calculated assuming an initial investment made at the Net Asset Value at the beginning of the period, reinvestment of all dividends and capital gain distributions at Net Asset Value during the period, and redemption at Net Asset Value on the last day of the period. Total Return calculated for a period of less than one year are not annualized. The Total Return would have been lower if certain fees had not been reimbursed by the investment sub-advisor, Amerivest Investment Management LLC (from October 1, 2007 through October 20, 2010) and the Advisor, DBX Strategic Advisors LLC. |
| † | Portfolio turnover rate is not annualized and does not include securities received or delivered from processing creations or redemptions. |
| (a) | Amount represents less than $0.01 |
| See Notes to Financial Statements. | 52 |
db-X Exchange-Traded Funds Inc.
FINANCIAL HIGHLIGHTS (Continued)
For a Share outstanding throughout each year
| Year Ended May 31, | ||||||||||||||||||||
| db X-trackers In-Target Date Fund | 2014 | 2013 | 2012 | 2011 | 2010 | |||||||||||||||
| Net Asset Value, beginning of year |
$ | 27.91 | $ | 25.89 | $ | 26.54 | $ | 25.07 | $ | 24.38 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Income from Investment Operations: |
||||||||||||||||||||
| Net investment income* |
0.16 | 0.14 | 0.16 | 0.25 | 0.33 | |||||||||||||||
| Net realized and unrealized gain (loss) |
1.54 | 2.02 | (0.63 | ) | 1.61 | 0.70 | ||||||||||||||
| Contributions from advisor |
— | — | — | 0.00 | (a) | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net Increase (decrease) in net asset value from operations |
1.70 | 2.16 | (0.47 | ) | 1.86 | 1.03 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Distributions paid to shareholders from: |
||||||||||||||||||||
| Net investment income |
(0.13 | ) | (0.14 | ) | (0.18 | ) | (0.39 | ) | (0.34 | ) | ||||||||||
| Net realized capital gains |
(0.13 | ) | — | — | — | — | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total distributions |
(0.26 | ) | (0.14 | ) | (0.18 | ) | (0.39 | ) | (0.34 | ) | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Net Asset Value, end of year |
$ | 29.35 | $ | 27.91 | $ | 25.89 | $ | 26.54 | $ | 25.07 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
| Total Return** |
6.12 | % | 8.37 | % | (1.77 | )% | 7.44 | % | 4.23 | % | ||||||||||
| Ratios/Supplemental Data |
||||||||||||||||||||
| Net Assets, end of year (000’s omitted) |
$ | 11,762 | $ | 11,187 | $ | 10,376 | $ | 15,948 | $ | 20,074 | ||||||||||
| Ratios to average net assets: |
||||||||||||||||||||
| Expenses, net of fee waiver and expense reimbursements |
0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | ||||||||||
| Expenses, prior to fee waiver and expense reimbursements |
1.41 | % | 1.47 | % | 1.36 | % | 1.66 | % | 2.06 | % | ||||||||||
| Net investment income |
0.57 | % | 0.51 | % | 0.59 | % | 0.96 | % | 1.30 | % | ||||||||||
| Portfolio turnover rate† |
79 | % | 62 | % | 59 | % | 60 | % | 42 | % | ||||||||||
| * | Based on average shares outstanding. |
| ** | Total Return is calculated assuming an initial investment made at the Net Asset Value at the beginning of the period, reinvestment of all dividends and capital gain distributions at Net Asset Value during the period, and redemption at Net Asset Value on the last day of the period. Total Return calculated for a period of less than one year are not annualized. The Total Return would have been lower if certain fees had not been reimbursed by the investment sub-advisor, Amerivest Investment Management LLC (from October 1, 2007 through October 20, 2010) and the Advisor, DBX Strategic Advisors LLC. |
| † | Portfolio turnover rate is not annualized and does not include securities received or delivered from processing creations or redemptions. |
| (a) | Amount represents less than $0.01 |
| See Notes to Financial Statements. | 53 |
db-X Exchange-Traded Funds Inc.
1. Organization
db-X Exchange-Traded Funds Inc. (the “Company”) was organized as a Maryland corporation on December 22, 2006 and is registered under the Investment Company Act of 1940, as amended (the “Act”).
As of May 31, 2014, there were five diversified series of exchange-traded funds (“ETF”) (each, a “Fund,” and collectively, the “Funds”) in operation and trading:
| db X-trackers 2010 Target Date Fund | ||
| db X-trackers 2020 Target Date Fund | ||
| db X-trackers 2030 Target Date Fund | ||
| db X-trackers 2040 Target Date Fund | ||
| db X-trackers In-Target Date Fund |
DBX Strategic Advisors LLC (“DBX” or the “Advisor”), an indirect wholly owned subsidiary of Deutsche Bank AG, serves as investment advisor to the Funds and has overall responsibility for the general management and administration of the Funds, subject to the supervision of the Funds’ Board of Directors.
Each Fund offers shares that are listed and traded on the NYSE Arca, Inc. (“NYSE Arca”). Unlike conventional mutual funds, each Fund issues and redeems shares on a continuous basis, at net asset value, only in large specified lots consisting of 200,000 shares each called a “Creation Unit”, to authorized participants who have entered into agreements with the Funds’ distributor. Except when aggregated in Creation Units, shares are not individually redeemable securities of the Funds.
The investment objective of each Fund is to track the performance, before fees and expenses, of a particular index (the “Underlying Index”). Zacks Investment Research (“Zacks”) is the creator of each Underlying Index. Each Underlying Index is comprised of a mix of securities from three broad asset classes: international equities, domestic equities, and fixed income, which includes cash, cash equivalents or short-term money market instruments. Short-term instruments include obligations of the U.S. government and its agencies or instrumentalities; commercial paper, variable amount master demand notes and other debt securities, including high quality U.S. dollar-denominated short-term bonds and notes issued by domestic and foreign corporations; variable and floating rate securities; bank obligations; repurchase agreements collateralized by these securities; and shares of other investment companies that primarily invest in any of the above-referenced securities. These Underlying Indexes are designed to reflect a portfolio of investments that can be used for lifecycle investing. Lifecycle investing is an investment technique that starts by targeting a particular investment horizon. That investment horizon corresponds to the date the investor expects to need his or her invested assets.
The underlying indexes for the Funds are:
| Fund |
Underlying Index | |
| db X-trackers 2010 Target Date Fund |
Zacks 2010 Lifecycle Index | |
| db X-trackers 2020 Target Date Fund | Zacks 2020 Lifecycle Index | |
| db X-trackers 2030 Target Date Fund | Zacks 2030 Lifecycle Index | |
| db X-trackers 2040 Target Date Fund | Zacks 2040 Lifecycle Index | |
| db X-trackers In-Target Date Fund | Zacks In-Target Lifecycle Index |
Each Fund is entitled to use its respective Underlying Index pursuant to a licensing agreement between Zacks and DBX. There is no charge to the Funds in connection with these licensing agreements.
Each Fund may invest in securities of non-U.S. issuers that may trade in non-U.S. Markets. This may involve certain considerations and risks not typically associated with securities of U.S. issuers. Such risks include, but are not limited to: generally less liquid and less efficient securities markets; generally greater price volatility; exchange rate fluctuations and exchange controls; imposition of restrictions on the expatriation of funds or other assets of the Fund; less publicly available information about issuers; the imposition of withholding or other taxes; higher transaction and custody costs; settlement delays and risk of loss attendant in settlement procedures; difficulties in enforcing contractual obligations; less regulation of securities markets; different accounting, disclosure and reporting requirements; more substantial governmental involvement in the economy; higher inflation rates; greater social, economic and political uncertainties; the risk of nationalization or expropriation of assets and the risk of war.
Pursuant to the Company’s organizational documents, the Company’s officers and directors are indemnified against certain liabilities that may arise out of the performance of their duties to the Funds. Additionally, in the normal course of business the Company enters into contracts that contain a variety of representations that provide indemnification for certain
54
db-X Exchange-Traded Funds Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
liabilities. The director’s 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, the Company expects the risk of loss to be remote.
2. Significant Accounting Policies
The financial statements have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”), which require management to make certain estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Funds.
Cash Cash consists of cash held at banks and are on deposit with major financial institutions.
Security Valuation The Net Asset Value (“NAV”), of each Fund’s shares is calculated each business day as of the close of regular trading on the New York Stock Exchange, generally 4:00 p.m. Eastern Time. NAV per share is calculated by dividing a Fund’s net assets by the number of Fund shares outstanding.
Various inputs are used in determining the value of the Funds’ investments. These inputs are summarized in three broad levels. Level 1 includes quoted prices in active markets for identical securities. Level 2 includes other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, and credit risk). Level 3 includes significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). The level assigned to the securities valuations may not be an indication of the risk or liquidity associated with investing in those securities.
Equity securities are valued at the most recent sale price or official closing price reported on the exchange (U.S. or foreign) or over-the-counter market on which they trade. Securities for which no sales are reported are valued at the calculated mean between the most recent bid and asked quotations on the relevant market or, if a mean cannot be determined, at the most recent bid quotation. Equity securities are generally categorized as Level 1.
Debt securities are valued at prices supplied by independent pricing services approved by the Fund’s Board. Such services may use various pricing techniques which take into account appropriate factors such as yield, quality, coupon rate, maturity, type of issue, trading characteristics, prepayment speeds and other data, as well as broker quotes. If the pricing services are unable to provide valuations, debt securities are valued at the average of the most recent reliable bid quotations or evaluated prices, as applicable, obtained from broker-dealers. These securities are generally categorized as Level 2.
Securities and other assets for which market quotations are not readily available or for which the above valuation procedures are deemed not to reflect fair value are valued in a manner that is intended to reflect their fair value as determined in accordance with procedures approved by the Board and are generally categorized as Level 3. In accordance with the Fund’s valuation procedures, factors considered in determining value may include, but are not limited to, the type of the security; the size of the holding; the initial cost of the security; the existence of any contractual restrictions on the security’s disposition; the price and extent of public trading in similar securities of the issuer or of comparable companies; quotations or evaluated prices from broker-dealers and/or pricing services; information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities); an analysis of the company’s or issuer’s financial statements; an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold; and with respect to debt securities, the maturity, coupon, creditworthiness, currency denomination and the movement of the market in which the security is normally traded. The value determined under these procedures may differ from published values for the same securities.
Fair value pricing could result in a difference between the prices used to calculate a Fund’s net asset value and the prices used by the Fund’s underlying index, which in turn could result in a difference between the Fund’s performance and the performance of the Fund’s underlying index.
55
db-X Exchange-Traded Funds Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
The following table summarizes the valuation of each Fund’s investments by the above fair value hierarchy levels as of May 31, 2014 (see the Schedule of Investments for security categories). For the year ended May 31, 2014, there were no transfers between investment levels.
| Level 1 | Level 2 | Level 3 | Fair Value at 5/31/2014 |
|||||||||||||
| db X-trackers 2010 Target Date Fund | ||||||||||||||||
| Investments in Securities |
||||||||||||||||
| Common Stocks |
$ | 2,413,004 | $ | — | $ | — | $ | 2,413,004 | ||||||||
| Preferred Stocks |
4,029 | — | — | 4,029 | ||||||||||||
| Rights |
— | — | 732 | 732 | ||||||||||||
| Corporate Bonds |
— | 2,964,577 | — | 2,964,577 | ||||||||||||
| United States Government & Agency Obligations |
— | 4,737,372 | — | 4,737,372 | ||||||||||||
| Sovereign Bond |
— | 8,400 | — | 8,400 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 2,417,033 | $ | 7,710,349 | $ | 732 | $ | 10,128,114 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| db X-trackers 2020 Target Date Fund | ||||||||||||||||
| Investments in Securities |
||||||||||||||||
| Common Stocks |
$ | 15,080,658 | $ | — | $ | — | $ | 15,080,658 | ||||||||
| Preferred Stocks |
20,699 | — | — | 20,699 | ||||||||||||
| Rights |
— | — | 1,532 | 1,532 | ||||||||||||
| Corporate Bonds |
— | 3,927,187 | — | 3,927,187 | ||||||||||||
| United States Government & Agency Obligations |
— | 8,996,529 | — | 8,996,529 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 15,101,357 | $ | 12,923,716 | $ | 1,532 | $ | 28,026,605 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| db X-trackers 2030 Target Date Fund | ||||||||||||||||
| Investments in Securities |
||||||||||||||||
| Common Stocks |
$ | 30,561,791 | $ | — | $ | — | $ | 30,561,791 | ||||||||
| Preferred Stocks |
41,679 | — | — | 41,679 | ||||||||||||
| Rights |
— | — | 3,501 | 3,501 | ||||||||||||
| Corporate Bonds |
— | 8,658,599 | — | 8,658,599 | ||||||||||||
| United States Government & Agency Obligations |
— | 756,378 | — | 756,378 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 30,603,470 | $ | 9,414,977 | $ | 3,501 | $ | 40,021,948 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| db X-trackers 2040 Target Date Fund | ||||||||||||||||
| Investments in Securities |
||||||||||||||||
| Common Stocks |
$ | 32,412,264 | $ | — | $ | — | $ | 32,412,264 | ||||||||
| Preferred Stocks |
44,357 | — | — | 44,357 | ||||||||||||
| Rights |
— | — | 3,587 | 3,587 | ||||||||||||
| Corporate Bonds |
— | 1,078,347 | — | 1,078,347 | ||||||||||||
| United States Government & Agency Obligations |
— | 1,239,530 | — | 1,239,530 | ||||||||||||
| Sovereign Bonds |
— | 98,892 | — | 98,892 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 32,456,621 | $ | 2,416,769 | $ | 3,587 | $ | 34,876,977 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| db X-trackers In-Target Date Fund | ||||||||||||||||
| Investments in Securities |
||||||||||||||||
| Common Stocks |
$ | 4,095,002 | $ | — | $ | — | $ | 4,095,002 | ||||||||
| Preferred Stocks |
5,653 | — | — | 5,653 | ||||||||||||
| Rights |
— | — | 244 | 244 | ||||||||||||
| Corporate Bonds |
— | 2,927,779 | — | 2,927,779 | ||||||||||||
| United States Government & Agency Obligations |
— | 4,668,813 | — | 4,668,813 | ||||||||||||
| Sovereign Bond |
— | 8,400 | — | 8,400 | ||||||||||||
|
|
|
|
|
|
|
|
|
|||||||||
| Total Investments |
$ | 4,100,655 | $ | 7,604,992 | $ | 244 | $ | 11,705,891 | ||||||||
|
|
|
|
|
|
|
|
|
|||||||||
56
db-X Exchange-Traded Funds Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
Investment Transactions and Investment Income Investment transactions are recorded as of the date that the securities are purchased or sold (trade date). Realized gains and losses from the sale or disposition of securities are calculated on the identified cost-method. Dividend income is net of any foreign taxes withheld at source. Interest income is recorded on the accrual basis. Discounts and premiums on securities purchased are accreted/amortized over the lives of the respective securities.
Tax Information and Dividends and Distributions to Shareholders It is each Fund’s policy to comply with all requirements of the Internal Revenue Code of 1986, as amended (“the Code”). Each fund intends to qualify for and to elect treatment as a separate Regulated Investment Company (“RIC”) under Subchapter M of the Code. It is the policy of each Fund to pay out dividends, if any, to investors at least annually sufficient to relieve it from all, or substantially all, Federal income and excise taxes. Taxable net realized gains from investment transactions, reduced by capital loss carryforwards, if any, are declared and distributed to shareholders at least annually. The capital loss carryforward amount, if any, is available to offset future net capital gains. The Funds may occasionally be required to make supplemental distributions at some other time during the year. The Funds reserve the right to declare special distributions if, in their reasonable discretion, such action is necessary or advisable to preserve the status of each Fund as a RIC or to avoid imposition of income or excise taxes on undistributed income. Dividends and distributions to shareholders, if any, are recorded on the ex-dividend date. The amount of dividends and distributions from net investment income and net realized capital gains are determined in accordance with Federal income tax regulations which may differ from U.S. GAAP. These “book/tax” differences are either considered temporary or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified at the end of the year within the components of net assets based on their federal tax treatment; temporary differences do not require reclassification. Dividends and distributions, which exceed earnings and profits for the full year for tax purposes, are reported as a tax return of capital. Each Fund pays out dividends from its net investment income to investors annually. Each Fund distributes any net capital gains annually.
The Funds are subject to accounting standards that establish a minimum threshold for recognizing, and a system for measuring, the benefits of a tax position taken or expected to be taken in a tax return. In accordance with U.S. GAAP requirements regarding accounting for uncertainties in income taxes, management has analyzed the Funds’ tax positions taken or expected to be taken on foreign, federal and state income tax returns for all open tax years and has concluded that no provision for income tax is required in the Funds’ financial statements. The Advisor does not believe that the unrecognized tax benefits will change significantly in the next 12 months.
The Funds recognize interest and penalties, if any, related to uncertain tax positions as income tax expense on the Statements of Operations. For the year ended May 31, 2014, the Funds did not incur any interest or penalties.
Foreign Taxes The Funds may be subject to foreign taxes (a portion of which may be reclaimable) on income, capital gains on investments, certain foreign currency transactions or other corporate events. All foreign taxes are recorded in accordance with the applicable foreign tax regulations and rates that exist in the foreign jurisdictions in which the Funds invest. These foreign taxes, if any, are paid by the Funds and are reflected in their Statements of Operations as follows: foreign taxes withheld at source are presented as a reduction of income, and foreign taxes on capital gains from sales of investments and foreign currency transactions are included in their respective net realized gain (loss) categories. Foreign taxes payable as of May 31, 2014, if any, are disclosed in the Funds’ Statements of Assets and Liabilities.
Expenses Expenses that are directly related to a specific Fund are charged to that respective Fund. Expenses which are not readily identifiable to a specific Fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expense and the relative net assets of each Fund.
Foreign Currency Translations The books and records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the prevailing exchange rates at period end. Purchases and sales of investment securities, income and expenses are translated into U.S. dollars at the prevailing exchange rates on the respective dates of the transactions.
Net realized and unrealized gains and losses on foreign currency transactions represent net gains and losses between trade and settlement dates on securities transactions, the acquisition and disposition of foreign currencies, and the difference between the amount of net investment income accrued and the U.S. dollar amount actually received. That portion of both realized and unrealized gains and losses on investments that results from fluctuations in foreign currency exchange rates is not separately disclosed, but is included with net realized and unrealized gain/appreciation and loss/depreciation on investments.
57
db-X Exchange-Traded Funds Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
Real Estate Investment Trusts Each Fund periodically recharacterizes distributions received from a Real Estate Investment Trust (“REIT”) investment based on information provided by the REIT into the following categories: ordinary income, long-term and short-term capital gains, and return of capital. If information is not available timely from a REIT, the recharacterization will be estimated and a recharacterization will be made in the following year when such information becomes available. Distributions received from REITs in excess of income are recorded as either a reduction of cost of investments or realized gains. Each Fund distinguishes between dividends received on a tax basis and a financial reporting basis and only distributions in excess of tax basis earnings and profits are reported in the financial statements as a tax return of capital.
3. Investment Advisory and Other Agreements
The Advisor has overall responsibility for the general management and administration of the Funds, subject to the supervision of the Funds’ Board of Directors. Under an investment advisory agreement between the Company, on behalf of the Funds, and the Advisor (the “Investment Advisory Agreement”), the Advisor is responsible for arranging sub-advisory, transfer agency, custody, fund administration, and all other non-distribution related services for the Funds to operate. The Advisor is also responsible for employing any sampling strategy for the Funds.
TDAM USA Inc. (“TDAM”) acts as investment sub-advisor to the Funds (“Sub-Advisor”). TDAM is a direct, wholly-owned subsidiary of The Toronto-Dominion Bank. The Sub-Advisor is responsible for the day-to-day management of the Funds, subject to the supervision of the Advisor and the Funds’ Board of Directors. In this regard, the Sub-Advisor is responsible for implementing the replication strategy for each Fund with regard to its underlying index and for general administration, compliance and management services as may be agreed between the Advisor and Sub Advisor from time to time.
For the services it provides to the Funds, the Advisor receives an advisory fee computed daily and payable monthly in an amount equal to 0.65% on an annualized basis of each Fund’s average daily net assets. Out of the advisory fee, the Advisor pays, or arranges for the payment of, all fees and expenses of the Sub-Advisor, the Transfer Agent, the Administrator and Accounting Agent and the Custodian. Each Fund is responsible for the payment of all other expenses associated with its operations, including but not limited to, brokerage expenses, taxes, interest, fees and expenses of counsel to the Funds, fees and expenses of the Disinterested Directors (including legal counsel fees), certain out-of-pocket expenses of the Advisor or Sub-Advisor, including, but not limited to, cost of obtaining prices for security valuations (including manual broker quotes), Federal Reserve charges related to securities transactions, postage and insurance on physical transfer items, telecommunication charges, and proxy voting execution, advice and reporting etc., fees and expenses of the Chief Compliance Officer and expenses associated with the Funds’ compliance program, litigation expenses, fees and expenses of the Funds’ independent auditors, registration fees, expenses associated with compliance by the Funds with regulatory requirements, including those relating to the development and distribution of its prospectus and shareholder reports, and extraordinary expenses. Pursuant to the Investment Advisory Agreement, the Advisor is authorized to engage one or more sub-advisors to perform any of the services contemplated to be performed by the Advisor under the Investment Advisory Agreement.
The Advisor pays TDAM a fee based on a percentage of the average daily net assets of each Fund as set forth below:
| • | 10 basis points (0.10%) of the first $100 million in combined average daily net assets of all Funds; and |
| • | 5 basis points (0.05%) of the combined average daily net assets of all Funds in excess of $100 million. |
The Advisor pays TDAM a minimum annual fee of $35,000 per Fund.
The Advisor has contractually agreed to reduce its fees and/or pay Fund operating expenses (excluding, among other things, acquired fund fees and expenses, interest, taxes and extraordinary expenses) in order to limit each Fund’s net annual operating expenses to 0.65% of the Fund’s average daily net assets (the “Expense Cap”). The Expense Cap will remain in effect until September 30, 2014. The Advisor is permitted to be reimbursed for fee reductions and/or expense payments made in the prior three fiscal years. This reimbursement may be paid to the Advisor if the aggregate amount actually paid by a Fund toward operating expenses for such fiscal year (taking into account the reimbursement) does not exceed the Expense Cap. No amounts were reimbursed to the Advisor by the funds under this contractual arrangement during the year ended May 31, 2014.
58
db-X Exchange-Traded Funds Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
The amounts subject to potential reimbursement to the Advisor as of May 31, 2014 were as follows:
| Reimbursements available through: | ||||||||||||
| 5/31/2015 | 5/31/2016 | 5/31/2017 | ||||||||||
| db X-trackers 2010 Target Date Fund |
$ | 187,622 | $ | 84,788 | $ | 83,224 | ||||||
| db X-trackers 2020 Target Date Fund |
333,966 | 155,260 | 139,432 | |||||||||
| db X-trackers 2030 Target Date Fund |
329,744 | 161,871 | 152,758 | |||||||||
| db X-trackers 2040 Target Date Fund |
308,119 | 150,327 | 150,231 | |||||||||
| db X-trackers In-Target Date Fund |
194,674 | 88,106 | 87,287 | |||||||||
For the year ended May 31, 2014, the advisory fee waivers and expenses assumed by the Advisor were as follows:
| Advisory Fees Waived by DBX |
Fees & Expenses Assumed by DBX |
|||||||
| db X-trackers 2010 Target Date Fund |
$ | 65,087 | $ | 18,137 | ||||
| db X-trackers 2020 Target Date Fund |
139,432 | — | ||||||
| db X-trackers 2030 Target Date Fund |
152,758 | — | ||||||
| db X-trackers 2040 Target Date Fund |
150,231 | — | ||||||
| db X-trackers In-Target Date Fund |
74,785 | 12,502 | ||||||
The Bank of New York Mellon, a wholly-owned subsidiary of The Bank of New York Mellon Corporation, serves as Administrator, Custodian, Accounting Agent and Transfer Agent for each Fund.
ALPS Distributors, Inc. (the “Distributor”) serves as the distributor of Creation Units for each Fund on an agency basis. The Distributor does not maintain a secondary market in shares of the Funds.
The Board of Directors is currently comprised of four Directors, of whom three are Independent Directors. The Company pays each Independent Director an annual fee of $30,000, plus a fee of $4,000 per meeting attended in-person or $1,000 per meeting attended telephonically. Each Independent Director also receives $2,000 per Audit Committee meeting attended in-person or $1,000 per meeting attended telephonically, although the Audit Committee Chairman receives $3,000 per Audit Committee meeting attended in-person. The Company reimburses each Director for their costs and expenses associated with the performance of their duties hereunder, including the cost and expenses associated with attendance at meetings of the Board. Directors’ fees and expenses are allocated among the Funds based on each Fund’s relative average daily net assets.
4. Federal Income Taxes
As of May 31, 2014, the components of accumulated earnings (losses) were as follows:
| Undistributed Net Investment Income (Loss) |
Capital and Other Gains (Losses) |
Unrealized Appreciation (Depreciation) |
Accumulated Earnings (Losses) |
|||||||||||||
| db X-trackers 2010 Target Date Fund |
$ | 20,490 | $ | (1,487,866 | ) | $ | 507,444 | $ | (959,932 | ) | ||||||
| db X-trackers 2020 Target Date Fund |
148,913 | (3,030,034 | ) | 3,417,834 | 536,713 | |||||||||||
| db X-trackers 2030 Target Date Fund |
417,265 | (2,981,974 | ) | 5,100,263 | 2,535,554 | |||||||||||
| db X-trackers 2040 Target Date Fund |
380,200 | (5,239,474 | ) | 7,346,127 | 2,486,853 | |||||||||||
| db X-trackers In-Target Date Fund |
78,807 | — | 1,060,107 | 1,138,914 | ||||||||||||
For the years ended May 31, 2014 and May 31, 2013, the tax characterization of distributions paid for each Fund was equal to the book characterization of distributions paid. The total distributions and distributions per share are disclosed in the accompanying Statement of Changes in Net Assets and the Financial Highlights for all Funds.
59
db-X Exchange-Traded Funds Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
At May 31, 2014, for Federal income tax purposes, the Funds have capital loss carryforwards available as shown in the table below, to the extent provided by regulations, to offset future capital gains through the years indicated. To the extent that these loss carryforwards are used to offset future capital gains, it is probable that the capital gains so offset will not be distributed to shareholders.
| Year of Expiration | Post-effective — no expiration short-term |
Post-effective — no expiration long-term |
Total Amount |
|||||||||||||||||||||
| 2017 | 2018 | 2019 | ||||||||||||||||||||||
| db X-trackers 2010 Target Date Fund |
$ | 467,239 | $ | 1,020,627 | $ | — | $ | — | $ | — | $ | 1,487,866 | ||||||||||||
| db X-trackers 2020 Target Date Fund |
— | 3,030,034 | — | — | — | 3,030,034 | ||||||||||||||||||
| db X-trackers 2030 Target Date Fund |
— | 2,910,271 | 71,703 | — | — | 2,981,974 | ||||||||||||||||||
| db X-trackers 2040 Target Date Fund |
— | 4,886,949 | 352,525 | — | — | 5,239,474 | ||||||||||||||||||
| db X-trackers In-Target Date Fund |
— | — | — | — | — | — | ||||||||||||||||||
db X-trackers 2010 Target Date Fund, db X-trackers 2020 Target Date Fund, db X-trackers 2030 Target Date Fund, db X-trackers 2040 Target Date Fund and db X-trackers In-Target Date Fund utilized $156,161, $1,209,863, $1,716,331, $1,874,186, and $211,212 respectively, of capital loss carryforwards during the fiscal year ended May 31, 2014.
Under the recently enacted Regulated Investment Company Modernization Act of 2010 (the “Act”), the Funds will be permitted to carry forward capital losses incurred in taxable years beginning after December 22, 2010 for an unlimited period. However, any losses incurred during those future taxable years (beginning on June 1, 2011) will be required to be utilized prior to the losses incurred in pre-enactment taxable years. As a result of this ordering rule, pre-enactment capital loss carryforwards presented in the table above may be more likely to expire unused. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term capital losses rather than being considered all short-term as under previous law.
Capital losses incurred after October 31 (“post-October losses”) within the taxable year are deemed to arise on the first business day of each Fund’s next taxable year.
In order to present paid-in capital and accumulated net realized gains or losses on the Statements of Assets and Liabilities that more closely represent their tax character, certain adjustments have been made to additional paid-in capital, undistributed net investment income or loss and accumulated net realized gains or losses on investments. These differences are primarily due to currency gain/(loss), return of capital adjustments and redemptions-in-kind. For the fiscal year ended May 31, 2014, the adjustments were as follows:
| Undistributed Net Investment Income (Loss) |
Undistributed Capital Gains (Accumulated Losses) |
Paid-in Capital |
||||||||||
| db X-trackers 2010 Target Date Fund |
$ | 187 | $ | (187 | ) | $ | — | |||||
| db X-trackers 2020 Target Date Fund |
(372 | ) | (673,378 | ) | 673,750 | |||||||
| db X-trackers 2030 Target Date Fund |
(1,362 | ) | (796,063 | ) | 797,425 | |||||||
| db X-trackers 2040 Target Date Fund |
517 | (517 | ) | — | ||||||||
| db X-trackers In-Target Date Fund |
(34 | ) | 34 | — | ||||||||
As of May 31, 2014, the cost of investments for Federal income tax purposes and the aggregated gross unrealized appreciation/depreciation on investments were as follows:
| Cost | Net Unrealized Appreciation (Depreciation) |
Gross Unrealized Appreciation |
Gross Unrealized (Depreciation) |
|||||||||||||
| db X-trackers 2010 Target Date Fund |
$ | 9,620,766 | $ | 507,348 | $ | 581,516 | $ | (74,168 | ) | |||||||
| db X-trackers 2020 Target Date Fund |
24,609,848 | 3,416,757 | 3,975,266 | (558,509 | ) | |||||||||||
| db X-trackers 2030 Target Date Fund |
34,923,025 | 5,098,923 | 6,411,023 | (1,312,100 | ) | |||||||||||
| db X-trackers 2040 Target Date Fund |
27,532,310 | 7,344,667 | 8,485,309 | (1,140,642 | ) | |||||||||||
| db X-trackers In-Target Date Fund |
10,645,900 | 1,059,991 | 1,144,119 | (84,128 | ) | |||||||||||
60
db-X Exchange-Traded Funds Inc.
NOTES TO FINANCIAL STATEMENTS (Continued)
5. Investments in Affiliates
The Advisor is a wholly-owned subsidiary of Deutsche Bank AG. Therefore, Deutsche Bank AG is considered to be affiliated with the Funds. The table below shows the transactions in and earnings from investments in Deutsche Bank AG Securities for the year ended May 31, 2014.
| Fair Value 5/31/2013 |
Purchases at Cost |
Proceeds from Sales |
Change in Unrealized Appreciation/ (Depreciation) |
Realized Gain (Loss) |
Fair Value 5/31/2014 |
Dividend Income |
||||||||||||||||||||||
| db X-trackers 2010 Target Date Fund |
||||||||||||||||||||||||||||
| Deutsche Bank AG (Common Stock) |
$ | 2,626 | $ | 1,708 | $ | — | $ | (567 | ) | $ | — | $ | 3,767 | $ | 95 | |||||||||||||
| db X-trackers 2020 Target Date Fund |
||||||||||||||||||||||||||||
| Deutsche Bank AG (Common Stock) |
38,355 | — | (10,340 | ) | 1,350 | (5,871 | ) | 23,494 | 593 | |||||||||||||||||||
| db X-trackers 2030 Target Date Fund |
||||||||||||||||||||||||||||
| Deutsche Bank AG (Common Stock) |
53,312 | 15,835 | (14,034 | ) | (1,723 | ) | (4,985 | ) | 48,405 | 1,221 | ||||||||||||||||||
| db X-trackers 2040 Target Date Fund |
||||||||||||||||||||||||||||
| Deutsche Bank AG (Common Stock) |
62,080 | — | (3,873 | ) | (3,841 | ) | (4,138 | ) | 50,228 | 1,267 | ||||||||||||||||||
| db X-trackers In-Target Date Fund |
||||||||||||||||||||||||||||
| Deutsche Bank AG (Common Stock) |
9,003 | — | (1,891 | ) | 783 | (1,779 | ) | 6,116 | 154 | |||||||||||||||||||
6. Investment Portfolio Transactions
For the year ended May 31, 2014, the cost of investments purchased and proceeds from sale of investments (excluding in-kind transactions and short-term investments) were as follows:
| Purchases | Sales | |||||||||||||||
| Other | U.S. Government | Other | U.S. Government | |||||||||||||
| db X-trackers 2010 Target Date Fund |
$ | 3,984,816 | $ | 3,104,001 | $ | 1,863,977 | $ | 4,800,930 | ||||||||
| db X-trackers 2020 Target Date Fund |
8,683,151 | 5,076,814 | 13,453,351 | 5,259,952 | ||||||||||||
| db X-trackers 2030 Target Date Fund |
17,883,931 | 1,326,671 | 16,604,145 | 998,939 | ||||||||||||
| db X-trackers 2040 Target Date Fund |
9,620,324 | 565,872 | 9,882,146 | 122,592 | ||||||||||||
| db X-trackers In-Target Date Fund |
4,182,287 | 3,030,132 | 2,682,216 | 4,540,706 | ||||||||||||
For the year ended May 31, 2014 the cost of in-kind purchases and the proceeds from in-kind sales were as follows:
| Purchases | Sales | |||||||
| db X-trackers 2020 Target Date Fund |
$ | — | $ | 2,999,244 | ||||
| db X-trackers 2030 Target Date Fund |
4,069,199 | 5,231,114 | ||||||
7. Fund Share Transactions
As of May 31, 2014, there were 12.5 billion Fund shares of $0.0001 par value authorized by the Company. Fund shares are issued and redeemed by each Fund only in Creation Units or multiples thereof. Except when aggregated in Creation Units, shares of each Fund are not redeemable. Transactions in capital shares for each Fund are disclosed in detail in the Statements of Changes in Net Assets. The consideration for the purchase of Creation Units of a Fund generally consists of the in-kind contribution of a designated portfolio of securities constituting a portfolio sampling representation of the securities included in the respective Fund’s Underlying Index and an amount of cash, which under certain circumstances may include cash in lieu of portfolio securities. Investors purchasing and redeeming Creation Units pay a purchase transaction fee and a redemption transaction fee to offset transfer and other transaction costs associated with the issuance and redemption of Creation Units.
8. Fund Name Change
Effective August 11, 2014, the “db X-trackers Funds” will be rebranded “Deutsche X-trackers ETFs.” As a result the Funds will be renamed as follows:
| Current Fund Name |
New Fund Name | |
| db X-trackers 2010 Target Date Fund | Deutsche X-trackers 2010 Target Date ETF | |
| db X-trackers 2020 Target Date Fund | Deutsche X-trackers 2020 Target Date ETF | |
| db X-trackers 2030 Target Date Fund | Deutsche X-trackers 2030 Target Date ETF | |
| db X-trackers 2040 Target Date Fund | Deutsche X-trackers 2040 Target Date ETF | |
| db X-trackers In-Target Date Fund | Deutsche X-trackers In Target Date ETF |
61
db-X Exchange-Traded Funds Inc.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
db-X Exchange-Traded Funds Inc.:
We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of db X-trackers 2010 Target Date Fund, db X-trackers 2020 Target Date Fund, db X-trackers 2030 Target Date Fund, db X-trackers 2040 Target Date Fund, and db X-trackers In-Target Date Fund (the “Company” comprising db-X Exchange-Traded Funds Inc.), as of May 31, 2014, and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. We were not engaged to perform an audit of the Company’s 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 Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements and the financial highlights, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of May 31, 2013, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. 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 db X-trackers 2010 Target Date Fund, db X-trackers 2020 Target Date Fund, db X-trackers 2030 Target Date Fund, db X-trackers 2040 Target Date Fund, and db X-trackers In-Target Date Fund at May 31, 2014, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with U.S. generally accepted accounting principles.
New York, New York
July 24, 2014
62
db-X Exchange-Traded Funds Inc.
OFFICERS AND DIRECTORS (Unaudited)
| Name, Address, and Age |
Position(s) Held with Fund |
Term of Office and Length of Time Served |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen by Director |
Other Directorships held by Director | |||||
| Disinterested Directors: |
||||||||||
| R. Charles Tschampion Age 68, 60 Wall Street New York, New York 10005 |
Director, Chairman of the Audit Committee and Member of the Nominating Committee | Since 2007 | Director, Special Projects CFA Institute (2005 to present)); Trustee of Lehigh University (October 1998-June 2010) and Chair of the Investment Sub-Committee for the Lehigh University Endowment Fund (1998 to 2008). | 5 | Trustee and Member of the Audit Committee, SPDR Select Sector Trust; Director, Select High Yield Oversees Fund, LLC; Director, Real Estate Information Standards Board. | |||||
| Ernest J. Scalberg Age 69, 60 Wall Street New York, New York 10005 |
Director, Member of the Audit and Nominating Committees | Since 2007 | Research Professor, and Director of the GLOBE Center, Monterey Institute of International Studies (2009 to present); Associate Vice President for External Programs and Dean of the Fisher Graduate School of International Business (2001-2009); Director, Adviser or Trustee to numerous non-profit organizations (1974 to present). | 5 | Trustee and Chair of the Nominating and Governance Committee and Member of the Audit Committee, SPDR Select Sector Trust; Chairman of the Board of the Foundation, International University in Geneva (IUG), Switzerland. | |||||
| Michael G. Smith Age 70, 60 Wall Street New York, New York 10005 |
Director, Member of the Audit and Nominating Committees | Since 2007 | Retired; formerly with Merrill Lynch as Managing Director of Global Investor Client Strategy (1996 to 1998), Head of Regional U.S. Institutional Sales (1995 to 1996) and of U.S. Central Region (1986 to 1995). | 5 | Director, Ivy Funds, Inc.; Director, Northwestern Mutual Series Fund, Inc.; Director, Cox Business School, Southern Methodist University. | |||||
63
db-X Exchange-Traded Funds Inc.
OFFICERS AND DIRECTORS (Unaudited) (Continued)
| Name, Address, and Age |
Position(s) Held with Fund |
Term of Office and Length of Time Served |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen by Director |
Other Directorships held by Director | |||||
| Interested Director/Officers:* |
||||||||||
| Alex Depetris Age 34, 60 Wall Street New York, New York 10005 |
Director, Chairman of the Board, President, Chief Executive Officer, and Secretary | Since 2010 | Director in the Deutsche Asset and Wealth Management Passive Asset Management Group at Deutsche Bank AG since 2008; Associate, Arnold & Porter, 2006-2008. |
22 | Trustee, Chairman of the Board, DBX ETF Trust and db-X Exchange Traded Funds Inc. | |||||
| Martin Kremenstein Age 37, 60 Wall Street New York, New York 10005 |
Chief Operating Officer | Since 2010 | Managing Director in the DBX Group at Deutsche Bank AG since 2006; Vice President, Market Risk Management JP Morgan Chase until 2006. | N/A | N/A | |||||
| Michael Gilligan Age 47, 60 Wall Street New York, New York 10005 |
Treasurer, Chief Financial Officer and Controller | Since 2010 | Director in the Finance Group at Deutsche Bank AG with CFO responsibility for DBX Advisors LLC, DBX Strategic Advisors LLC and DB Commodity Services LLC since 2008; Chief Operating Officer, Americas Credit Trading, Credit Suisse, 2007-2008. |
N/A | N/A | |||||
64
db-X Exchange-Traded Funds Inc.
OFFICERS AND DIRECTORS (Unaudited) (Continued)
| Name, Address, and Age |
Position(s) Held with Fund |
Term of Office and Length of Time Served |
Principal Occupation(s) During Past 5 Years |
Number of Portfolios in Fund Complex Overseen by Director |
Other Directorships held by Director | |||||
| Frank Gecsedi Age 46, 60 Wall Street New York, New York 10005 |
Chief Compliance Officer | Since 2010 | Vice President of Deutsche Bank’s Global Markets Legal, Risk and Capital Division since 2010; Vice President and Compliance Manager at Bank of America Merrill Lynch, 2000-2010. | N/A | N/A |
| * | Officers/Director of the Company are “interested persons” as defined in the 1940 Act. |
| ** | Effective February 22, 2011, Mr. Depetris was elected as a Director of the Company and appointed Chairman of the Board. On such date, Mr. Depetris was also elected President and Chief Executive Officer of the Company. Mr. Depetris has served as the Company’s Secretary since 2010. |
The Fund’s SAI includes additional information about the Fund’s Directors and is available by calling 1-877-369-4617, or on the Company’s website at www.dbxus.com.
65
db-X Exchange-Traded Funds Inc.
BOARD CONSIDERATIONS IN APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY CONTRACTS (Unaudited)
At a meeting held on February 25, 2014, the Board of Trustees (the “Board”), including the Independent Trustees (those not affiliated with the Trust or its service providers), unanimously approved the continuance of the Investment Advisory Agreement and Sub-Advisory Agreements (together, the “Agreements”), on behalf of the Trust’s five (5) underlying portfolios (each, a “Fund”, and together, the “Funds”).
In reaching this decision with respect to the Investment Advisory Agreement (the “Advisory Agreement”), the Board considered all factors it believed relevant, including (1) the nature, extent and quality of the services to be provided to the Funds and their shareholders; (2) the Adviser’s financial resources and its resulting ability to perform its obligations under the Advisory Agreement; (3) the competitiveness of the advisory fee; (4) the total cost of the services to be provided by and the profits that could be realized by the Adviser from its relationship with the Funds; and (5) the extent to which economies of scale would be realized as the Funds grow, and if the Funds’ shareholders would benefit from those economies.
In reaching this decision with respect to the Sub-Advisory Agreement, the Board considered all factors it believed relevant, including (1) the nature, extent and quality of the services to be provided to the Funds and their shareholders; (2) the performance of the Sub-Advisor with respect to its management of other funds of the Trust, as well as the Sub-Advisor’s financial resources and its resulting ability to perform its obligations under the Sub-Advisory Agreement; (3) the total cost of the services to be provided by and the profits that could be realized by the Sub-Advisor from its relationship with the Funds; and (4) the extent to which economies of scale would be realized as the Funds grow, and if the Funds’ shareholders would benefit from those economies.
The Board reached a determination, with the assistance of Trust counsel and through the exercise of its business judgment, that approval of the Agreements and the compensation to be received thereunder is consistent with the Board’s duties under state and federal law. The Board reached this conclusion based on multiple factors.
The Board considered the following in determining whether to approve the Advisory Agreement:
| (i) | Nature, Extent and Quality of Services |
The Board reviewed in detail the nature, extent and quality of services to be provided by the Adviser under the Advisory Agreement. The Board noted that these services include, among other things, furnishing a continuous investment program for the Funds, including arranging for, or implementing, the purchase and sale of portfolio securities, the provision of general corporate services such as portfolio management compliance services and the preparation and filing of certain reports on behalf of the Trust. The Board also considered, among other things, the professional experience and qualifications of the senior management and key professional personnel of the Adviser, including those individuals responsible for portfolio management. The Board considered that the Adviser provides, at its own expense, office facilities and equipment for use by the Funds and supervisory persons responsible for supervising and monitoring the Trust’s service providers. The Board also considered that the Adviser pays for the compensation of officers of the Trust who are also officers or employees of the Adviser, except as may otherwise be determined by the Board. The Board also considered that the Adviser arranges for the provision of transfer agency, custody, fund administration and accounting, and other non-distribution services necessary for each Fund’s operation. The Board also considered the role to be played by the Adviser in working with Sub-Advisor to manage the Funds’ portfolios, noting that the Adviser would provide oversight of day-to-day operations, including monitoring tracking error, providing services in connection with creation and redemption units and assistance in meeting legal and regulatory requirements applicable to the Funds.
The Board evaluated these factors in consultation with Trust Counsel. Based on its review, the Board concluded that the nature, extent, and quality of services to be provided by the Adviser under the Advisory Agreement are reasonable and appropriate in relation to the fees to be paid to the Adviser. The Board considered the staffing of the Adviser, including the training, qualifications and experience of investment personnel in managing the Funds. The Board also considered the expertise of the Adviser in supervising third-party service providers to the Funds, such as the administrator and custodian. The Board further considered the compliance program of the Adviser which supports each Fund’s compliance program.
| (ii) | Adviser’s Financial Resources |
In connection with the assessment of the ability of the Adviser to perform its duties under the Advisory Agreement, the Board considered the Adviser’s financial condition and whether it had the resources necessary to carry out its functions. The Board concluded that the Adviser had the financial resources necessary to perform its obligations under the Advisory Agreement.
66
db-X Exchange-Traded Funds Inc.
BOARD CONSIDERATIONS IN APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY CONTRACTS (Unaudited) (Continued)
| (iii) | Reasonableness of Advisory Fee |
The Board compared each Fund’s proposed advisory fee to that of other exchange-traded funds (“ETFs”), and noted that each Fund’s fee is competitive with the fees of its respective peer group. The Board also noted that the Funds’ portfolios would be managed on a day-to-day basis by the Sub-Adviser, which will receive a fee from the Adviser. The Board considered the allocation of responsibilities between the Adviser and Sub-Adviser and noted that the Adviser would provide oversight of day-to-day operations, including monitoring tracking error, providing services in connection with creation and redemption units and assistance in meeting legal and regulatory requirements applicable to the Funds. Based on its review, the Board concluded that the advisory fee is reasonable in light of the services provided.
| (iv) | Costs of Services and Profitability |
The Board considered the expenses of the Adviser in developing and rendering services to the Funds, and the likelihood and level of profits in the early years of the Funds’ operations. The Board considered the asset levels at which the Adviser expected to “break-even” with respect to its operation of the Funds and noted that since the fee paid by the Adviser to the Sub-Adviser under the Sub-Advisory Agreement contained breakpoints, the Adviser could experience increased profitability as each Fund’s assets increased. The Board considered whether the Adviser would benefit in other ways from its relationships with the Funds, and concluded that there were no material fall-out benefits likely to accrue to the Adviser related to the operation of the Funds.
| (v) | Economies of Scale |
The Board considered whether economies of scale would be realized by the Funds at higher asset levels. The Board also assessed whether certain costs would increase if asset levels rise. The Board concluded that under foreseeable conditions, they were unable to assess at this time whether economies of scale would be realized if the Funds were to experience significant growth. In the event there were to be significant asset growth in the Funds, the Board determined to reassess whether the advisory fees appropriately took into account any economies of scale that had been realized as a result of that growth.
Given all the information available to it and considering all material factors, the Board concluded that the Investment Advisory Agreement was fair and reasonable and it was unanimously approved.
The Board considered the following in determining whether to approve the Advisory Agreement:
| (i) | Nature, Extent and Quality of Services |
In considering the nature, extent and quality of services that the Sub-Advisor proposes to provide to the Funds, the Board reviewed in detail the nature, extent and quality of services to be provided by the Sub-Advisor under the Sub-Advisory Agreement. The Board noted that these services include, among other things, furnishing a continuous investment program for the Funds, including arranging for, or implementing, the purchase and sale of portfolio securities.
The Board also considered the Sub-Advisor’s operational capabilities and resources, and its experience in serving as investment sub-adviser to other funds, (including certain other index-based ETFs advised by the Adviser. The Board considered the professional experience and qualifications of the Sub-Advisor’s senior management and key professional personnel, as well as Sub-Advisor’s depth and breadth of experience in managing investment portfolios consisting of U.S. and non-U.S. equity securities. The Board gave special consideration to the Sub-Advisor’s experience and capabilities in implementing currency hedging strategies, and their techniques for implementing such strategies while minimizing index tracking error. In addition, the Board considered the Sub-Advisor’s operational capabilities and resources, and the Sub-Advisor’s experience in managing index funds covering various asset classes. The Board noted that the Sub-Advisor manages its index-based portfolios using both full replication and sampling techniques and maintains strict discipline in the implementation of its indexing strategies. To that end, the Board noted that when there are changes to a benchmark index, the Sub-Advisor closely monitors any such changes to devise strategies to realign its portfolios at the lowest possible cost while tracking the respective benchmark index. The Board also noted the Sub-Advisor’s processes to minimize the cost of trading.
The Board evaluated these factors in consultation with Trust Counsel. Based on its review, the Board concluded that the nature, extent, and quality of services to be provided by the Sub-Advisor under the Sub-Advisory Agreement are reasonable and appropriate in relation to the fees to be paid to the Sub-Advisor, taking special consideration of the fact that the fees to be paid to the Sub-Advisor are payable by the Adviser and not the Funds.
67
db-X Exchange-Traded Funds Inc.
BOARD CONSIDERATIONS IN APPROVAL OF INVESTMENT ADVISORY AND SUB-ADVISORY CONTRACTS (Unaudited) (Continued)
| (ii) | Performance of Sub-Advisor; Sub-Advisor’s Financial Resources |
The Board considered the Sub-Advisor’s performance in managing the Funds, as well as other index based portfolios, and its record at minimizing tracking error. The Board concluded that the Sub-Advisor had generally been able to keep any such Fund’s tracking error, as well as the Funds’ tracking error, within acceptable ranges.
The Board also considered the Sub-Advisor’s financial condition and whether it had the resources necessary to carry out its functions. The Board concluded that the Sub-Advisor had the financial resources necessary to perform its obligations under the Sub-Advisory Agreement.
| (iii) | Reasonableness of Sub-Advisory Fee |
The Board noted that the fee to be paid to the Sub-Advisor in respect of the Funds would be paid by the Adviser and not the Funds. Based on its review, the Board concluded that the sub-advisory fees were reasonable in light of the services provided.
| (iv) | Costs of Services and Profitability |
The Board considered the asset levels at which the Sub-Advisor expected to “break-even” with respect to its operation of the Funds, and further noted that the fee paid by the Adviser to the Sub-Advisor under the Sub-Advisory Agreement contained breakpoints.
The Board noted that since the fee paid by the Adviser to the Sub-Adviser under the Sub-Advisory Agreement contained breakpoints, the Adviser could experience increased profitability as each Fund’s assets increased.
The Board also considered whether the Sub-Advisor would benefit in other ways from its relationship with the Funds. The Board discussed the Sub-Advisor’s practices regarding the selection and compensation of brokers and dealers that would execute portfolio transactions for the Funds and the brokers’ and dealers’ provision of brokerage services to Sub-Advisor. The Board discussed the possible potential benefits the Sub-Advisor might derive from the Funds’ soft dollar arrangements, whereby brokers provide brokerage services to the Funds or the Sub-Advisor in return for allocating fund brokerage.
| (v) | Economies of Scale |
The Board considered whether economies of scale would be realized by the Funds at higher asset levels. The Board also assessed whether certain costs would increase if asset levels rise. The Board concluded that under foreseeable conditions, they were unable to assess at this time whether economies of scale would be realized if the Funds were to experience significant growth. In the event there were to be significant asset growth in the Funds, the Board determined to reassess whether the sub-advisory fees appropriately took into account any economies of scale that had been realized as a result of that growth.
Given all the information available to it and considering all material factors, the Board concluded that the Sub-Advisory Agreement was fair and reasonable and it was unanimously approved.
68
db-X Exchange-Traded Funds Inc.
ADDITIONAL INFORMATION (Unaudited)
Proxy Voting
The Funds’ policies and procedures for voting proxies for portfolio securities and information about how each Fund voted proxies related to its portfolio securities during the 12-month period ended June 30 are available on our website — www.dbxus.com (click on “proxy voting” at the bottom of the page) — or on the SEC’s website — www.sec.gov. To obtain a written copy of the Funds’ policies and procedures without charge, upon request, call us toll free at (855) 329-3837.
Quarterly Portfolio Disclosure
The Funds are required to file their complete schedule of portfolio holdings with the SEC for their first and third fiscal quarters on Form N-Q. Copies of the filings are available without charge, upon request on the SEC’s website at www.sec.gov and are available by calling the Company at 855-369-4617. You can also obtain copies of Form N-Q by (i) visiting the SEC’s Public Reference Room in Washington, DC (information on the operation of the Public Reference Room may be obtained by calling 800-SEC-0330); (ii) sending your request and a duplicating fee to the SEC’s Public Reference Room, Washington, DC 20549-0102; or (iii) sending your request electronically to publicinfo@sec.gov.
Information about each Fund’s portfolio holdings is available daily at www.dbxus.com.
Discount & Premium Information
Information regarding how often shares of each Fund traded on NYSE Arca at a price above (i.e., at a premium) or below (i.e., at a discount) the Net Asset Value of the Fund can be found at www.dbxus.com.
Tax Information
Form 1099-DIV, Form 1042-S and other year-end tax information provide shareholders with actual calendar year amounts that should be included in their tax returns. Shareholders should consult their tax advisors.
Each Fund designates the following amounts or, if subsequently determined to be different, the maximum amount allowable for its fiscal year ended May 31, 2014.
| Qualified Dividend Income* |
Dividends Received Deduction* |
|||||||
| db X-trackers 2010 Target Date Fund |
100% | 75% | ||||||
| db X-trackers 2020 Target Date Fund |
100% | 70% | ||||||
| db X-trackers 2030 Target Date Fund |
86% | 46% | ||||||
| db X-trackers 2040 Target Date Fund |
100% | 63% | ||||||
| db X-trackers In-Target Date Fund |
100% | 82% | ||||||
* The above percentage is based on ordinary income dividends paid to shareholders during each Fund’s fiscal year.
69
db-X Exchange-Traded Funds Inc.
PRIVACY POLICY NOTICE (Unaudited)
DBX Strategic Advisors, LLC (“Advisors”) collects non-public information about you from the following sources: (i) information received from you on applications or other forms; and (ii) information about your transactions with the Advisors, Advisors’ affiliates and third-party service providers and vendors. Advisors does not disclose any non-public personal information about you to anyone, other than as set forth below, as permitted by applicable law and regulation. Advisors may disclose non-public personal information about you to the funds in which you invest, to Advisors’ affiliates, and to non-affiliated companies that work with Advisors to service your account(s), or to provide services or process transactions that you have requested. Advisors may disclose non-public personal information in situations that may include, but are not limited to, in response to legal and/or regulatory inquiries and the proposed or actual sale, assignment merger or other transfer of all or a portion of Advisors’ business to another business entity. Advisors may also disclose non-public personal information about you to parties representing you, such as your investment representative, your accountant, your tax adviser, or to other third parties at your direction/consent. Advisors will not sell, rent, license or trade your personal and financial information to or with third parties for their own direct marketing use unless you give us general or specific consent to do so. If you decide to close your account(s) or become an inactive customer, Advisors will adhere to the privacy policies and practices as described in this notice. Advisors restricts access to your personal and account information to those employees who need to know that information to provide products and services to you. Advisors maintains reasonable and customary physical, electronic and procedural safeguards to guard your non-public personal information.
Advisors reserves the right, at their discretion, to change, modify, add, or remove portions of this Privacy Policy Notice, and any of the policies described herein, at any time. Advisors will indicate any such changes to the Privacy Policy Notice at the privacy link which can be found at www.dbxus.com. At all times, you are bound by the then-current version of the Privacy Policy and all applicable laws. Advisors highly recommends that you review this Privacy Policy Notice from time to time to ensure that you are familiar with the most recent version. The examples contained in this Privacy Policy Notice are illustrations; they are not intended to be exclusive.
70
db-X Exchange-Traded Funds Inc.
This report is intended for the shareholders of the db-X Exchange-Traded Funds.
An Investor should consider the fund’s investment objective, risks, charges and expenses carefully before investing. For this and more complete information about the fund call 877-369-4617 or visit the website www.dbxus.com. Please read the prospectus carefully before investing.
There are risks involved with investing in exchange-traded funds including possible loss of money. db-X Exchange-Traded Funds are not actively managed and are subject to risks similar to stocks, including those related to short selling and margin maintenance. Losses from short sales may be unlimited, and losses from purchases on margin may exceed original investment.
Investments in small and medium capitalization companies will be subject to higher volatility than larger, more established companies.
Investments in foreign securities will be subject to certain risks not associated with domestic securities, such as currency fluctuations, and changes in political and economic conditions.
Investments in fixed income securities will be subject to certain risks as well. The prices of fixed income securities respond to economic developments, particularly interest rate changes, as well as to perceptions about the credit risk of individual issuers. Generally, fixed income securities will decrease in value if interest rates rise, and the volatility of lower rated securities is even greater than that of higher rated securities.
There is no assurance that the investment process will consistently lead to successful investing. Diversification does not eliminate the risk of experiencing investment losses.
The prospectus is not an offer to buy or sell the portfolio shares, nor is the fund soliciting an offer to buy its shares in any jurisdiction where the offer or sale is not permitted.
db-X Exchange-Traded Funds are distributed by ALPS Distributors, Inc., member of FINRA, which is neither affiliated with db-X Exchange-Traded Funds Inc. or any other affiliate, nor is it affiliated with The Bank of New York Mellon, Amerivest Investment Management, LLC, or TDAM USA Inc.
“Target Date” refers to a time in the future, generally a specified year, in which the investor expects to retire or otherwise require the use of the invested funds. Target date funds are generally more aggressive the further the target date is from the present, with an objective of capital appreciation. As the target date approaches, the fund’s objective will generally become more conservative, aiming to achieve a higher level of capital preservation.
Zacks and Zacks Lifecycle index are servicemarks of Zacks Investment Research, Inc. (“Zacks”) and have been licensed for use by Deutsche Bank AG. The Fund is not sponsored, endorsed, issued, sold or promoted by Zacks. Zacks does not make any representation regarding the advisability of investing in the Funds.
Investors should note that although target date funds aim to preserve capital as the target date approaches, there is no guarantee that the fund will achieve this objective.
Copyright © 2013 Deutsche Bank AG. All rights reserved. db-X® is a registered trademark of Deutsche Bank AG. All other trademarks, servicemarks or registered trademarks are the property of their respective owners.
Not FDIC Insured — No Bank Guarantee — May Lose Value
db-X Exchange-Traded Funds Inc.
INVESTMENT ADVISOR
DBX Strategic Advisors LLC
60 Wall Street
New York, NY 10005
INVESTMENT SUB-ADVISOR
TDAM USA Inc.
161 Bay Street, 35th Floor
TD Canada Trust Tower
Toronto, Ontario Canada M5J 2T2
ADMINISTRATOR, CUSTODIAN, FUND ACCOUNTANT & TRANSFER AGENT
The Bank of New York Mellon
101 Barclay Street
New York, NY 10286
DISTRIBUTOR
ALPS Distributors, Inc.
1290 Broadway
Suite 1100
Denver, CO 80203
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Ernst & Young LLP
5 Times Square
New York, NY 10036
LEGAL COUNSEL
Dechert LLP
1095 Avenue of the Americas
New York, NY 10036
R-35363-1 (8/14) TDX860 (8/15)
Item 2. Code of Ethics.
| (a) | The registrant, as of the end of the period covered by this report, has adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
| (c) | There have been no amendments, during the period covered by this report, to a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, and that relates to any element of the code of ethics description. |
| (d) | The registrant has not granted any waivers, including an implicit waiver, from a provision of the code of ethics that applies to the registrant’s principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party, that relates to one or more of the items set forth in paragraph (b) of this item’s instructions. |
Item 3. Audit Committee Financial Expert.
R. Charles Tschampion is the designated financial expert on the Audit Committee of db-X Exchange-Traded Funds Inc. with respect to db-X Exchange-Traded Funds Inc., R. Charles Tschampion is not an “interested person” as such terms are defined by Section 2(a)(19) of the Act (15 U.S.C. 80a-2(a)(19).
Item 4. Principal Accountant Fees and Services.
Audit Fees
| (a) | The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the 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 are $98,000 for 2014 and $98,000 for 2013. |
Audit-Related Fees
| (b) | The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this Item are $0 for 2014 and $0 for 2013. |
Tax Fees
| (c) | The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning are $18,200 for 2014 and $17,500 for 2013. |
All Other Fees
| (d) | The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal accountant, other than the services reported in paragraphs (a) through (c) of this Item are $0 for 2014 and $0 for 2013. |
| (e)(1) | In accordance with Rule 2-01(c)(7)(A), the Audit Committee pre-approves all of the audit and permissible non-audit services of the Registrant. |
| (e)(2) | All of the services described in paragraphs (b) through (d) above were approved by the Audit Committee in accordance with paragraph (c) (7) (i) (c) of Rule 2-01 of Regulation S-X. |
| (f) | Not Applicable. |
| (g) | The aggregate non-audit fees billed by the registrant’s accountant for services rendered to the registrant, and rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant for each of the last two fiscal years of the registrant was $4,524,752 for 2014 and $0 for 2013. |
| (h) | The registrant’s audit committee of the board of directors has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X is compatible with maintaining the principal accountant’s independence. |
Item 5. Audit Committee of Listed registrants.
The Registrant is a listed issuer as defined in Rule 10A-3 under the Exchange Act and has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Registrant’s audit committee members are Ernest J. Scalberg, Michael G. Smith and R. Charles Tschampion.
| Item 6. | Investments. |
| (a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1 of this form. |
| (b) | Not applicable. |
| Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable.
| Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable.
| Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable.
| Item 10. | Submission of Matters to a Vote of Security Holders. |
There were no material changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board or Trustees.
| Item 11. | Controls and Procedures. |
| (a) | The Chief Executive and Financial Officers concluded that the Registrant’s Disclosure Controls and Procedures and effective based on the evaluation of the Disclosure Controls and Procedures as of date within 90 days of the filing of this report. |
| (b) | There have been no changes in the registrant’s internal control over financial reporting 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 controls over financial reporting. |
Item 12. Exhibits.
| (a)(1) | Code of ethics, or any amendment thereto, that is the subject of disclosure required by Item 2 is attached hereto. |
| (a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
| (a)(3) | Not applicable. |
| (b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(12.other) Not applicable.
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) db-X Exchange-Traded Funds Inc. | ||||
| By (Signature and Title)* |
/s/ Alex Depetris |
|||
| Alex Depetris |
||||
| President and Chief Executive Officer |
||||
Date August 7, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title)* |
/s/ Alex Depetris |
|||
| Alex Depetris |
||||
| President and Chief Executive Officer |
||||
| Date August 7, 2014 |
||||
| By (Signature and Title)* |
/s/ Michael Gilligan |
|||
| Michael Gilligan |
||||
| Treasurer, Chief Financial Officer and Controller |
||||
Date August 7, 2014
* Print the name and title of each signing officer under his or her signature.