N-CSR 1 e54062ncsr.htm SHAREHOLDER REPORT a54062.htm - Generated by SEC Publisher for SEC Filing

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:   811-22227
 
  IndexIQ ETF Trust  
(Exact name of registrant as specified in charter)
 

800 Westchester Ave., Suite N-611

  Rye Brook, NY 10573

(Address of principal executive offices) (Zip code)

 

Adam S. Patti

 IndexIQ Advisors LLC

 800 Westchester Ave., Suite N-611

Rye Brook, NY 10573

 (Name and address of agent for service)

 

Registrant's telephone number, including area code:1-888-934-0777

 

Date of fiscal year end:  April 30

 

Date of reporting period: April 30, 2013

 

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 | APRIL 30, 2013

IndexIQ ETF Trust


IQ Hedge Multi-Strategy Tracker ETF (QAI)
IQ Hedge Macro Tracker ETF (MCRO)
IQ Hedge Market Neutral Tracker ETF (QMN)
IQ Real Return ETF (CPI)
IQ Global Resources ETF (GRES)
IQ Merger Arbitrage ETF (MNA)
IQ Australia Small Cap ETF (KROO)
IQ Canada Small Cap ETF (CNDA)
IQ Global Agribusiness Small Cap ETF (CROP)
IQ Global Oil Small Cap ETF (IOIL)
IQ US Real Estate Small Cap ETF (ROOF)

 
 


The investment return and value of each of the Funds’ shares will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Performance may be lower or higher than performance data quoted. Consider the Funds’ investment objectives, risks, charges and expenses carefully before investing. The prospectus and the statement of additional information include this and other relevant information about the Funds and are available by visiting www.indexiq.com or by calling 1-888-934-0777. Read the prospectus carefully before investing.

Each of the Funds’ performance that is current to the most recent month-end is available by visiting www.indexiq.com or by calling 1-888-934-0777.

The Funds file their complete schedules of portfolio holdings with the Commission for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Commission’s web site at www.sec.gov. The Funds’ Forms N-Q also may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC; information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.

Each Funds’ premium/discount information is available, free of charge, on the Funds’ website, www.indexiq.com or by calling 1-888-934-0777.

The Funds are distributed by ALPS Distributors, Inc., which is not affiliated with IndexIQ or the Funds’ investment advisor.

IndexIQ® and IQ® are registered service marks of IndexIQ.

 
 

Help Preserve the Environment — Go Green!

With e-Delivery, you can:

Receive email notifications when your most recent shareholder communications are available for review.
Access prospectuses, annual reports and semiannual reports online.

It’s easy to enroll:

1. Visit https://www.icsdelivery.com/live/

2. Follow the simple enrollment instructions

If you have questions about IndexIQ e-Delivery services, contact a representative at 888-934-0777.


 
 

Table of Contents

 

Shareholder Letter 5
Management’s Discussion of Fund Performance 6
Fund Expenses 28
Portfolio Summaries 30
Schedules of Investments  
IQ Hedge Multi-Strategy Tracker ETF 32
IQ Hedge Macro Tracker ETF 34
IQ Hedge Market Neutral Tracker ETF 35
IQ Real Return ETF 36
IQ Global Resources ETF 37
IQ Merger Arbitrage ETF 40
IQ Australia Small Cap ETF 41
IQ Canada Small Cap ETF 43
IQ Global Agribusiness Small Cap ETF 45
IQ Global Oil Small Cap ETF 46
IQ US Real Estate Small Cap ETF 47
Statements of Assets and Liabilities 48
Statements of Operations 51
Statements of Changes in Net Assets 54
Financial Highlights 58
Notes to Financial Statements 63
Report of Independent Registered Public Accounting Firm 78
Supplemental Information 79
Board Review and Approval of Advisory Contracts 80
Board of Trustees and Officers 82
4
 

Shareholder Letter (unaudited)

 

Dear Shareholder:

For the twelve months ended April 30, 2013, the key focus of the markets was on yield. The announcement by the Federal Reserve (the “Fed”) of the latest round of monetary stimulus (named Quantitative Easing 3 or “QE3”) in which the Fed committed to purchase $85 billion each month of mortgages and other assets contained an open-ended commitment to continue the program until the unemployment rate dropped. Additionally, investors grappled with the sovereign debt issues that continued to plague Europe, fiscal gridlock in the U.S., and sluggish global economic growth. The confluence of these events drove the yield on the U.S. 10 year Treasury bond to record lows. With interest rates at an all-time low, investors looked for yield wherever they could find it. Real estate and Real Estate Investment Trusts (“REITs”) were major beneficiaries in this economic climate, as they posted very strong returns. Corporate bonds, both investment grade and high yield, also moved sharply higher as investors assumed more risk to obtain higher yield.

Equity assets also benefitted from historic low yields. With low inflation and an accommodative monetary policy, U.S. large cap and small cap stocks had returns near 20%. Developed international large cap stocks also participated in the rally, although emerging market stocks were weighed down by concerns of slowing growth in China. Commodity returns were generally negative with precious metals falling sharply on reduced inflation fears. Oil also dropped, although natural gas had a sharp recovery after falling near record low prices in June.

Investors have recognized that having a well-diversified portfolio is critical to a better long-term investment strategy. Alternative investments have historically provided investors with added diversification to their portfolios. By marrying the diversification benefits of alternative investments and the growth of exchange-traded funds (ETFs), IndexIQ is seeking to provide investors with innovative tools in a dynamic market environment.*

We at IndexIQ call ourselves “The alternative to alternatives” because, despite the attractive features of alternative assets, for the most part, these strategies have not been available to the majority of investors in a liquid and transparent manner. We believe that our solutions bridge this gap by giving investors the alternative asset performance characteristics they are looking for, but in a more liquid and transparent (daily holdings are published) manner relative to typical alternative asset strategies.

I want to personally thank you for your interest in IndexIQ and our investment products. I invite you to visit us at www.indexiq.com or call us at (888) 934-0777 for more information on our company and our investment solutions.

Adam S. Patti
Chief Executive Officer

Registered Representative of ALPS Distributors, Inc

 

* Diversification does not eliminate the risk of experiencing investment loss.

5
 

Management’s Discussion of Fund Performance (unaudited)

 

IQ Hedge Multi-Strategy Tracker ETF

The Fund seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of the IQ Hedge Multi-Strategy Index, which seeks to track the “beta” portion of the returns (i.e., that portion of the returns of hedge funds that are non-idiosyncratic, or unrelated to manager skill) of hedge funds that employ various hedge fund investment styles, which may include but are not limited to macro, long/short, event-driven, market neutral, emerging markets, fixed-income arbitrage and other strategies commonly used by hedge fund managers. The Fund implements its strategy by investing primarily in ETFs representing various asset classes. The Fund does not invest directly in hedge funds.

For the 12-month period ended April 30, 2013, the Fund (NAV) returned 3.85% versus 5.80% and 16.89% for the HFRI Fund of Funds Composite Index and Standard & Poor’s 500® Composite Stock Price Index (the “S&P 500 Index”), respectively.

The principal positive contributors to Fund performance for the period, in aggregate, were the Fund’s exposures, through investments in ETFs, to the investment grade corporate bond market and the convertible bond market. The Fund also benefitted from positions in equities (U.S. large cap and small cap, as well developed international).

The primary drivers of negative performance were the Fund’s long exposures to emerging equity markets and the Japanese Yen. Short exposure to real estate also detracted from performance. The short exposure to real estate was effected through a total return swap on an ETF that invests primarily in REITs.

Overall, during the fiscal year, the Fund used derivatives, including total return swaps to effect long and short exposure to several asset classes and futures to effect short exposure to several asset classes. The use of swaps had a materially positive impact on performance, while the use of futures had a moderately negative impact on performance.

Hypothetical Growth of a $10,000 Investment
(Since Inception Through 4/30/2013)

This chart illustrates the performance of a hypothetical $10,000 investment made on the Fund’s inception, and is not intended to imply any future performance.

Fund Performance History

IQ Hedge Multi-Strategy Tracker ETF
(as of April 30, 2013)

   
  1 Year   Since Inception1
  Average
Annual
  Average
Annual
  Cumulative
IQ Hedge Multi-Strategy Tracker ETF Market Price2 4.00 %   4.41 %   19.37 %
IQ Hedge Multi-Strategy Tracker ETF NAV 3.85 %   4.39 %   19.27 %
IQ Hedge Multi-Strategy Index 4.74 %   4.96 %   21.97 %
HFRI Fund of Funds Composite Index3 5.80 %   4.72 %   20.74 %
S&P 500 Index 16.89 %   20.08 %   111.77 %

 

 
1Fund Inception Date: 3/24/2009.
2The price used to calculate Market Price returns is determined by using the closing price listed on the NYSE Arca and does not represent returns an investor would receive if shares were traded at other times.
3Data shown above for the HFRI Fund of Funds Composite Index is from 3/31/2009 to 4/30/2013.
6
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

Since the shares of the Fund did not trade in the secondary market until the day after the Fund’s commencement, for the period from commencement (3/24/2009) to the first day of secondary market trading in shares of the Fund (3/25/2009), the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns.

The performance data quoted above represents past performance. Past performance does not guarantee future results. The investment return and value of the Fund shares will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current Fund performance may be lower or higher than performance data quoted. Fund performance that is current to the most recent month-end is available by calling 1-888-934-0777 or by visiting www.indexiq.com. Returns shown include the reinvestment of all dividends and other distributions and do not reflect taxes that a shareholder would pay on the Fund’s distributions or redemption of the Fund’s shares. The gross total annual operating expense ratio was 1.03%, which includes a management fee of 0.75% and acquired fund fees and expenses of 0.28%. This expense information is consistent with the current Fund prospectus, dated August 27, 2012.

Index performance is for illustrative purposes only and does not represent actual Fund performance. One cannot invest directly in an index. Performance data for the Index assumes reinvestment of dividends and is net of the management fees for the Index’s components, as applicable, but it does not reflect management fees, transaction costs or other expenses that you would pay if you invested in the Fund directly.

The HFRI Fund of Funds Composite Index is an equally weighted hedge fund index including over 650 domestic and off-shore funds of funds.

The S&P 500 Index is a broad-based unmanaged index of 500 stocks, which is designed to represent the equity market in general (performance data assumes reinvestment of dividends, but it does not reflect management fees, transaction costs or other expenses).

The Fund is non-diversified and may be susceptible to greater losses if a single portfolio investment declines than would a diversified mutual fund. The Fund is not suitable for all investors. The Fund does not invest in hedge funds.

There is no guarantee that the Fund itself, or each of the ETFs in the Fund’s portfolio, will perform exactly as their underlying indexes. The Fund’s investment performance depends on the investment performance of the underlying ETFs in which it invests. The Fund’s underlying ETFs invest in: foreign securities, which subject them to risk of loss not typically associated with domestic markets, such as currency fluctuations and political uncertainty; commodities markets, which subject them to greater volatility than investments in traditional securities, such as stocks and bonds; and fixed income securities, which subject them to credit risk, the possibility that the issuer of a security will be unable to make interest payments and/or repay the principal on its debt, and interest rate risk, changes in the value of a fixed income security resulting from changes in interest rates. Leverage, including borrowing, will cause some of the Fund’s underlying ETFs to be more volatile than if the underlying ETFs had not been leveraged.

7
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

IQ Hedge Macro Tracker ETF

The Fund seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of the IQ Hedge Macro Index, which seeks to track the “beta” portion of the returns (i.e., that portion of the returns of hedge funds that are non-idiosyncratic, or unrelated to manager skill) of a combination of hedge funds pursuing a macro strategy and hedge funds pursuing an emerging markets strategy. The Fund implements its strategy by investing primarily in ETFs representing various asset classes. The Fund does not invest directly in hedge funds.

For the 12-month period ended April 30, 2013, the Fund (NAV) returned 0.36% versus 5.80% and 17.40% for the HFRI Fund of Funds Composite Index and the MSCI World Index, respectively.

The principal positive contributors to Fund performance for the period, in aggregate, were the Fund’s exposures, through investments in ETFs, to investment grade corporate bonds, the currency carry strategy, and equities (emerging markets large cap and small cap). The Fund also benefitted from sovereign bond exposure to both U.S. and non-U.S countries.

The primary driver of negative performance was the Fund’s exposure to gold, volatility and the Japanese Yen.

Overall, during the fiscal year, the Fund used derivatives, including total return swaps and futures, to effect short exposure to several asset classes. The use of swaps had a materially negative impact on performance, while the use of futures had a moderately negative impact on performance.

Hypothetical Growth of a $10,000 Investment
(Since Inception Through 4/30/2013)

This chart illustrates the performance of a hypothetical $10,000 investment made on the Fund’s inception, and is not intended to imply any future performance.

Fund Performance History

IQ Hedge Macro Tracker ETF
(as of April 30, 2013)

   
  1 Year   Since Inception1
  Average
Annual
  Average
Annual
  Cumulative
IQ Hedge Macro Tracker ETF Market Price2 0.50 %   3.04 %   12.35 %
IQ Hedge Macro Tracker ETF NAV 0.36 %   3.02 %   12.28 %
IQ Hedge Macro Index 1.31 %   3.52 %   14.42 %
HFRI Fund of Funds Composite Index3 5.80 %   3.78 %   15.63 %
MSCI World Index 17.40 %   14.01 %   66.63 %

 

 
1Fund Inception Date: 6/08/2009.
2The price used to calculate Market Price returns is determined by using the closing price listed on the NYSE Arca and does not represent returns an investor would receive if shares were traded at other times.
3Data shown above for the HFRI Fund of Funds Composite Index is from 5/31/2009 to 4/30/2013.
8
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

Since the shares of the Fund did not trade in the secondary market until the day after the Fund’s commencement, for the period from commencement (6/8/2009) to the first day of secondary market trading in shares of the Fund (6/9/2009), the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns.

The performance data quoted above represents past performance. Past performance does not guarantee future results. The investment return and value of the Fund shares will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current Fund performance may be lower or higher than performance data quoted. Fund performance that is current to the most recent month-end is available by calling 1-888-934-0777 or by visiting www.indexiq.com. Returns shown include the reinvestment of all dividends and other distributions and do not reflect taxes that a shareholder would pay on the Fund’s distributions or redemption of the Fund’s shares. The gross total annual operating expense ratio was 1.05%, which includes a management fee of 0.75% and acquired fund fees and expenses of 0.30%. This expense information is consistent with the current Fund prospectus, dated August 27, 2012.

Index performance is for illustrative purposes only and does not represent actual Fund performance. One cannot invest directly in an index. Performance data for the Index assumes reinvestment of dividends and is net of the management fees for the Index’s components, as applicable, but it does not reflect management fees, transaction costs or other expenses that you would pay if you invested in the Fund directly.

The HFRI Fund of Funds Composite Index is an equally weighted hedge fund index including over 650 domestic and off-shore funds of funds.

The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets (performance data assumes reinvestment of dividends, but it does not reflect management fees, transaction costs or other expenses).

The Fund is non-diversified and may be susceptible to greater losses if a single portfolio investment declines than would a diversified mutual fund. The Fund is not suitable for all investors. The Fund does not invest in hedge funds.

There is no guarantee that the Fund itself, or each of the ETFs in the Fund’s portfolio, will perform exactly as their underlying indexes. The Fund’s investment performance depends on the investment performance of the underlying ETFs in which it invests. The Fund’s underlying ETFs invest in: foreign securities, which subject them to risk of loss not typically associated with domestic markets, such as currency fluctuations and political uncertainty; commodities markets, which subject them to greater volatility than investments in traditional securities, such as stocks and bonds; and fixed income securities, which subject them to credit risk, the possibility that the issuer of a security will be unable to make interest payments and/or repay the principal on its debt, and interest rate risk, changes in the value of a fixed income security resulting from changes in interest rates. Leverage, including borrowing, will cause some of the Fund’s underlying ETFs to be more volatile than if the underlying ETFs had not been leveraged.

9
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

IQ Hedge Market Neutral Tracker ETF

The Fund seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of the IQ Hedge Market Neutral Index, which seeks to track the “beta” portion of the returns (i.e., that portion of the returns of hedge funds that are non-idiosyncratic, or unrelated to manager skill) of hedge funds pursuing a market neutral strategy. The Fund implements its strategy by investing primarily in ETFs representing various asset classes. The Fund does not invest directly in hedge funds.

For the since inception (October 4, 2012) period ended April 30, 2013, the Fund (NAV) returned 3.10% versus 7.78% and 0.11% for the HFRI Equity Market Neutral Index and the Barclays Capital Short Term Treasury Bond Index, respectively.

The principal positive contributors to Fund performance for the period, in aggregate, were the Fund’s exposures, through investments in ETFs, to Convertible bonds. The Fund also benefitted from positive exposure to international developed market equities.

The primary driver of negative performance was the Fund’s short exposure to U.S. small cap equities. The short exposure was effected through a futures contract on the Russell 2000 index.

Overall, during the fiscal year, the Fund used derivatives, including total return swaps to effect long exposure to convertible bond returns and futures to effect short exposure to several asset classes. The use of swaps had a materially positive impact on performance, while the use of futures had a moderately negative impact on performance.

Hypothetical Growth of a $10,000 Investment
(Since Inception Through 4/30/2013)

This chart illustrates the performance of a hypothetical $10,000 investment made on the Fund’s inception, and is not intended to imply any future performance.

Fund Performance History

IQ Hedge Market Neutral Tracker ETF
(as of April 30, 2013)

  Since Inception1
  Cumulative
IQ Hedge Market Neutral ETF Market Price2 3.22 %
IQ Hedge Market Neutral ETF NAV 3.10 %
IQ Hedge Market Neutral Index 3.50 %
HFRI Equity Market Neutral Index 7.78 %3
Barclays Capital Short Term Treasury Bond Index 0.11 %

 

 
1Fund Inception Date: 10/4/2012.
2The price used to calculate Market Price returns is determined by using the closing price listed on the NYSE Arca and does not represent returns an investor would receive if shares were traded at other times.
3Data shown above for the HFRI Fund of Funds Composite Index is from 9/30/2012 to 4/30/2013.
10
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

Since the shares of the Fund did not trade in the secondary market until the day after the Fund’s commencement, for the period from commencement (10/4/2012) to the first day of secondary market trading in shares of the Fund (10/5/2012), the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns.

The performance data quoted above represents past performance. Past performance does not guarantee future results. The investment return and value of the Fund shares will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current Fund performance may be lower or higher than performance data quoted. Fund performance that is current to the most recent month-end is available by calling 1-888-934-0777 or by visiting www.indexiq.com. Returns shown include the reinvestment of all dividends and other distributions and do not reflect taxes that a shareholder would pay on the Fund’s distributions or redemption of the Fund’s shares. The gross total annual operating expense ratio was 0.99%, which includes a management fee of 0.75 and acquired fund fees and expenses of 0.24%. This expense information is consistent with the current Fund prospectus, dated August 27, 2012.

Index performance is for illustrative purposes only and does not represent actual Fund performance. One cannot invest directly in an index. Performance data for the Index assumes reinvestment of dividends and is net of the management fees for the Index’s components, as applicable, but it does not reflect management fees, transaction costs or other expenses that you would pay if you invested in the Fund directly.

The HFRI Equity Market Neutral Index is an equally weighted hedge fund index including domestic and off-shore equity market neutral hedge funds.

The Barclays Capital U.S. Short Treasury Bond Index (the “Barclays Capital Short Term Treasury Bond Index”) measures the performance of public obligations of the U.S. Treasury that have a remaining maturity of between 1 and 12 months.

The Fund is non-diversified and may be susceptible to greater losses if a single portfolio investment declines than would a diversified mutual fund. The Fund is not suitable for all investors. The Fund does not invest in hedge funds.

There is no guarantee that the Fund itself, or each of the ETFs in the Fund’s portfolio, will perform exactly as their underlying indexes. The Fund’s investment performance depends on the investment performance of the underlying ETFs in which it invests. The Fund’s underlying ETFs invest in: foreign securities, which subject them to risk of loss not typically associated with domestic markets, such as currency fluctuations and political uncertainty; commodities markets, which subject them to greater volatility than investments in traditional securities, such as stocks and bonds; and fixed income securities, which subject them to credit risk, the possibility that the issuer of a security will be unable to make interest payments and/or repay the principal on its debt, and interest rate risk, changes in the value of a fixed income security resulting from changes in interest rates. Leverage, including borrowing, will cause some of the Fund’s underlying ETFs to be more volatile than if the underlying ETFs had not been leveraged.

11
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

IQ Real Return ETF

The Fund seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of the IQ Real Return Index, which seeks to provide investors with a hedge against the U.S. inflation rate by providing a “real return” or a return above the rate of inflation, as represented by the Consumer Price Index, a leading government measure of inflation in the U.S. economy.

For the 12-month period ended April 30, 2013, the Fund (NAV) returned 1.09% versus 0.19% for the Barclays Capital Short Term Treasury Bond Index.

The principal positive contributors to Fund performance for the period, in aggregate, were the Fund’s exposures, through investments in ETFs, to U.S. large cap equities, U.S. REITs, and long term U.S. Treasury Bonds. The primary driver of negative performance was the Fund’s exposure to gold and oil.

Hypothetical Growth of a $10,000 Investment
(Since Inception Through 4/30/2013)

This chart illustrates the performance of a hypothetical $10,000 investment made on the Fund’s inception, and is not intended to imply any future performance.

Fund Performance History

IQ Real Return ETF
(as of April 30, 2013)

   
  1 Year   Since Inception1
  Average
Annual
  Average
Annual
  Cumulative
IQ Real Return ETF Market Price2 0.90 %   1.74 %   6.26 %
IQ Real Return ETF NAV 1.09 %   1.76 %   6.30 %
IQ Real Return Index 1.56 %   2.31 %   8.35 %
Barclays Capital Short Term Bond Index 0.19 %   0.22 %   0.76 %

 

 
1Fund Inception Date: 10/26/2009.
2The price used to calculate Market Price returns is determined by using the closing price listed on the NYSE Arca and does not represent returns an investor would receive if shares were traded at other times.
12
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

Since the shares of the Fund did not trade in the secondary market until the day after the Fund’s commencement, for the period from commencement (10/26/2009) to the first day of secondary market trading in shares of the Fund (10/27/2009), the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns.

The performance data quoted above represents past performance. Past performance does not guarantee future results. The investment return and value of the Fund shares will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current Fund performance may be lower or higher than performance data quoted. Fund performance that is current to the most recent month-end is available by calling 1-888-934-0777 or by visiting www.indexiq.com. Returns shown include the reinvestment of all dividends and other distributions and do not reflect taxes that a shareholder would pay on the Fund’s distributions or redemption of the Fund’s shares. The gross total annual operating expense ratio was 0.71%, which includes a management fee of 0.48% and acquired fund fees and expenses of 0.23%. This expense information is consistent with the current Fund prospectus, dated August 27, 2012.

Index performance is for illustrative purposes only and does not represent actual Fund performance. One cannot invest directly in an index. Performance data for the Index assumes reinvestment of dividends and is net of the management fees for the Index’s components, as applicable, but it does not reflect management fees, transaction costs or other expenses that you would pay if you invested in the Fund directly.

The Barclays Capital U.S. Short Treasury Bond Index (the “Barclays Capital Short Term Treasury Bond Index”) measures the performance of public obligations of the U.S. Treasury that have a remaining maturity of between 1 and 12 months.

The Fund is non-diversified and may be susceptible to greater losses if a single portfolio investment declines than would a diversified mutual fund. The Fund is not suitable for all investors.

There is no guarantee that the Fund itself, or each of the ETFs in the Fund’s portfolio, will perform exactly as their underlying indexes. The Fund’s investment performance depends on the investment performance of the underlying ETFs in which it invests. The Fund’s underlying ETFs invest in: foreign securities, which subject them to risk of loss not typically associated with domestic markets, such as currency fluctuations and political uncertainty; commodities markets, which subject them to greater volatility than investments in traditional securities, such as stocks and bonds; and fixed income securities, which subject them to credit risk, the possibility that the issuer of a security will be unable to make interest payments and/or repay the principal on its debt, and interest rate risk, changes in the value of a fixed income security resulting from changes in interest rates.

13
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

IQ Global Resources ETF

The Fund seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of the IQ Global Resources Index, which seeks to identify investment opportunities in the global resources market segment based on momentum and valuation factors.

For the 12-month period ended April 30, 2013, the Fund (NAV) returned –0.35% versus 17.40% and –5.33% for the MSCI World Index and the Dow Jones – UBS Commodity Index, respectively.

The principal positive contributors to Fund performance for the period, in aggregate, were the Fund’s exposures, through investments in equities, to the livestock, grains, food and fiber, and water segments. The primary drivers of negative performance were the Fund’s exposure to the Precious Metals, Industrial Metals, and Coal segments. The market hedges also detracted from performance. These hedges included short positions in futures contracts on both the S&P 500 and the EAFE indices.

Hypothetical Growth of a $10,000 Investment
(Since Inception Through 4/30/2013)

This chart illustrates the performance of a hypothetical $10,000 investment made on the Fund’s inception, and is not intended to imply any future performance.

Fund Performance History

IQ Global Resources ETF
(as of April 30, 2013)

  1 Year Since Inception1
  Average
Annual
Average
Annual
Cumulative
IQ Global Resources ETF Market Price2 –0.87 % 4.88 % 18.21 %
IQ Global Resources ETF NAV –0.35 % 5.08 % 18.98 %
IQ Global Resources Index 0.69 % 6.14 % 23.27 %
MSCI World Index 17.40 % 10.62 % 42.50 %
Dow Jones-UBS Commodity Index –5.33 % -0.23 % –0.80 %

 

 
1Fund Inception Date: 10/26/2009.
2The price used to calculate Market Price returns is determined by using the closing price listed on the NYSE Arca and does not represent returns an investor would receive if shares were traded at other times.
14
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

Since the shares of the Fund did not trade in the secondary market until the day after the Fund’s commencement, for the period from commencement (10/26/2009) to the first day of secondary market trading in shares of the Fund (10/27/2009), the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns.

The performance data quoted above represents past performance. Past performance does not guarantee future results. The investment return and value of the Fund shares will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current Fund performance may be lower or higher than performance data quoted. Fund performance that is current to the most recent month-end is available by calling 1-888-934-0777 or by visiting www.indexiq.com. Returns shown include the reinvestment of all dividends and other distributions and do not reflect taxes that a shareholder would pay on the Fund’s distributions or redemption of the Fund’s shares. The gross total annual operating expense ratio was 0.75%. This expense information is consistent with the current Fund prospectus, dated August 27, 2012.

Index performance is for illustrative purposes only and does not represent actual Fund performance. One cannot invest directly in an index. Performance data for the Index assumes reinvestment of dividends and is net of the management fees for the Index’s components, as applicable, but it does not reflect management fees, transaction costs or other expenses that you would pay if you invested in the Fund directly.

The MSCI World Index is a free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed markets (performance data assumes reinvestment of dividends, but it does not reflect management fees, transaction costs or other expenses).

The Dow Jones-UBS Commodity Index is composed of futures contracts on physical commodities traded on U.S. exchanges, with the exception of aluminum, nickel and zinc, which trade on the London Metal Exchange.

As the Fund’s investments are concentrated in the global resources sector, the value of its shares will be affected by factors specific to that sector and generally will fluctuate more widely than that of a fund which invests in a broad range of industries. The Fund is susceptible to foreign securities risk. Since the Fund invests in foreign markets, it will be subject to risk of loss not typically associated with domestic markets. Loss may result because of less foreign government regulation, less public information, less economic, political and social stability, or other factors. The Fund is exposed to mid and small capitalization companies risk. Stock prices of mid and small capitalization companies generally are more volatile than those of larger companies and also are more vulnerable than those of large capitalization companies to adverse business and economic developments. Since the Fund may invest directly in foreign currencies or in securities that trade in, and receive revenues in, foreign currencies, the Fund is subject to the risk that those currencies will decline in value relative to the U.S. that the U.S. dollar will decline in value relative to the currency being hedged. The ETF should be considered a speculative investment with a high degree of risk, does not represent a complete investment program and is not suitable for all investors.

15
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

IQ Merger Arbitrage ETF

The Fund seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of the IQ Merger Arbitrage Index, which seeks to identify investment opportunities in the acquisition and merger market segment globally.

For the 12-month period ended April 30, 2013, the Fund (NAV) returned –1.42% versus 17.40% and 16.89% for the MSCI World Index and the S&P 500 Index, respectively.

The principal positive contributors to Fund performance for the period were the Fund’s positions in NYSE Euronext, Cooper Industries, Sprint Nextel, eAccess, and Cove Energy. The primary drivers of negative performance were the Fund’s positions in Xstrata, TNT Express, Avon Products and the market hedges. These hedges included short positions in futures contracts on both the S&P 500 and the EAFE indices.

Hypothetical Growth of a $10,000 Investment
(Since Inception Through 4/30/2013)

This chart illustrates the performance of a hypothetical $10,000 investment made on the Fund’s inception, and is not intended to imply any future performance.

Fund Performance History

IQ Merger Arbitrage ETF
(as of April 30, 2013)

  1 Year Since Inception1
  Average
Annual
Average
Annual
Cumulative
IQ Merger Arbitrage ETF Market Price2 –1.62 % 0.95 % 3.33 %
IQ Merger Arbitrage ETF NAV –1.42 % 1.13 % 3.96 %
IQ Merger Arbitrage Index 0.09 % 2.07 % 7.31 %
MSCI World Index 17.40 % 9.77 % 37.96 %
S&P 500 16.89 % 13.50 % 54.85 %

 

 
1Fund Inception Date: 11/16/2009.
2The price used to calculate Market Price returns is determined by using the closing price listed on the NYSE Arca and does not represent returns an investor would receive if shares were traded at other times.
16
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

Since the shares of the Fund did not trade in the secondary market until the day after the Fund’s commencement, for the period from commencement (11/16/2009) to the first day of secondary market trading in shares of the Fund (11/17/2009), the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns.

The performance data quoted above represents past performance. Past performance does not guarantee future results. The investment return and value of the Fund shares will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current Fund performance may be lower or higher than performance data quoted. Fund performance that is current to the most recent month-end is available by calling 1-888-934-0777 or by visiting www.indexiq.com. Returns shown include the reinvestment of all dividends and other distributions and do not reflect taxes that a shareholder would pay on the Fund’s distributions or redemption of the Fund’s shares. The gross total annual operating expense ratio was 0.76%, which includes a management fee of 0.75% and other operating expenses of 0.01%. This expense information is consistent with the current Fund prospectus, dated August 27, 2012.

Index performance is for illustrative purposes only and does not represent actual Fund performance. One cannot invest directly in an index. Performance data for the Index assumes reinvestment of dividends and is net of the management fees for the Index’s components, as applicable, but it does not reflect management fees, transaction costs or other expenses that you would pay if you invested in the Fund directly.

The MSCI World Index is a free-float adjusted market capitalization weighted index that is designed to measure the equity market performance of developed market (performance data assumes reinvestment of dividends, but it does not reflect management fees, transaction costs or other expenses).

The S&P 500 Index is a broad-based unmanaged index of 500 stocks, which is designed to represent the equity market in general (performance data assumes reinvestment of dividends, but it does not reflect management fees, transaction costs or other expenses).

Certain of the proposed takeover transactions in which the Fund invests may be renegotiated, terminated or involve a longer time frame than originally contemplated, which may negatively impact the Fund’s returns. The Fund’s investment strategy may result in high portfolio turnover, which, in turn, may result in increased transaction costs to the Fund and lower total returns. The Fund is susceptible to foreign securities risk — since the Fund invests in foreign markets, it will be subject to risk of loss not typically associated with domestic markets, including currency transaction risk. Diversification does not eliminate the risk of experiencing investment losses. Stock prices of mid and small capitalization companies generally are more volatile than those of larger companies and also more vulnerable than those of larger capitalization companies to adverse economic developments.

The ETF should be considered a speculative investment with a high degree of risk, does not represent a complete investment program and is not suitable for all investors.

17
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

IQ Australia Small Cap ETF

The Fund seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of the IQ Australia Small Cap Index, which seeks to provide investors with a means of tracking the overall performance of small cap Australian companies.

For the 12-month period ended April 30, 2013, the Fund (NAV) returned –6.51% versus 19.96% for the MSCI EAFE Index.

The principal positive contributors to Fund performance for the period were the Fund’s allocations to equities in the Consumer cyclical and staples sectors as well as financial and health care companies.

The primary driver of negative performance was the Fund’s allocation to Basic Materials, Energy and Capital Goods stocks.

Hypothetical Growth of a $10,000 Investment
(Since Inception Through 4/30/2013)

This chart illustrates the performance of a hypothetical $10,000 investment made on the Fund’s inception, and is not intended to imply any future performance.

Fund Performance History

IQ Australia Small Cap ETF
(as of April 30, 2013)

  1 Year Since Inception1
  Average
Annual
Average
Annual
Cumulative
IQ Australia Small Cap ETF Market Price2 –7.15 % –0.25 % –0.79 %
IQ Australia Small Cap ETF NAV –6.51 % –0.03 % –0.09 %
IQ Australia Small Cap Index –5.82 % 0.75 % 2.33 %
MSCI EAFE Index 19.96 % 7.44 % 24.98 %

 

 
1Fund Inception Date: 3/22/2010.
2The price used to calculate Market Price returns is determined by using the closing price listed on the NYSE Arca and does not represent returns an investor would receive if shares were traded at other times.
18
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

Since the shares of the Fund did not trade in the secondary market until the day after the Fund’s commencement, for the period from commencement (3/22/2010) to the first day of secondary market trading in shares of the Fund (3/23/2010), the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns.

The performance data quoted above represents past performance. Past performance does not guarantee future results. The investment return and value of the Fund shares will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current Fund performance may be lower or higher than performance data quoted. Fund performance that is current to the most recent month-end is available by calling 1-888-934-0777 or by visiting www.indexiq.com. Returns shown include the reinvestment of all dividends and other distributions and do not reflect taxes that a shareholder would pay on the Fund’s distributions or redemption of the Fund’s shares. The gross total annual operating expense ratio was 0.69%. This expense information is consistent with the current Fund prospectus, dated August 27, 2012.

Index performance is for illustrative purposes only and does not represent actual Fund performance. One cannot invest directly in an index. Performance data for the Index assumes reinvestment of dividends and is net of the management fees for the Index’s components, as applicable, but it does not reflect management fees, transaction costs or other expenses that you would pay if you invested in the Fund directly.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada.

As the Fund’s investments are concentrated in Australia, the value of its shares will be affected by factors specific to Australia and may fluctuate more widely than that of a fund which invests in a more diversified manner. Any negative changes in the agricultural or mining industries could have an adverse impact on the Australian economy. The Australian economy is heavily dependent upon trading with its key partners, including the U.S., Asia and Europe. Any reduction in this trading may cause an adverse impact on the economy in which the Fund invests. The Fund is susceptible to foreign securities risk — since the Fund invests in foreign markets, it will be subject to risk of loss not typically associated with domestic markets. The Fund is concentrated in small capitalization companies, whose stock prices generally are more volatile than those of larger companies and also are more vulnerable than those of large capitalization companies to adverse business and economic developments. Both the Fund’s ability to track its Index and Fund returns in general may be adversely impacted by changes in currency exchange rates. The Fund is not suitable for all investors. Investors in the Fund should be willing to accept a high degree of volatility in the price of the Fund’s Shares and the possibility of significant losses. An investment in the Fund involves a substantial degree of risk and the Fund does not represent a complete investment program.

19
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

IQ Canada Small Cap ETF

The Fund seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of the IQ Canada Small Cap Index, which seeks to provide investors with a means of tracking the overall performance of small cap Canadian companies.

For the 12-month period ended April 30, 2013, the Fund (NAV) returned –15.49% versus 19.96% for the MSCI EAFE Index.

The principal positive contributors to Fund performance for the period were the Fund’s allocations to equities in the transportation, financial, and consumer staples sectors. The primary driver of negative performance was the Fund’s allocation to materials and energy.

Hypothetical Growth of a $10,000 Investment
(Since Inception Through 4/30/2013)

This chart illustrates the performance of a hypothetical $10,000 investment made on the Fund’s inception, and is not intended to imply any future performance.

Fund Performance History

IQ Canada Small Cap ETF
(as of April 30, 2013)

  1 Year Since Inception1
  Average
Annual
Average
Annual
Cumulative
IQ Canada Small Cap ETF Market Price2 –15.56 % –3.24 % –9.71 %
IQ Canada Small Cap ETF NAV –15.49 % –3.04 % –9.15 %
IQ Canada Small Cap Index –14.51 % –2.18 % –6.62 %
MSCI EAFE Index 19.96 % 7.44 % 24.98 %

 

 
1Fund Inception Date: 3/22/2010.
2The price used to calculate Market Price returns is determined by using the closing price listed on the NYSE Arca and does not represent returns an investor would receive if shares were traded at other times.
20
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

Since the shares of the Fund did not trade in the secondary market until the day after the Fund’s commencement, for the period from commencement (3/22/2010) to the first day of secondary market trading in shares of the Fund (3/23/2010), the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns.

The performance data quoted above represents past performance. Past performance does not guarantee future results. The investment return and value of the Fund shares will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current Fund performance may be lower or higher than performance data quoted. Fund performance that is current to the most recent month-end is available by calling 1-888-934-0777 or by visiting www.indexiq.com. Returns shown include the reinvestment of all dividends and other distributions and do not reflect taxes that a shareholder would pay on the Fund’s distributions or redemption of the Fund’s shares. The gross total annual operating expense ratio was 0.69%. This expense information is consistent with the current Fund prospectus, dated August 27, 2012.

Index performance is for illustrative purposes only and does not represent actual Fund performance. One cannot invest directly in an index. Performance data for the Index assumes reinvestment of dividends and is net of the management fees for the Index’s components, as applicable, but it does not reflect management fees, transaction costs or other expenses that you would pay if you invested in the Fund directly.

The MSCI EAFE Index (Europe, Australasia, Far East) is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the U.S. and Canada.

As the Fund’s investments are concentrated in Canada, the value of its shares will be affected by factors specific to Canada and may fluctuate more widely than that of a fund which invests in a broad range of countries. Any negative changes in the agricultural or mining industries could have an adverse impact on the Canadian economy. The Canadian economy is heavily dependent upon trading with its key partners. Any reduction in this trading may cause an adverse impact on the economy in which the Fund invests. The Fund is susceptible to foreign securities risk. Since the Fund invests in foreign markets, it will be subject to risk of loss not typically associated with domestic markets. The Fund is concentrated in small capitalization companies, whose stock prices generally are more volatile than those of larger companies and also are more vulnerable than those of large capitalization companies to adverse business and economic developments. Both the Fund’s ability to track its Index and Fund returns in general may be adversely impacted by changes in currency exchange rates. The Fund is not suitable for all investors. Investors in the Fund should be willing to accept a high degree of volatility in the price of the Fund’s Shares and the possibility of significant losses. An investment in the Fund involves a substantial degree of risk and the Fund does not represent a complete investment program.

21
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

IQ Global Agribusiness Small Cap ETF

The Fund seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of the IQ Global Agribusiness Small Cap Index. The IQ Global Agribusiness Small Cap Index is float-adjusted market cap-weighted and includes global small cap companies engaged in the agribusiness sector, including crop production and farming, livestock operations, agricultural machinery, agricultural supplies and logistics, agricultural chemicals, and biofuels.

For the 12-month period ended April 30, 2013, the Fund (NAV) returned 7.91%.

The principal positive contributors to Fund performance for the period were the Fund’s allocations to equities in the Agricultural Supplies and Logistics and Livestock Operation sectors.

The primary drivers of negative performance were the Fund’s allocations to Biofuel stocks.

Hypothetical Growth of a $10,000 Investment
(Since Inception Through 4/30/2013)

This chart illustrates the performance of a hypothetical $10,000 investment made on the Fund’s inception, and is not intended to imply any future performance.

Fund Performance History

IQ Global Agribusiness Small Cap ETF
(as of April 30, 2013)

  1 Year Since Inception1
  Average
Annual
Average
Annual
Cumulative
IQ Global Agribusiness Small Cap ETF Market Price2 8.45 % 2.90 % 6.22 %
IQ Global Agribusiness Small Cap ETF NAV 7.91 % 3.00 % 6.43 %
IQ Global Agribusiness Small Cap Index 8.90 % 3.33 % 7.16 %

 

 
1Fund Inception Date: 3/21/2011.
2The price used to calculate Market Price returns is determined by using the closing price listed on the NYSE Arca and does not represent returns an investor would receive if shares were traded at other times.
22
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

Since the shares of the Fund did not trade in the secondary market until the day after the Fund’s commencement, for the period from commencement (3/21/2011) to the first day of secondary market trading in shares of the Fund (3/22/2011), the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns.

The performance data quoted above represents past performance. Past performance does not guarantee future results. The investment return and value of the Fund shares will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current Fund performance may be lower or higher than performance data quoted. Fund performance that is current to the most recent month-end is available by calling 1-888-934-0777 or by visiting www.indexiq.com. Returns shown include the reinvestment of all dividends and other distributions and do not reflect taxes that a shareholder would pay on the Fund’s distributions or redemption of the Fund’s shares. The gross total annual operating expense ratio was 0.75%. This expense information is consistent with the current Fund prospectus, dated August 27, 2012.

Index performance is for illustrative purposes only and does not represent actual Fund performance. One cannot invest directly in an index. Performance data for the Index assumes reinvestment of dividends and is net of the management fees for the Index’s components, as applicable, but it does not reflect management fees, transaction costs or other expenses that you would pay if you invested in the Fund directly.

As the Fund’s investments are concentrated in the Agribusiness sector, adverse weather conditions, economic forces and government policy and regulation could adversely affect the Fund’s portfolio companies and, thus, the Fund’s financial situation and performance. The Fund is susceptible to foreign securities risk. Since the Fund invests in foreign markets, it will be subject to risk of loss not typically associated with domestic markets. The Fund is concentrated in small capitalization companies, whose stock prices generally are more volatile than those of larger companies and also are more vulnerable than those of large capitalization companies to adverse business and economic developments. Both the Fund’s ability to track its Index and Fund returns in general may be adversely impacted by changes in currency exchange rates. The Fund is not suitable for all investors. Investors in the Fund should be willing to accept a high degree of volatility in the price of the Fund’s shares and the possibility of significant losses. An investment in the Fund involves a substantial degree of risk and the Fund does not represent a complete investment program.

23
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

IQ Global Oil Small Cap ETF

The Fund seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of the IQ Global Oil Small Cap Index. The IQ Global Oil Small Cap Index is float-adjusted market cap-weighted and includes global small cap companies engaged primarily in the oil sector, including exploration and production, refining and marketing, and equipment, services and drilling.

For the 12-month period ended April 30, 2013, the Fund (NAV) returned 12.09%.

The principal positive contributors to Fund performance for the period were the Fund’s allocations to equities in the Refining and Marketing sector as well as in the Equipment, Services and Drilling sector. The primary drivers of negative performance were the Fund’s allocations to Exploration and Production stocks.

Hypothetical Growth of a $10,000 Investment
(Since Inception Through 4/30/2013)

This chart illustrates the performance of a hypothetical $10,000 investment made on the Fund’s inception, and is not intended to imply any future performance.

Fund Performance History

IQ Global Oil Small Cap ETF
(as of April 30, 2013)

  1 Year Since Inception1
  Average
Annual
Average
Annual
Cumulative
IQ Global Oil Small Cap ETF Market Price2 11.06 % 0.14 % 0.29 %
IQ Global Oil Small Cap ETF NAV 12.09 % 0.78 % 1.56 %
IQ Global Oil Small Cap Index 13.41 % 1.79 % 3.59 %

 

 
1Fund Inception Date: 5/4/2011.
2The price used to calculate Market Price returns is determined by using the closing price listed on the NYSE Arca and does not represent returns an investor would receive if shares were traded at other times.
24
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

Since the shares of the Fund did not trade in the secondary market until the day after the Fund’s commencement, for the period from commencement (5/4/2011) to the first day of secondary market trading in shares of the Fund (5/5/2011), the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns.

The performance data quoted above represents past performance. Past performance does not guarantee future results. The investment return and value of the Fund shares will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current Fund performance may be lower or higher than performance data quoted. Fund performance that is current to the most recent month-end is available by calling 1-888-934-0777 or by visiting www.indexiq.com. Returns shown include the reinvestment of all dividends and other distributions and do not reflect taxes that a shareholder would pay on the Fund’s distributions or redemption of the Fund’s shares. The gross total annual operating expense ratio was 0.76%, which includes a management fee of 0.75% and other operating expenses of 0.01%. This expense information is consistent with the current Fund prospectus, dated August 27, 2012.

Index performance is for illustrative purposes only and does not represent actual Fund performance. One cannot invest directly in an index. Performance data for the Index assumes reinvestment of dividends and is net of the management fees for the Index’s components, as applicable, but it does not reflect management fees, transaction costs or other expenses that you would pay if you invested in the Fund directly.

As the Fund’s investments are concentrated in the Oil sector, the uncertainty and risks associated with oil exploration, economic forces and government policy and regulation could adversely affect the Fund’s portfolio companies and, thus, the Fund’s financial situation and performance. The Fund is susceptible to foreign securities risk. Since the Fund invests in foreign markets, it will be subject to risk of loss not typically associated with domestic markets. The Fund is concentrated in small capitalization companies, whose stock prices generally are more volatile than those of larger companies and also are more vulnerable than those of large capitalization companies to adverse business and economic developments. Both the Fund’s ability to track its Index and Fund returns in general may be adversely impacted by changes in currency exchange rates. The Fund is not suitable for all investors. Investors in the Fund should be willing to accept a high degree of volatility in the price of the Fund’s shares and the possibility of significant losses. An investment in the Fund involves a substantial degree of risk and the Fund does not represent a complete investment program.

25
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

IQ U.S. Real Estate Small Cap ETF

The Fund seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of the IQ U.S. Real Estate Small Cap Index. The IQ U.S. Real Estate Small Cap Index is float-adjusted market cap-weighted and includes U.S. small cap companies engaged primarily in the real estate sector, including Real Estate Investment Trusts (“REITs”) or real estate holding companies.

For the 12-month period ended April 30, 2013, the Fund (NAV) returned 39.85% versus 19.95% for the Dow Jones U.S. Real Estate Index.

The principal positive contributors to Fund performance for the period were the Fund’s allocations to equities in the Mortgage REIT and Diversified REIT sectors. The Fund also benefitted from positions in Office, Residential, Retail and Specialized REITs.

All of the sectors had positive performance for the 12-month period ended April 30, 2013.

Hypothetical Growth of a $10,000 Investment
(Since Inception Through 4/30/2013)

This chart illustrates the performance of a hypothetical $10,000 investment made on the Fund’s inception, and is not intended to imply any future performance.

Fund Performance History

IQ U.S. Real Estate Small Cap ETF
(as of April 30, 2013)

  1 Year Since Inception1
  Average
Annual
Average
Annual
Cumulative
IQ U.S. Real Estate Small Cap ETF Market Price2 39.64 % 22.08 % 45.57 %
IQ U.S. Real Estate Small Cap ETF NAV 39.85 % 23.29 % 48.30 %
IQ U.S. Real Estate Small Cap Index 41.18 % 24.36 % 50.70 %
Dow Jones US Real Estate Index 19.95 % 17.97 % 36.46 %

 

 
1Fund Inception Date: 6/13/2011.
2The price used to calculate Market Price returns is determined by using the closing price listed on the NYSE Arca and does not represent returns an investor would receive if shares were traded at other times.
26
 

Management’s Discussion of Fund Performance (unaudited) (continued)

 

Since the shares of the Fund did not trade in the secondary market until the day after the Fund’s commencement, for the period from commencement (6/13/2011) to the first day of secondary market trading in shares of the Fund (6/14/2011), the NAV of the Fund is used as a proxy for the secondary market trading price to calculate market returns.

The performance data quoted above represents past performance. Past performance does not guarantee future results. The investment return and value of the Fund shares will fluctuate so that an investor’s shares, when sold, may be worth more or less than their original cost. Current Fund performance may be lower or higher than performance data quoted. Fund performance that is current to the most recent month-end is available by calling 1-888-934-0777 or by visiting www.indexiq.com. Returns shown include the reinvestment of all dividends and other distributions and do not reflect taxes that a shareholder would pay on the Fund’s distributions or redemption of the Fund’s shares. The gross total annual operating expense ratio was 0.69%. This expense information is consistent with the current Fund prospectus, dated August 27, 2012.

Index performance is for illustrative purposes only and does not represent actual Fund performance. One cannot invest directly in an index. Performance data for the Index assumes reinvestment of dividends and is net of the management fees for the Index’s components, as applicable, but it does not reflect management fees, transaction costs or other expenses that you would pay if you invested in the Fund directly.

The Dow Jones U.S. Real Estate Index measures the stock performance of REITs and real estate operating companies in the U.S.

As the Fund’s investments are concentrated in the real estate sector, it is exposed to concentration risk, interest rate risk, leverage risk, property risk and management risk. The Fund is concentrated in small capitalization companies, whose stock prices generally are more volatile than those of larger companies. The Fund is non-diversified and is susceptible to greater losses if a single portfolio investment declines than would a diversified fund. The Fund is not suitable for all investors. Investors in the Fund should be willing to accept a high degree of volatility in the price of the Fund’s shares and the possibility of significant losses. An investment in the Fund involves a substantial degree of risk and the Fund does not represent a complete investment program.

27
 

Fund Expenses (unaudited)

 

As a shareholder of a Fund, you incur two types of costs: (1) transaction costs and (2) ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.

Actual Expenses

The first line of the table below provides information about actual account values and actual expenses. You may use the information together with the amount you invested, in a particular Fund, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid for Period 11/01/12 to 04/30/13” to estimate the expenses you paid on your account during this period. Each Fund will indirectly bear its pro rata share of the expenses incurred by the underlying ETF investments in which each Fund invests. These expenses are not included in the table.

Hypothetical Example for Comparison Purposes

The second line of the table below also provides information about hypothetical account values and hypothetical expenses based on each Funds’ actual expense ratio and an assumed annual rate of return of 5% before expenses, which are not the Funds’ actual returns. 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 other funds. The Funds will indirectly bear their pro rata share of the expenses incurred by the underlying ETF investments in which the Funds invest. These expenses are not included in the table.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the hypothetical example 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.

28
 

Fund Expenses (unaudited) (continued)

 

  Beginning
Account
Value
Ending
Account
Value
04/30/13
Annualized
Expense
Ratios for the
Period 11/01/12
to 04/30/13
Expenses*
Paid for
Period
11/1/12 to
04/30/13
IQ Hedge Multi-Strategy Tracker ETF        
Actual $1,000.00 $1,020.09 0.75% $3.76
Hypothetical (5% return before expenses) $1,000.00 $1,021.08 0.75% $3.76
IQ Hedge Macro Tracker ETF        
Actual $1,000.00 $   983.73 0.75% $3.69
Hypothetical (5% return before expenses) $1,000.00 $1,021.08 0.75% $3.76
IQ Hedge Market Neutral Tracker ETF1        
Actual $1,000.00 $1,031.84 0.76% $3.83
Hypothetical (5% return before expenses) $1,000.00 $1,021.03 0.76% $3.81
IQ Real Return ETF        
Actual $1,000.00 $1,003.22 0.48% $2.38
Hypothetical (5% return before expenses) $1,000.00 $1,022.41 0.48% $2.41
IQ Global Resources ETF        
Actual $1,000.00 $   985.30 0.75% $3.69
Hypothetical (5% return before expenses) $1,000.00 $1,021.08 0.75% $3.76
IQ Merger Arbitrage ETF        
Actual $1,000.00 $1,049.95 0.75% $3.81
Hypothetical (5% return before expenses) $1,000.00 $1,021.08 0.75% $3.76
IQ Australia Small Cap ETF        
Actual $1,000.00 $1,019.97 0.69% $3.46
Hypothetical (5% return before expenses) $1,000.00 $1,021.37 0.69% $3.46
IQ Canada Small Cap ETF        
Actual $1,000.00 $   886.82 0.69% $3.23
Hypothetical (5% return before expenses) $1,000.00 $1,021.37 0.69% $3.46
IQ Global Agribusiness Small Cap ETF        
Actual $1,000.00 $1,064.94 0.75% $3.84
Hypothetical (5% return before expenses) $1,000.00 $1,021.08 0.75% $3.76
IQ Global Oil Small Cap ETF        
Actual $1,000.00 $1,199.39 0.75% $4.09
Hypothetical (5% return before expenses) $1,000.00 $1,021.08 0.75% $3.76
IQ US Real Estate Small Cap ETF        
Actual $1,000.00 $1,266.04 0.69% $3.88
Hypothetical (5% return before expenses) $1,000.00 $1,021.37 0.69% $3.46

 

 
*Expenses are calculated using the Fund’s annualized expense ratio, multiplied by the average account value for the period, multiplied by 181/365 (to reflect the six-month period).
1IQ Hedge Market Neutral Tracker ETF commenced operations on October 4, 2012.
29
 

Portfolio Summaries (unaudited)
April 30, 2013

 

SCHEDULES OF INVESTMENTS SUMMARY TABLE

IQ Hedge Multi-Strategy Tracker ETF
Net Assets ($ mil): $383.5

 
Industry   % of
Net Assets
Aggregate Bond Funds   25.9 %
Money Market Fund   15.5  
Corporate Bond Funds   13.1  
Short-Term Treasury Bond Funds   11.3  
U.S. Large Cap Equity Funds   10.7  
Equity Funds   10.2  
U.S. Small Cap Equity Fund   4.8  
Treasury Inflation-Protected Securities Bond Fund   3.8  
Emerging Equity Funds   2.8  
Commodity Funds   1.9  
International Bond Funds   1.7  
Currency Harvest Fund   0.8  
Currency Fund   0.5  
High Yield Corporate Bond Funds   0.3  
Real Estate Fund   0.1  
Total Investments   103.4  
Liabilities in Excess of Other Assets   (3.4 )
Total Net Assets   100.0 %

 

IQ Hedge Macro Tracker ETF
Net Assets ($ mil): $63.2

 
Industry   % of
Net Assets
Short-Term Treasury Bond Funds   35.5 %
Money Market Fund   22.2  
Corporate Bond Funds   17.3  
Emerging Equity Funds   12.4  
Currency Harvest Fund   9.1  
Debt Fund   7.3  
Currency Funds   6.9  
U.S. Small Cap Equity Fund   5.4  
Commodity Funds   5.2  
Total Investments   121.3  
Liabilities in Excess of Other Assets   (21.3 )
Total Net Assets   100.0 %

 

IQ Hedge Market Neutral Tracker ETF
Net Assets ($ mil): $5.1

 
Industry   % of
Net Assets
Short-Term Treasury Bond Funds   44.7 %
Equity Funds   20.6  
Aggregate Bond Funds   15.6  
Treasury Inflation-Protected Securities Bond Fund   9.4  
Money Market Fund   7.1  
U.S. Small Cap Equity Fund   0.9  
Currency Harvest Fund   0.3  
High Yield Corporate Bond Funds   0.2  
Total Investments   98.8  
Other Assets in Excess of Liabilities   1.2  
Total Net Assets   100.0 %

 

IQ Real Return ETF
Net Assets ($ mil): $61.0

 
Industry   % of
Net Assets
Short-Term Treasury Bond Funds   59.7 %
Money Market Fund   12.4  
Real Estate Funds   10.6  
U.S. Large Cap Equity Funds   10.1  
Commodity Fund   9.2  
Intermediate-Term Treasury Bond Funds   7.5  
Long-Term Bond Fund   2.6  
Total Investments   112.1  
Liabilities in Excess of Other Assets   (12.1 )
Total Net Assets   100.0 %

 

IQ Global Resources ETF
Net Assets ($ mil): $85.5

 
Industry   % of
Net Assets
Water   19.7 %
Energy   17.3  
Precious Metals   16.1  
Industrial Metals   15.2  
Money Market Fund   11.4  
Timber   8.3  
Livestock   7.3  
Coal   4.1  
Grains Food Fiber   2.4  
Total Investments   101.8  
Liabilities in Excess of Other Assets   (1.8 )
Total Net Assets   100.0 %

 

See notes to financial statements.

30
 

Portfolio Summaries (unaudited) (continued)
April 30, 2013

 

IQ Merger Arbitrage ETF
Net Assets ($ mil): $14.1

 
Industry   % of
Net Assets
Money Market Fund   20.9 %
Communication Services   15.8  
Financials   14.8  
Energy   11.9  
Consumer Staples   11.9  
Technology   10.2  
Consumer Cyclicals   7.7  
Capital Goods   5.4  
Transportation   3.5  
Utilities   1.6  
Total Investments   103.7  
Liabilities in Excess of Other Assets   (3.7 )
Total Net Assets   100.0 %

 

IQ Australia Small Cap ETF
Net Assets ($ mil): $13.9

 
Industry   % of
Net Assets
Consumer Discretionary   23.9 %
Materials   21.3  
Money Market Fund   20.9  
Industrials   18.9  
Energy   8.4  
Health Care   7.8  
Financials   7.4  
Consumer Staples   3.8  
Information Technology   3.5  
Telecommunication Services   2.8  
Utilities   1.0  
Total Investments   119.7  
Liabilities in Excess of Other Assets   (19.7 )
Total Net Assets   100.0 %

 

IQ Canada Small Cap ETF
Net Assets ($ mil): $16.0

 
Industry   % of
Net Assets
Materials   34.9 %
Energy   28.9  
Industrials   15.7  
Financials   5.8  
Oil, Gas & Consumable Fuels   3.0  
Utilities   2.7  
Telecommunication Services   2.2  
Consumer Discretionary   2.0  
Money Market Fund   2.0  
Consumer Staples   1.6  
Metals & Mining   1.2  
Health Care   0.8  
Information Technology   0.5  
Total Investments   101.3  
Liabilities in Excess of Other Assets   (1.3 )
Total Net Assets   100.0 %

 

IQ Global Agribusiness Small Cap ETF
Net Assets ($ mil): $37.0

 
Industry   % of
Net Assets
Crop Production and Farming   38.6 %
Livestock Operations   24.0  
Agricultural Supplies and Logistics   14.6  
Agricultural Chemicals   9.7  
Agricultural Machinery   7.9  
Biofuels   4.3  
Money Market Fund   7.8  
Total Investments   106.9  
Liabilities in Excess of Other Assets   (6.9 )
Total Net Assets   100.0 %

 

IQ Global Oil Small Cap ETF
Net Assets ($ mil): $1.9

 
Industry   % of
Net Assets
Equipment, Services & Drilling   34.5 %
Exploration & Production   34.1  
Refining & Marketing   30.6  
Money Market Fund   13.4  
Total Investments   112.6  
Liabilities in Excess of Other Assets   (12.6 )
Total Net Assets   100.0 %

 

IQ US Real Estate Small Cap ETF
Net Assets ($ mil): $58.2

 
Industry   % of
Net Assets
Mortgage REITs   28.2 %
Office REITs   19.1  
Retail REITs   14.2  
Specialized REITs   14.1  
Hotel REITs   11.2  
Diversified REITs   8.0  
Residential REITs   3.9  
Money Market Funds   3.3  
Total Investments   102.0  
Liabilities in Excess of Other Assets   (2.0 )
Total Net Assets   100.0 %

 

See notes to financial statements.

31
 

Schedules of Investments — IQ Hedge Multi-Strategy Tracker ETF
April 30, 2013

 

       
   Shares  Value
Investment Companies — 87.9%          
Aggregate Bond Funds — 25.9%          
iShares Core Total US Bond Market ETF   398,766   $44,478,359 
SPDR Barclays Aggregate Bond ETF(a)   34,284    2,018,642 
Vanguard Total Bond Market ETF   629,126    52,959,827 
Total Aggregate Bond Funds        99,456,828 
           
Commodity Funds — 1.9%          
iShares Silver Trust*   10,466    245,533 
PowerShares DB Commodity Index          
Tracking Fund*(a)   266,927    7,012,172 
Total Commodity Funds        7,257,705 
           
Corporate Bond Funds — 13.1%          
iShares Barclays Credit Bond Fund   20,496    2,344,127 
iShares iBoxx $ Investment Grade          
Corporate Bond Fund   338,136    41,296,550 
PowerShares Senior Loan Portfolio(a)   264,610    6,665,526 
Total Corporate Bond Funds        50,306,203 
           
Currency Fund — 0.5%          
WisdomTree Emerging Currency Fund*   84,487    1,801,263 
           
Currency Harvest Fund — 0.8%          
PowerShares DB G10 Currency          
Harvest Fund*(a)   117,502    3,223,080 
           
Emerging Equity Funds — 2.8%          
iShares MSCI Emerging Markets          
Index Fund   106,524    4,611,424 
Vanguard FTSE Emerging Markets ETF   135,662    5,936,569 
Total Emerging Equity Funds        10,547,993 
           
Equity Funds — 10.2%          
iShares MSCI EAFE Index Fund   486,675    30,144,649 
Vanguard MSCI EAFE ETF   238,503    9,141,820 
Total Equity Funds        39,286,469 
           
High Yield Corporate Bond Funds — 0.3%          
iShares iBoxx $ High Yield Corporate          
Bond Fund(a)   6,826    654,272 
SPDR Barclays High Yield Bond ETF(a)   12,225    510,394 
Total High Yield Corporate Bond Funds        1,164,666 
           
International Bond Funds — 1.7%          
iShares JPMorgan USD Emerging Markets          
Bond Fund   36,978    4,489,129 
PowerShares Emerging Markets          
Sovereign Debt Portfolio(a)   62,905    1,950,055 
Total International Bond Funds        6,439,184 
           
Real Estate Fund — 0.1%          
SPDR Dow Jones International Real          
Estate ETF   4,534    209,063 

 

       
   Shares  Value
Investment Companies (continued)          
Short-Term Treasury Bond Funds — 11.3%          
iShares Barclays 1-3 Year Treasury Bond          
Fund(a)   164,962   $13,940,939 
iShares Barclays Short Treasury Bond          
Fund(a)   53,620    5,911,605 
SPDR Barclays 1-3 Month T-Bill ETF*   47,104    2,157,363 
Vanguard Short-Term Bond ETF(a)   264,222    21,425,762 
Total Short-Term Treasury Bond Funds        43,435,669 
           
Treasury Inflation-Protected Security — 3.8%          
iShares Barclays US Treasury Inflation          
Protected Securities Fund   118,421    14,465,125 
           
U.S. Large Cap Equity Funds — 10.7%          
iShares Russell 1000 Growth Index Fund   452,883    33,006,113 
SPDR S&P 500 ETF Trust   50,874    8,123,560 
Total U.S. Large Cap Equity Funds        41,129,673 
           
U.S. Small Cap Equity Fund — 4.8%          
iShares Russell 2000 Index Fund(a)   196,451    18,493,897 
           
Total Investment Companies — 87.9%          
(Cost $330,076,002)        337,216,818 
           
Short-Term Investment — 9.7%          
Money Market Fund — 9.7%          
Morgan Stanley Institutional Liquidity          
Funds Treasury Portfolio — Institutional          
Class, 0.03%(b)          
(Cost $37,148,330)   37,148,330    37,148,330 
           
Investment of Cash Collateral For          
Securities Loaned — 5.8%          
Money Market Fund — 5.8%          
BNY Mellon Overnight          
Government Fund, 0.17%          
(Cost $22,216,423)   22,216,423    22,216,423 
           
Total Investments — 103.4%          
(Cost $389,440,755)       $396,581,571 
Liabilities in Excess of Other          
Assets — (3.4)%(c)        (13,080,295)
Net Assets — 100.0%       $383,501,276 

 

 
*Non-income producing securities.
(a)All or a portion of security is on loan. The aggregate market value of securities on loan is $21,860,034; cash collateral of $22,216,423 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments.
(b)Rate shown represents annualized 7-day yield as of April 30, 2013.
(c)Liabilities in Excess of Other Assets includes net unrealized appreciation (depreciation) on futures and swap contracts.

ETF — Exchange Traded Fund

See notes to financial statements.

32
 

Schedules of Investments — IQ Hedge Multi-Strategy Tracker ETF (continued)
April 30, 2013

 

Open futures contracts outstanding at April 30, 2013:

                   
Type  Broker  Expiration
Date
  Number of
Contracts
Purchased
(Sold)
  Value at
Trade Date
  Value at
April 30, 2013
  Unrealized
Appreciation
(Depreciation)
E-Mini Future Euro FX Future  Morgan Stanley  June 2013   (109)  $(8,833,095)  $(8,969,338)  $(136,243)
E-Mini Future Japanese Yen FX Future  Morgan Stanley  June 2013   (42)   (2,765,051)   (2,692,725)   72,326 
Gold 100 Oz Future  Morgan Stanley  June 2013   (34)   (5,436,347)   (5,005,140)   431,207 
                        $367,290 

 

Cash posted as collateral to the broker for futures contracts was $405,325 at April 30, 2013.

Total return swap contracts outstanding at April 30, 2013:

             
Total Return Benchmark  Annual
Financing Rate
Received (Paid)
  Expiration
Date
  Notional
Amount
  Unrealized
Appreciation
(Depreciation)1
iShares Dow Jones US Real Estate Index Fund   (0.68)%  4/14/2014  $(16,520,566)  $ 
ProShares VIX Mid-Term Futures ETF   (4.53)%  4/14/2014   (1,640,897)    
SPDR Barclays Capital Convertible Securities ETF   0.53%  4/14/2014   27,106,407     
                $ 

 

 

Cash posted as Collateral to the broker for swap contracts was $9,122,662 at April 30, 2013.

Morgan Stanley acts as the counterparty to the total return swap contracts listed above. The Fund either received fees from, or pay fees to, the counterparty, depending upon the total return of the benchmark, and the agreed-upon financing rate.

1Reflects a reset date of April 30, 2013.

See notes to financial statements.

33
 

Schedules of Investments — IQ Hedge Macro Tracker ETF
April 30, 2013

 

       
   Shares  Value
Investment Companies — 99.1%          
Commodity Funds — 5.2%          
PowerShares DB Commodity Index          
Tracking Fund*   64,446   $1,692,997 
PowerShares DB Gold Fund*(a)   31,442    1,578,388 
Total Commodity Funds        3,271,385 
           
Corporate Bond Funds — 17.3%          
iShares Barclays Credit Bond Fund   5,277    603,530 
iShares iBoxx $ Investment Grade          
Corporate Bond Fund   84,754    10,351,006 
Total Corporate Bond Funds        10,954,536 
           
Currency Funds — 6.9%          
CurrencyShares Japanese Yen Trust*(a)   3,915    393,301 
Market Vectors Emerging Markets          
Local Currency Bond ETF(a)   143,866    3,969,263 
Total Currency Funds        4,362,564 
           
Currency Harvest Funds — 9.1%          
CurrencyShares Euro Trust*(a)   28,055    3,662,019 
PowerShares DB G10 Currency Harvest          
Fund*(a)   77,157    2,116,417 
Total Currency Harvest Fund        5,778,436 
           
Debt Fund — 7.3%          
WisdomTree Emerging Markets Local          
Debt Fund(a)   86,456    4,641,823 
           
Emerging Equity Funds — 12.4%          
iShares MSCI Emerging Markets Index          
Fund   33,083    1,432,163 
SPDR S&P Emerging Markets          
SmallCap ETF(a)   95,146    4,668,814 
Vanguard FTSE Emerging Markets ETF   39,258    1,717,930 
Total Emerging Equity Funds        7,818,907 

 

       
   Shares  Value
Short-Term Treasury Bond Funds — 35.5%          
iShares Barclays 1-3 Year Treasury          
Bond Fund   91,974   $7,772,723 
iShares Barclays Short Treasury          
Bond Fund   28,534    3,145,873 
SPDR Barclays 1-3 Month T-Bill ETF*   21,742    995,784 
Vanguard Short-Term Bond ETF   129,531    10,503,669 
Total Short-Term Treasury Bond Funds        22,418,049 
           
U.S. Small Cap Equity Fund — 5.4%          
iShares Russell 2000 Index Fund(a)   36,067    3,395,347 
           
Total Investment Companies — 99.1%          
(Cost $61,636,987)        62,641,047 
           
Short-Term Investment — 0.8%          
           
Money Market Fund — 0.8%          
Morgan Stanley Institutional Liquidity          
Funds Treasury Portfolio — Institutional          
Class, 0.03%(b)          
(Cost $547,701)   547,701    547,701 
           
Investment of Cash Collateral For          
Securities Loaned — 21.4%          
           
Money Market Fund — 21.4%          
BNY Mellon Overnight          
Government Fund, 0.17%          
(Cost $13,528,401)   13,528,401    13,528,401 
           
Total Investments — 121.3%          
(Cost $75,713,089)       $76,717,149 
Liabilities in Excess of Other          
Assets — (21.3)%(c)        (13,491,870)
Net Assets — 100.0%       $63,225,279 

 

 
*Non-income producing securities.
(a)All or a portion of security is on loan. The aggregate market value of securities on loan is $13,273,076; cash collateral of $13,528,401 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments.
(b)Rate shown represents annualized 7-day yield as of April 30, 2013.
(c)Liabilities in Excess of Other Assets includes net unrealized appreciation (depreciation) on swap contracts.

ETF — Exchange Traded Fund

Total return swap contract outstanding at April 30, 2013:

                
Total Return Benchmark   Annual
Financing Rate
Received (Paid)
   Expiration
Date
   Notional
Amount
    Unrealized
Appreciation
(Depreciation)1
 
Pro-Shares VIX Mid-Term ETF   0.53%   6/5/2014  $612,424   $    —   

 

 

Cash posted as collateral to the broker for swap contracts was $113,760 at April 30, 2013.

Morgan Stanley acts as the counterparty to the total return swap contract listed above. The Fund either receives fees from, or pays fees to, the counterparty, depending upon the total return of the benchmark, and the agreed-upon financing rate.

1Reflects a reset date of April 30, 2013.

See notes to financial statements.

34
 

Schedules of Investments — IQ Hedge Market Neutral Tracker ETF
April 30, 2013

 

       
   Shares  Value
Investment Companies — 91.7%          
Aggregate Bond Funds — 15.6%          
iShares Core Total US Bond Market ETF   3,221   $359,270 
SPDR Barclays Aggregate Bond ETF   277    16,310 
Vanguard Total Bond Market ETF   5,082    427,803 
Total Aggregate Bond Funds        803,383 
           
Currency Harvest Fund — 0.3%          
PowerShares DB G10 Currency Harvest          
Fund*   503    13,797 
           
Equity Funds — 20.6%          
iShares MSCI EAFE Index Fund   13,096    811,166 
Vanguard MSCI EAFE ETF   6,418    246,002 
Total Equity Funds        1,057,168 
           
High Yield Corporate Bond Funds — 0.2%          
iShares iBoxx $ High Yield Corporate          
Bond Fund(a)   76    7,285 
SPDR Barclays High Yield Bond ETF   136    5,678 
Total High Yield Corporate Bond Funds        12,963 
           
Short-Term Treasury Bond Funds — 44.7%          
iShares Barclays 1-3 Year Treasury          
Bond Fund   8,714    736,420 
iShares Barclays Short Treasury          
Bond Fund   2,833    312,338 
SPDR Barclays 1-3 Month T-Bill ETF*   2,488    113,950 
Vanguard Short-Term Bond ETF   13,958    1,131,855 
Total Short-Term Treasury Bond Funds        2,294,563 
           
Treasury Inflation-Protected Security — 9.4%          
iShares Barclays US Treasury Inflation          
Protected Securities Fund   3,963    484,080 

 

       
   Shares  Value
U.S. Small Cap Equity Fund — 0.9%      
iShares Russell 2000 Index Fund(a)   482   $45,376 
Total Investment Companies — 91.7%          
(Cost $4,642,709)        4,711,330 
           
Short-Term Investment — 6.1%          
           
Money Market Fund — 6.1%          
Morgan Stanley Institutional Liquidity          
Funds Treasury Portfolio — Institutional          
Class, 0.03%(b)          
(Cost $313,505)   313,505    313,505 
           
Investment of Cash Collateral For          
Securities Loaned — 1.0%          
           
Money Market Fund —1.0%          
BNY Mellon Overnight          
Government Fund, 0.17%          
(Cost $50,663)   50,663    50,663 
           
Total Investments — 98.8%          
(Cost $5,006,877)       $5,075,498 
Other Assets in Excess of          
Liabilities — 1.2%(c)        61,570 
Net Assets — 100.0%       $5,137,068 

 

 
*Non-income producing securities.
(a)All or a portion of security is on loan. The aggregate market value of securities on loan is $49,923; cash collateral of $50,663 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments.
(b)Rate shown represents annualized 7-day yield as of April 30, 2013.
(c)Other Assets in Excess of Liabilities includes net unrealized appreciation (depreciation) on futures and swap contracts.

ETF — Exchange Traded Fund

Open futures contracts outstanding at April 30, 2013:

                   
Type  Broker  Expiration
Date
   Number of
Contracts
Purchased
(Sold)
    Value at
Trade Date
    Value at
April 30, 2013
    Unrealized
Depreciation
 
Mini MSCI Emerging Market Index Future   Morgan Stanley  June 2013   (4)   $(201,117)   $(207,980)   $(6,863)

 

 

Cash posted as collateral to broker for futures contracts was $7,200 at April 30, 2013.

Total return swap contract outstanding at April 30, 2013:

             
Total Return Benchmark   Annual
Financing Rate
Received (Paid)
   Expiration
Date
   Notional
Amount
    Unrealized
Appreciation
(Depreciation)1
 
SPDR Barclays Capital Convertible Securities ETF   0.53%   10/03/2014   $315,994    $    —   

 

 

Cash posted as collateral to the broker for swap contracts was $106,418 at April 30, 2013.

Morgan Stanley acts as the counterparty to the total return swap contract listed above. The Fund either receives fees from, or pays fees to, the counterparty, depending upon the total return of the benchmark, and the agreed-upon financing rate.

1Reflects a reset date of April 30, 2013

See notes to financial statements.

35
 

Schedules of Investments — IQ Real Return ETF
April 30, 2013

 

       
   Shares  Value
Investment Companies — 99.7%      
Commodity Fund — 9.2%      
PowerShares DB Gold Fund*(a)   111,237   $5,584,097 
           
Intermediate-Term Treasury Bond          
Funds — 7.5%          
iShares Barclays 3-7 Year Treasury Bond          
Fund   12,269    1,522,828 
iShares Barclays 7-10 Year Treasury Bond          
Fund   28,229    3,072,162 
Total Intermediate-Term Treasury Bond          
Funds        4,594,990 
           
Long-Term Bond Fund — 2.6%          
iShares Barclays 20+ Year Treasury Bond          
Fund   12,866    1,582,647 
           
Real Estate Funds — 10.6%          
iShares Dow Jones US Real Estate Index          
Fund   19,046    1,399,119 
SPDR Dow Jones REIT ETF   6,395    530,082 
Vanguard REIT ETF   60,123    4,526,059 
Total Real Estate Funds        6,455,260 
           
Short-Term Treasury Bond Funds — 59.7%          
iShares Barclays Short Treasury Bond          
Fund(a)   241,647    26,641,582 
SPDR Barclays 1-3 Month T-Bill ETF*   212,280    9,722,424 
Total Short-Term Treasury Bond Funds        36,364,006 
           
U.S. Large Cap Equity Funds — 10.1%          
iShares Core S&P 500 ETF   121    19,404 
SPDR S&P 500 ETF Trust   38,590    6,162,051 
Total U.S. Large Cap Equity Funds        6,181,455 
Total Investment Companies — 99.7%          
(Cost $60,206,552)       $60,762,455 

 

       
   Shares  Value
Short-Term Investment — 0.3%      
       
Money Market Fund — 0.3%      
Morgan Stanley Institutional Liquidity      
Funds Treasury Portfolio — Institutional      
Class, 0.03%(b)      
(Cost $209,497)   209,497   $209,497 
           
Investment of Cash Collateral For          
Securities Loaned — 12.1%          
           
Money Market Fund —12.1%          
BNY Mellon Overnight          
Government Fund, 0.17%          
(Cost $7,386,500)   7,386,500    7,386,500 
           
Total Investments — 112.1%          
(Cost $67,802,549)       $68,358,452 
Liabilities in Excess of Other          
Assets — (12.1)%        (7,404,392)
Net Assets — 100.0%       $60,954,060 

 

 
*Non-income producing securities.
(a)All or a portion of security is on loan. The aggregate market value of securities on loan is $7,236,890; cash collateral of $7,386,500 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments.
(b)Rate shown represents annualized 7-day yield as of April 30, 2013.
ETF — Exchange Traded Fund
REIT — Real Estate Investment Trust

See notes to financial statements.

36
 

Schedules of Investments — IQ Global Resources ETF
April 30, 2013

 

       
   Shares  Value
Common Stocks — 90.4%          
Australia — 8.2%          
BHP Billiton Ltd.   139,036   $4,719,469 
Fortescue Metals Group Ltd.(a)   81,339    295,519 
Iluka Resources Ltd.(a)   10,934    101,583 
Newcrest Mining Ltd.   71,864    1,253,999 
PanAust Ltd.   56,902    137,036 
Regis Resources Ltd.*   46,201    180,805 
Whitehaven Coal Ltd.(a)   70,602    142,912 
Woodside Petroleum Ltd.   5,038    196,427 
Total Australia        7,027,750 
           
Canada — 15.1%          
Agnico-Eagle Mines Ltd.   16,192    523,501 
Alamos Gold, Inc.   12,011    168,012 
Argonaut Gold, Inc.*   13,931    88,363 
B2Gold Corp.*   60,598    152,421 
Barrick Gold Corp.   93,926    1,854,521 
Canadian Natural Resources Ltd.   6,730    197,715 
Canfor Corp.*   25,190    526,915 
Centerra Gold, Inc.   22,154    92,726 
China Gold International Resources          
Corp., Ltd.*   37,210    105,802 
Domtar Corp. ADR   6,024    418,728 
Eldorado Gold Corp.   67,065    531,399 
Enbridge, Inc.   4,914    234,207 
Goldcorp, Inc.   76,255    2,260,699 
Husky Energy, Inc.   6,028    174,514 
IAMGOLD Corp.   35,367    190,223 
Imperial Oil Ltd.   5,228    208,320 
Kinross Gold Corp.   107,031    584,183 
New Gold, Inc.*   44,638    358,577 
Norbord, Inc.*   7,728    258,151 
Osisko Mining Corp.*   40,980    173,152 
Pan American Silver Corp.   14,215    187,253 
Resolute Forest Products*(a)   16,662    243,765 
Silver Wheaton Corp.   33,318    815,850 
Suncor Energy, Inc.   9,296    290,289 
Teck Resources Ltd., Class B   15,210    405,257 
TransCanada Corp.   4,372    217,068 
West Fraser Timber Co., Ltd.   7,524    657,962 
Westshore Terminals Investment Corp.   5,186    149,519 
Yamana Gold, Inc.   70,572    874,915 
Total Canada        12,944,007 
           
Finland — 1.1%          
UPM-Kymmene Oyj(a)   92,819    971,638 
           
France — 4.9%          
GDF Suez(a)   14,429    310,078 
Suez Environnement Co.   114,060    1,639,858 
Total SA   13,820    697,291 
Veolia Environnement   113,777    1,569,788 
Total France        4,217,015 
           
Germany — 0.1%          
Suedzucker AG   1,241    50,082 
           
Hong Kong — 2.0%          
China Modern Dairy Holdings Ltd.*   789,096    272,502 
CNOOC Ltd.   273,585    510,465 
Hong Kong & China Gas Co. Ltd.   52,815    158,909 
Lee & Man Paper Manufacturing Ltd.   830,130    617,201 

 

       
   Shares  Value
Common Stocks (continued)      
Hong Kong (continued)      
Shougang Fushan Resources      
Group Ltd.(a)   369,634   $144,318 
Total Hong Kong        1,703,395 
           
Ireland — 0.1%          
Kerry Group PLC, Class A   1,067    63,176 
           
Italy — 0.6%          
Eni SpA   22,247    532,641 
           
Japan — 2.7%          
Ajinomoto Co., Inc.   3,673    50,414 
Itoham Foods, Inc.   37,463    172,297 
Kurita Water Industries Ltd.   26,689    547,698 
Maruha Nichiro Holdings, Inc.   80,771    161,691 
Mitsubishi Materials Corp.   35,058    100,412 
Mitsui & Co., Ltd.   11,181    153,579 
Nippon Meat Packers, Inc.   33,261    510,815 
Nippon Paper Industries Co., Ltd.*   20,500    305,574 
Nisshin Seifun Group, Inc.   1,392    17,977 
Nissin Foods Holdings Co., Ltd.   643    28,846 
Sumitomo Metal Mining Co., Ltd.   14,245    198,444 
Toyo Suisan Kaisha Ltd.   845    28,713 
Yamazaki Baking Co., Ltd.   1,000    13,079 
Total Japan        2,289,539 
           
Netherlands — 2.3%          
D.E Master Blenders 1753 NV*   3,613    57,351 
Nutreco NV*   5,686    540,267 
Royal Dutch Shell PLC, Class A   39,116    1,332,325 
Total Netherlands        1,929,943 
           
New Zealand — 1.1%          
Fletcher Building Ltd.   120,695    915,278 
           
Norway — 0.8%          
Norsk Hydro ASA   53,233    249,658 
Statoil ASA   19,518    477,012 
Total Norway        726,670 
           
Singapore — 0.8%          
Golden Agri-Resources Ltd.   77,438    33,323 
Olam International Ltd.   14,735    20,039 
People’s Food Holdings Ltd.   187,000    198,896 
Sakari Resources Ltd.   240,456    365,825 
Wilmar International Ltd.   39,471    106,717 
Total Singapore        724,800 
           
Spain — 0.2%          
Ebro Foods SA   945    19,399 
Repsol SA   7,849    184,197 
Total Spain        203,596 
           
Sweden — 2.1%          
Boliden AB   7,143    113,217 
Holmen AB, B Shares   14,805    413,744 
Sandvik AB(a)   87,345    1,239,372 
Total Sweden        1,766,333 

 

See notes to financial statements.

37
 

Schedules of Investments — IQ Global Resources ETF (continued)
April 30, 2013

 

       
   Shares  Value
Common Stocks (continued)          
Switzerland — 3.1%          
Aryzta AG*   558   $34,659 
Barry Callebaut AG   32    31,278 
Lindt & Spruengli AG   13    50,380 
Pentair Ltd.   46,196    2,510,752 
Total Switzerland        2,627,069 
           
United Kingdom — 14.0%          
Anglo American PLC   36,335    885,036 
Antofagasta PLC   25,753    359,736 
Associated British Foods PLC   4,808    144,799 
BG Group PLC   20,824    351,492 
BP PLC   117,136    850,296 
Centrica PLC   31,824    183,760 
Eurasian Natural Resources Corp.   33,630    143,626 
Evraz PLC   35,000    84,435 
Hochschild Mining PLC   31,746    122,783 
Kazakhmys PLC   13,684    73,754 
Pennon Group PLC   81,473    869,246 
Polymetal International PLC   35,919    388,815 
Randgold Resources Ltd.   8,641    680,512 
Rio Tinto PLC   48,263    2,192,653 
Severn Trent PLC   53,389    1,513,154 
Tate & Lyle PLC   2,824    37,118 
United Utilities Group PLC   152,794    1,760,974 
Vedanta Resources PLC   7,122    134,014 
Xstrata PLC   78,436    1,176,220 
Total United Kingdom        11,952,423 
           
United States — 31.2%          
Alcoa, Inc.   27,972    237,762 
Allied Nevada Gold Corp.*   8,431    90,212 
Alpha Natural Resources, Inc.*   15,353    113,919 
American Water Works Co., Inc.   39,740    1,664,311 
Anadarko Petroleum Corp.   3,112    263,773 
Apache Corp.   2,444    180,563 
Aqua America, Inc.   31,448    997,845 
Arch Coal, Inc.(a)   14,803    71,795 
Archer-Daniels-Midland Co.   3,994    135,556 
Bunge Ltd.   826    59,645 
Chevron Corp.   11,871    1,448,381 
Cliffs Natural Resources, Inc.(a)   3,736    79,726 
Cloud Peak Energy, Inc.*   4,271    83,455 
Coeur d’Alene Mines Corp.*   8,456    128,869 
ConAgra Foods, Inc.   2,505    88,602 
ConocoPhillips   7,427    448,962 
CONSOL Energy, Inc.   15,884    534,338 
EOG Resources, Inc.   1,670    202,337 
Exxon Mobil Corp.   27,381    2,436,635 
Flowers Foods, Inc.   822    27,077 
Flowserve Corp.   10,765    1,702,162 
Freeport-McMoRan Copper Gold, Inc. .   24,762    753,508 
General Mills, Inc.   3,863    194,772 
Halliburton Co.   5,685    243,147 
Hershey Co.   1,353    120,633 
Hillshire Brands Co.   723    25,963 
Hormel Foods Corp.   43,537    1,796,772 
IDEX Corp.   18,502    962,659 

 

       
   Shares  Value
Common Stocks (continued)          
United States (continued)          
Ingredion, Inc.   484   $34,853 
J.M. Smucker Co.   626    64,622 
Joy Global, Inc.   7,431    420,000 
KapStone Paper And Packaging Corp. .   8,339    246,668 
Kellogg Co.   2,192    142,568 
Kinder Morgan, Inc.   6,305    246,526 
Louisiana-Pacific Corp.*   24,555    444,937 
Marathon Petroleum Corp.   2,034    159,384 
MeadWestvaco Corp.   30,951    1,067,190 
Mondelez International, Inc., Class A   10,780    339,031 
National Oilwell Varco, Inc.   2,616    170,616 
Newmont Mining Corp.   46,594    1,509,646 
Occidental Petroleum Corp.   4,946    441,480 
Peabody Energy Corp.   18,731    375,744 
Phillips 66   3,762    229,294 
Royal Gold, Inc.   6,073    337,537 
Schlumberger Ltd.   8,066    600,352 
Seaboard Corp.   197    540,958 
Smithfield Foods, Inc.*   22,821    584,218 
Southern Copper Corp.   22,066    735,460 
Tyson Foods, Inc., Class A   58,249    1,434,673 
Valero Energy Corp.   3,356    135,314 
Williams Cos., Inc. (The)   4,169    158,964 
Xylem, Inc.   41,692    1,156,953 
Total United States        26,670,367 
Total Common Stocks — 90.4%          
(Cost $80,751,595)        77,315,722 
           
Short-Term Investment — 8.4%          
Money Market Fund — 8.4%          
Morgan Stanley Institutional Liquidity          
Funds Treasury Portfolio — Institutional          
Class, 0.03%(b)          
(Cost $7,167,510)   7,167,510    7,167,510 
           
Investment of Cash Collateral For          
Securities Loaned — 3.0%          
Money Market Fund — 3.0%          
BNY Mellon Overnight          
Government Fund, 0.17%          
(Cost $2,627,801)   2,627,801   $2,627,801 
Total Investments — 101.8%          
(Cost $90,546,906)       $87,111,033 
Liabilities in Excess of Other          
Assets — (1.8)%(c)        (1,600,288)
Net Assets — 100.0%       $85,510,745 

 

 
*Non-income producing securities.
(a)All or a portion of security is on loan. The aggregate market value of securities on loan is $2,405,793; total collateral of $2,628,440 (which includes non-cash collateral of $639 and is included in liabilities in excess of other Assets) was received with which the Fund purchased highly liquid short-term investments.
(b)Rate shown represents annualized 7-day yield as of April 30, 2013.
(c)Liabilities in Excess of Other Assets includes net unrealized depreciation on futures contracts.

ADR — American Depositary Receipt

See notes to financial statements.

38
 

Schedules of Investments — IQ Global Resources ETF (continued)
April 30, 2013

 

Open futures contracts outstanding at April 30, 2013:

                   
Type  Broker  Expiration
Date
  Number of
Contracts
Purchased
(Sold)
  Value at
Trade Date
  Value at
April 30, 2013
  Unrealized
(Depreciation)
E-mini S&P 500 Future  Morgan Stanley  June 2013  (114)  $(8,835,913)  $(9,075,540)  $(239,627)
Mini MSCI EAFE Index  Morgan Stanley  June 2013  (110)    (9,164,763)    (9,574,400)    (409,637)
                  $(649,264)

 

 

Cash posted as collateral to broker for futures contracts was $817,000 at April 30, 2013.

See notes to financial statements.

39
 

Schedules of Investments — IQ Merger Arbitrage ETF
April 30, 2013

 

       
   Shares  Value
Common Stocks — 82.8%          
Capital Goods — 5.4%          
Energy Solutions, Inc.*   14,973   $61,839 
Gardner Denver, Inc.   6,272    470,964 
Impregilo SpA(a)   43,712    229,828 
Total Capital Goods        762,631 
           
Communication Services — 15.8%          
Clearwire Corp., Class A*   123,874    416,217 
Sprint Nextel Corp.*   107,228    755,957 
Virgin Media, Inc.   21,664    1,056,770 
Total Communication Services        2,228,944 
           
Consumer Cyclicals — 7.7%          
Ameristar Casinos, Inc.   12,437    328,212 
Arbitron, Inc.   5,294    247,177 
Gemina SpA*   21,291    40,730 
Hot Topic, Inc.   5,757    80,310 
OfficeMax, Inc.   13,667    157,307 
WMS Industries, Inc.*   9,247    234,689 
Total Consumer Cyclicals        1,088,425 
           
Consumer Staples — 11.9%          
American Greetings Corp., Class A   7,425    136,917 
GrainCorp Ltd., Class A   42,639    567,431 
HJ Heinz Co.   13,293    962,679 
Total Consumer Staples        1,667,027 
           
Energy — 11.9%          
Berry Petroleum Co., Class A   4,734    226,806 
McMoRan Exploration Co.*   19,962    330,371 
Plains Exploration & Production Co.*   24,860    1,123,672 
Total Energy        1,680,849 
           
Financials — 14.8%          
Alterra Capital Holdings Ltd.   10,286    334,810 
CommonWealth REIT   11,854    264,700 
CreXus Investment Corp.   3,133    40,823 
Knight Capital Group, Inc., Class A*   33,067    117,057 
Netspend Holdings, Inc.*   10,767    171,841 
NYSE Euronext   29,783    1,155,878 
Total Financials        2,085,109 

 

       
   Shares  Value
Common Stocks (continued)          
Technology — 10.2%          
Compuware Corp.*   13,852   $166,224 
Cymer, Inc.*   1,510    158,188 
Dell, Inc.   72,372    969,785 
Intermec, Inc.*   10,816    106,429 
Kayak Software Corp.*   850    33,847 
Total Technology        1,434,473 
           
Transportation — 3.5%          
US Airways Group, Inc.* (a)   29,142    492,500 
           
Utilities — 1.6%          
Copano Energy LLC   5,563    223,577 
Total Common Stocks — 82.8%          
(Cost $11,219,817)        11,663,535 
           
Short-Term Investment — 16.0%          
Money Market Fund — 16.0%          
Morgan Stanley Institutional Liquidity          
Funds Treasury Portfolio — Institutional          
Class, 0.03%(b)          
(Cost $2,247,849)   2,247,849    2,247,849 
           
Investment of Cash Collateral For          
Securities Loaned — 4.9%          
Money Market Fund — 4.9%          
BNY Mellon Overnight          
Government Fund, 0.17%          
(Cost $693,122)   693,122    693,122 
           
Total Investments — 103.7%          
(Cost $14,160,788)       $14,604,506 
Liabilities in Excess of Other          
Assets — (3.7)%(c)        (526,424)
Net Assets — 100.0%       $14,078,082 

 

 
*Non-income producing securities.
(a)All or a portion of security is on loan. The aggregate market value of securities on loan is $679,717; cash collateral of $693,122 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments.
(b)Rate shown represents annualized 7-day yield as of April 30, 2013.
(c)Liabilities in Excess of Other Assets includes net unrealized depreciation on futures contracts.

Open futures contracts outstanding at April 30, 2013:

                   
Type  Broker  Expiration
Date
  Number of
Contracts
Purchased
(Sold)
  Value at
Trade Date
  Value at
April 30, 2013
  Unrealized
Depreciation
Mini MSCI EAFE Index Future  Morgan Stanley  June 2013  (22)  $(1,832,258)  $(1,914,880)  $  (82,622)
E-mini S&P 500 Future  Morgan Stanley  June 2013  (23)    (1,782,520)    (1,831,030)      (48,510)
                  $(131,132)

 

 

Cash posted as collateral to broker for futures contracts was $164,100 at April 30, 2013.

See notes to financial statements.

40
 

Schedules of Investments — IQ Australia Small Cap ETF
April 30, 2013

 

       
   Shares  Value
Common Stocks — 98.8%          
Consumer Discretionary — 23.9%          
Ainsworth Game Technology Ltd.   16,504   $65,273 
Aristocrat Leisure Ltd.   66,227    270,863 
Automotive Holdings Group Ltd.   26,007    109,876 
Billabong International Ltd.*   55,318    27,276 
Breville Group Ltd.(a)   14,215    102,996 
Cash Converters International Ltd.   41,050    60,083 
David Jones Ltd.   85,306    263,884 
Fairfax Media Ltd.(a)   303,202    204,580 
Fleetwood Corp. Ltd.   7,780    69,050 
Flight Centre Ltd.(a)   6,091    241,340 
G.U.D. Holdings Ltd.   11,017    83,370 
G8 Education Ltd.   33,251    83,874 
Invocare Ltd.   14,485    175,472 
JB Hi-Fi Ltd.   12,094    200,867 
Myer Holdings Ltd.(a)   87,450    291,396 
Navitas Ltd.(a)   27,072    152,032 
Pacific Brands Ltd.   124,399    111,054 
Seven West Media Ltd.   91,942    190,881 
Southern Cross Media Group Ltd.   82,468    133,117 
Super Retail Group Ltd.   22,056    301,301 
Ten Network Holdings Ltd.*   231,689    74,556 
Wotif.com Holdings Ltd.   18,326    97,209 
Total Consumer Discretionary        3,310,350 
           
Consumer Staples — 3.8%          
Goodman Fielder Ltd.*   242,460    195,056 
GrainCorp Ltd., Class A   24,682    328,463 
Total Consumer Staples        523,519 
           
Energy — 8.4%          
Aquila Resources Ltd.*(a)   27,455    52,724 
Aurora Oil & Gas Ltd.*   65,077    206,037 
AWE Ltd.*   80,947    108,395 
Beach Energy Ltd.   181,084    255,645 
Buru Energy Ltd.*   31,488    60,796 
Coalspur Mines Ltd.*(a)   60,239    28,452 
Drillsearch Energy Ltd.*(a)   56,867    66,705 
Energy Resources of Australia Ltd.*   26,566    28,404 
Horizon Oil Ltd.*(a)   138,186    58,095 
Karoon Gas Australia Ltd.*   28,665    124,379 
Paladin Energy Ltd.*(a)   115,588    90,589 
Senex Energy Ltd.*(a)   126,413    89,888 
Total Energy        1,170,109 
           
Financials — 7.4%          
Bank of Queensland Ltd.   49,683    517,282 
FlexiGroup Ltd.   30,017    130,868 
IOOF Holdings Ltd.   32,027    293,226 
Magellan Financial Group Ltd.   12,463    92,760 
Total Financials        1,034,136 
           
Health Care — 7.8%          
Acrux Ltd.   21,691    90,966 
Ansell Ltd.   20,975    344,015 
Mesoblast Ltd.*(a)   21,264    129,790 
Primary Health Care Ltd.   71,130    389,118 
Sigma Pharmaceuticals Ltd.   171,128    129,677 
Total Health Care        1,083,566 

 

       
   Shares  Value
Common Stocks (continued)          
Industrials — 18.9%          
Ausdrill Ltd.   39,667   $62,382 
Ausenco Ltd.   13,560    38,990 
Boart Longyear Ltd.   73,729    73,090 
Bradken Ltd.(a)   25,521    136,169 
Cabcharge Australia Ltd.(a)   17,695    87,800 
Cardno Ltd.(a)   20,619    139,337 
CSR Ltd.   77,428    163,160 
Decmil Group Ltd.(a)   21,983    42,558 
Downer EDI Ltd.   62,450    318,297 
GWA Group Ltd.   34,778    93,502 
Mermaid Marine Australia Ltd.   34,183    136,967 
Mineral Resources Ltd.   16,343    165,407 
Monadelphous Group Ltd.(a)   13,286    288,657 
NRW Holdings Ltd.   41,953    56,614 
SAI Global Ltd.(a)   33,452    122,579 
Skilled Group Ltd.   33,277    98,448 
Transfield Services Ltd.   71,483    118,354 
Transpacific Industries Group Ltd.*   137,566    138,516 
UGL Ltd.(a)   25,444    265,706 
Virgin Australia Holdings Ltd.*   154,873    73,149 
Total Industrials        2,619,682 
           
Information Technology — 3.5%          
carsales.com Ltd.   31,126    312,441 
Codan Ltd.   7,366    25,921 
Iress Ltd.   16,299    141,444 
Total Information Technology        479,806 
           
Materials — 21.3%          
Adelaide Brighton Ltd.   72,134    254,588 
Aquarius Platinum Ltd.*   72,732    43,790 
Arrium Ltd.   192,827    170,139 
Atlas Iron Ltd.   129,193    111,981 
Beadell Resources Ltd.*   101,587    74,344 
BlueScope Steel Ltd.*   81,744    420,029 
CuDeco Ltd.*(a)   19,302    75,537 
Discovery Metals Ltd.*   59,309    20,932 
DuluxGroup Ltd.   54,322    264,464 
Evolution Mining Ltd.*   74,500    75,401 
Independence Group NL   33,381    114,349 
Kingsgate Consolidated Ltd.   21,763    48,797 
Lynas Corp. Ltd.*(a)   311,008    163,035 
Medusa Mining Ltd.   26,948    91,473 
Mirabela Nickel Ltd.*   118,576    17,232 
Mount Gibson Iron Ltd.   51,769    26,601 
Northern Star Resources Ltd.   54,740    38,355 
Nufarm Ltd.   25,176    109,763 
PanAust Ltd.   72,685    175,045 
Papillon Resources Ltd.*   38,606    40,476 
Perseus Mining Ltd.*(a)   64,060    90,104 
Regis Resources Ltd.*   47,072    184,214 
Resolute Mining Ltd.   40,882    40,528 
Sandfire Resources NL*   15,309    89,151 
Silver Lake Resources Ltd.*   53,470    58,280 
St. Barbara Ltd.*   78,971    49,185 
Sundance Resources Ltd.*(a)   425,040    46,327 
Western Areas Ltd.   22,347    64,025 
Total Materials        2,958,145 

 

See notes to financial statements.

41
 

Schedules of Investments — IQ Australia Small Cap ETF (continued)
April 30, 2013

 

       
   Shares  Value
Common Stocks (continued)          
Telecommunication Services — 2.8%          
iiNET Ltd.   17,756   $113,723 
M2 Telecommunications Group Ltd.   22,019    128,684 
TPG Telecom Ltd.   39,312    147,724 
Total Telecommunication Services        390,131 
           
Utilities — 1.0%          
Envestra Ltd.   125,984    137,317 
           
Total Common Stocks — 98.8%          
(Cost $15,411,728)        13,706,761 

 

       
   Shares  Value
Investment of Cash Collateral For      
Securities Loaned — 20.9%      
Money Market Fund — 20.9%      
BNY Mellon Overnight      
Government Fund, 0.17%      
(Cost $2,896,195)   2,896,195   $2,896,195 
           
Total Investments — 119.7%          
(Cost $18,307,923)       $16,602,956 
Liabilities in Excess of Other          
Assets — (19.7)%        (2,733,101)
Net Assets — 100.0%       $13,869,855 

 

 
*Non-income producing securities.
(a)All or a portion of security is on loan. The aggregate market value of securities on loan is $2,460,061; cash collateral of $2,896,195 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments.

See notes to financial statements.

42
 

Schedules of Investments — IQ Canada Small Cap ETF
April 30, 2013

 

       
   Shares  Value
Common Stocks — 99.3%          
Consumer Discretionary — 2.0%          
Martinrea International, Inc.*   13,037   $110,559 
RONA, Inc.   20,392    212,871 
Total Consumer Discretionary        323,430 
           
Consumer Staples — 1.6%          
Jean Coutu Group (PJC), Inc., Class A   15,344    255,517 
           
Energy — 28.9%          
Advantage Oil & Gas Ltd.*   28,292    112,229 
AltaGas Ltd.   17,483    652,495 
Bankers Petroleum Ltd.*   42,155    105,613 
Bellatrix Exploration Ltd.*   16,605    104,168 
Birchcliff Energy Ltd.*   16,384    128,681 
BlackPearl Resources, Inc.*   45,789    100,150 
Calfrac Well Services Ltd.   5,806    147,711 
Canyon Services Group, Inc.(a)   8,439    88,010 
Crew Energy, Inc.*   17,739    123,274 
Deethree Exploration Ltd.*   11,002    85,754 
Denison Mines Corp.*   57,253    71,150 
Ensign Energy Services, Inc.   21,372    360,361 
Gran Tierra Energy, Inc.*   44,155    245,830 
Ithaca Energy, Inc.*   40,844    67,001 
Legacy Oil + Gas, Inc.*   23,751    125,620 
Niko Resources Ltd.   11,166    73,933 
Nuvista Energy Ltd.*   19,207    139,778 
Parex Resources, Inc.*   17,429    77,974 
PetroBakken Energy Ltd.   14,139    120,888 
Petrominerales Ltd.   13,795    76,254 
Poseidon Concepts Corp.   13,377    3,591 
Precision Drilling Corp.   39,883    323,949 
Secure Energy Services, Inc.   16,455    212,507 
Southern Pacific Resource Corp.*   67,234    44,116 
Sprott Resource Corp.   10,037    43,008 
TransGlobe Energy Corp.*   11,422    90,618 
Trican Well Service Ltd.   24,892    325,674 
Trinidad Drilling Ltd.   20,358    139,248 
Uranium One, Inc.*   79,216    220,515 
Whitecap Resources, Inc.   20,801    213,831 
Total Energy        4,623,931 
           
Financials — 5.8%          
AGF Management Ltd., Class B(a)   11,459    131,012 
Canaccord Financial, Inc.   12,628    72,188 
Element Financial Corp.*   16,285    152,189 
Industrial Alliance Insurance and          
Financial Services, Inc.   15,509    573,888 
Total Financials        929,277 
           
Health Care — 0.8%          
CML Healthcare, Inc.   15,335    117,850 
           
Industrials — 15.7%          
Aecon Group, Inc.   9,218    113,638 
Air Canada, Class B*   33,410    99,647 
CAE, Inc.   43,923    475,540 
Chorus Aviation, Inc., Class B   14,282    54,808 
Horizon North Logistics, Inc.   15,332    90,695 
Progressive Waste Solutions Ltd.(a)   18,318    408,847 
Russel Metals, Inc.   10,206    276,496 
Superior Plus Corp.   18,720    241,945 

 

       
   Shares  Value
Common Stocks (continued)          
Industrials (continued)          
TransForce, Inc.   13,524   $267,293 
WestJet Airlines Ltd.   19,498    478,412 
Total Industrials        2,507,321 
           
Information Technology — 0.5%          
Wi-LAN, Inc.   20,047    79,323 
           
Materials — 34.9%          
Alacer Gold Corp.   39,357    118,167 
Alamos Gold, Inc.   20,450    286,058 
Argonaut Gold, Inc.*   24,646    156,327 
AuRico Gold, Inc.   41,935    215,960 
Aurizon Mines Ltd.*   21,867    93,916 
B2Gold Corp.*   103,850    261,212 
Banro Corp.*   33,973    43,570 
Canexus Corp.   20,459    191,806 
Canfor Corp.*   9,216    192,777 
Capstone Mining Corp.*   51,228    103,897 
Centerra Gold, Inc.   27,128    113,545 
China Gold International Resources          
Corp., Ltd.*(a)   41,084    116,817 
Colossus Minerals, Inc.*   17,515    40,050 
Continental Gold Ltd.*   17,244    85,376 
Dominion Diamond Corp.*   13,550    215,135 
Dundee Precious Metals, Inc.*   16,293    104,641 
Endeavour Mining Corp.*   69,558    75,377 
Endeavour Silver Corp.*   14,877    77,798 
First Majestic Silver Corp.*   18,959    234,101 
Fortuna Silver Mines, Inc.*   21,275    66,415 
Gabriel Resources Ltd.*   35,750    64,687 
HudBay Minerals, Inc.   29,350    233,434 
Intertape Polymer Group, Inc.   8,415    93,700 
Ivanplats Ltd., Class A*(a)   36,778    109,692 
Kirkland Lake Gold, Inc.*   9,810    32,965 
Major Drilling Group International, Inc.   13,466    100,809 
Methanex Corp.   15,978    678,293 
Nevsun Resources Ltd.   33,289    124,770 
NovaGold Resources, Inc.*   38,632    95,250 
Orbite Aluminae, Inc.,          
Class Warrants*(a)   29,943    30,067 
Premier Gold Mines Ltd.*   24,646    51,701 
Primero Mining Corp.*   11,065    65,454 
Rio Alto Mining Ltd.*   26,951    99,139 
Romarco Minerals, Inc.*   99,186    43,388 
Rubicon Minerals Corp.*   46,845    81,502 
Sabina Gold & Silver Corp.*   18,969    22,630 
Sandstorm Gold Ltd.*   13,438    108,749 
SEMAFO, Inc.   46,352    88,017 
Sherritt International Corp.   49,924    233,775 
Silvercorp Metals, Inc.   28,190    82,397 
Taseko Mines Ltd.*   31,835    75,010 
Thompson Creek Metals Co., Inc.*   24,249    72,565 
Timmins Gold Corp. *   23,491    55,583 
Torex Gold Resources, Inc.*   103,069    143,457 
Total Materials        5,579,979 
           
Metals & Mining — 1.2%          
Pretium Resources, Inc.*   12,320    91,005 
Silver Standard Resources, Inc.*   13,732    98,705 
Total Metals & Mining        189,710 

 

See notes to financial statements.

43
 

Schedules of Investments — IQ Canada Small Cap ETF (continued)
April 30, 2013

 

       
   Shares  Value
Common Stocks (continued)          
Oil, Gas & Consumable Fuels — 3.0%          
Gibson Energy, Inc.   14,707   $383,814 
Twin Butte Energy Ltd.   40,977    90,847 
Total Oil, Gas & Consumable Fuels        474,661 
           
Telecommunication Services — 2.2%          
Manitoba Telecom Services, Inc.   10,994    356,976 
           
Utilities — 2.7%          
Algonquin Power & Utilities Corp.   23,650    187,159 
Atlantic Power Corp.   20,332    95,813 
Just Energy Group, Inc.(a)   21,782    146,390 
Total Utilities        429,362 
           
Total Common Stocks — 99.3%          
(Cost $21,891,886)       $15,867,337 

 

       
   Shares  Value
Investment of Cash Collateral For      
Securities Loaned — 2.0%      
Money Market Fund — 2.0%      
BNY Mellon Overnight      
Government Fund, 0.17%      
(Cost $316,226)   316,226   $316,226 
Total Investments — 101.3%          
(Cost $22,208,112)       $16,183,563 
Liabilities in Excess of Other          
Assets — (1.3)%        (202,175)
Net Assets — 100.0%       $15,981,388 

 

 
*Non-income producing securities.
(a)All or a portion of security is on loan. The aggregate market value of securities on loan is $306,463; cash collateral of $316,226 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments.

See notes to financial statements.

44
 

Schedules of Investments — IQ Global Agribusiness Small Cap ETF
April 30, 2013

 

       
   Shares  Value
Common Stocks — 99.1%          
Australia — 6.4%          
GrainCorp Ltd.   130,830   $1,741,059 
Nufarm Ltd.   141,317    616,115 
Total Australia        2,357,174 
China — 9.0%          
China Bluechemical Ltd., Class H   1,436,414    875,478 
China Minzhong Food Corp., Ltd.*(a)   348,797    283,195 
China Modern Dairy Holdings Ltd.*   1,385,244    478,372 
First Tractor Co., Ltd., Class H   347,058    258,485 
People’s Food Holdings Ltd.   520,149    553,238 
Shenguan Holdings Group Ltd.(a)   946,148    480,352 
Yongye International, Inc. ADR*   28,472    151,471 
Zhongpin, Inc. ADR*   20,637    267,456 
Total China        3,348,047 
Hong Kong — 7.0%          
Asian Citrus Holdings Ltd.   639,166    271,789 
China Agri-Industries Holdings Ltd.   1,780,734    874,236 
China Foods Ltd.   625,249    319,046 
China Yurun Food Group Ltd.*(a)   1,101,308    655,625 
Global Bio-chem Technology          
Group Co., Ltd.   1,651,237    142,557 
Sinofert Holdings Ltd.   1,521,638    329,401 
Total Hong Kong        2,592,654 
Indonesia — 2.3%          
Bumitama Agri Ltd.*   249,919    204,943 
PT Bakrie Sumatera Plantations Tbk   10,752,150    100,637 
PT Malindo Feedmill Tbk   598,582    172,387 
PT Perusahaan Perkebunan London          
Sumatra Indonesia Tbk   2,386,677    373,129 
Total Indonesia        851,096 
Ireland — 4.5%          
Glanbia PLC   125,963    1,685,607 
Japan — 25.1%          
Fuji Oil Co., Ltd.   42,507    674,631 
House Foods Corp.   50,514    880,534 
Iseki & Co., Ltd.   127,849    464,619 
Itoham Foods, Inc.   85,466    393,068 
Kewpie Corp.   78,596    1,186,888 
Kumiai Chemical Industry Co., Ltd.   34,968    231,900 
Mitsui Sugar Co., Ltd.   61,154    192,107 
Miyoshi Oil & Fat Co. Ltd.   46,731    81,075 
Morinaga Milk Industry Co., Ltd.   147,852    435,618 
Nippon Meat Packers, Inc.   118,337    1,817,392 
Nisshin Oillio Group Ltd.   67,344    237,132 
Nisshin Seifun Group, Inc.   129,275    1,669,520 
NOF Corp.   112,658    606,024 
Prima Meat Packers Ltd.   95,215    264,893 
Yamatane Corp.(a)   63,661    136,589 
Total Japan        9,271,990 
Luxembourg — 2.0%          
Adecoagro SA ADR*   97,290    725,783 
Netherlands — 10.3%          
CSM NV   56,166    1,258,097 
Nutreco NV*   26,729    2,539,712 
Total Netherlands        3,797,809 

 

       
   Shares  Value
Common Stocks (continued)      
New Zealand — 0.5%      
A2 Corp. Ltd.*   302,736   $181,791 
Singapore — 2.5%          
First Resources Ltd.   412,107    578,854 
Indofood Agri Resources Ltd.(a)   328,138    283,739 
Mewah International, Inc.   159,746    58,365 
Total Singapore        920,958 
Spain — 3.5%          
Ebro Foods SA   63,972    1,313,185 
Thailand — 1.0%          
GFPT PCL*   372,221    106,530 
Thai Vegetable Oil PCL   323,196    253,271 
Total Thailand        359,801 
United Kingdom — 4.1%          
Dairy Crest Group PLC   112,775    806,880 
Devro PLC   137,702    707,040 
Total United Kingdom        1,513,920 
United States — 20.9%          
American Vanguard Corp.   20,364    587,298 
Chiquita Brands International, Inc.*   37,238    321,364 
CVR Partners LP(a)   18,649    490,655 
Dole Food Co., Inc.*   45,631    490,990 
Lindsay Corp.   10,704    822,281 
Smithfield Foods, Inc.*   109,829    2,811,622 
Toro Co.   48,866    2,199,459 
Total United States        7,723,669 
Total Common Stocks — 99.1%          
(Cost $37,531,336)        36,643,484 
Short-Term Investment — 0.5%          
Money Market Fund — 0.5%          
Morgan Stanley Institutional Liquidity          
Funds Treasury Portfolio — Institutional          
Class, 0.03%(b)          
(Cost $190,453)   190,453    190,453 
Investment of Cash Collateral For          
Securities Loaned — 7.3%          
Money Market Fund — 7.3%          
BNY Mellon Overnight          
Government Fund, 0.17%          
(Cost $2,684,833)   2,684,833    2,684,833 
Total Investments — 106.9%          
(Cost $40,406,622)       $39,518,770 
Liabilities in Excess of Other          
Assets — (6.9)%        (2,541,631)
Net Assets — 100.0%       $36,977,139 

 

 
*Non-income producing securities.
(a)All or a portion of security is on loan. The aggregate market value of securities on loan is $941,252; cash collateral of $2,684,833 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments.
(b)Rate shown represents annualized 7-day yield as of April 30, 2013.

ADR — American Depositary Receipt

LP — Limited Partnership

PCL — Public Company Limited

See notes to financial statements.

45
 

Schedules of Investments — IQ Global Oil Small Cap ETF
April 30, 2013

 

       
   Shares  Value
Common Stocks — 99.2%          
Australia — 5.3%          
Caltex Australia Ltd.   4,073   $91,071 
Horizon Oil Ltd.*(a)   25,737    10,820 
Total Australia        101,891 
Bermuda — 0.2%          
Archer Ltd.*   5,948    3,895 
Canada — 8.9%          
Bankers Petroleum Ltd.*   7,482    18,745 
Canyon Services Group, Inc.   1,498    15,623 
Ensign Energy Services, Inc.   3,793    63,955 
Horizon North Logistics, Inc.   2,721    16,096 
Ithaca Energy, Inc.*   7,250    11,893 
Southern Pacific Resource Corp.*   11,934    7,831 
Sunshine Oilsands Ltd.*   51,521    12,614 
TAG Oil Ltd.*   1,640    8,967 
Twin Butte Energy Ltd.   7,273    16,124 
Total Canada        171,848 
China — 1.3%          
Shandong Molong Petroleum Machinery          
Co. Ltd., Class H   6,944    2,496 
Sinopec Shanghai Petrochemical Co.,          
Ltd., Class H   67,315    23,159 
Total China        25,655 
Colombia — 0.7%          
Petrominerales Ltd.   2,449    13,537 
Finland — 2.8%          
Neste Oil OYJ   3,422    53,372 
France — 2.3%          
Etablissements Maurel et Prom   2,601    44,288 
Ireland — 0.8%          
Providence Resources PLC*   1,642    15,628 
Italy — 1.3%          
ERG SpA   1,449    13,888 
Saras SpA*   9,094    12,121 
Total Italy        26,009 
Japan — 8.1%          
Cosmo Oil Co., Ltd.   14,144    33,687 
Showa Shell Sekiyu K.K.   5,558    44,562 
Tonengeneral Sekiyu K.K.   7,715    77,934 
Total Japan        156,183 
Netherlands — 10.3%          
Core Laboratories NV ADR(a)   1,379    199,652 
Norway — 3.0%          
Det Norske Oljeselskap ASA*   2,000    28,400 
DNO International ASA*   16,705    29,220 
Total Norway        57,620 
Philippines — 0.8%          
Petron Corp.   44,050    16,481 
Russia — 0.9%          
Alliance Oil Co., Ltd.*   2,081    16,588 
Singapore — 0.1%          
Kreuz Holdings Ltd.   4,364    1,825 

 

       
   Shares  Value
Common Stocks (continued)          
Thailand — 7.1%          
Bangchak Petroleum PCL   21,602   $26,681 
Esso Thailand PCL   26,115    8,586 
IRPC PCL   317,896    44,408 
Thai Oil PCL   25,616    57,603 
Total Thailand        137,278 
United Arab Emirates — 3.4%          
Dragon Oil PLC   6,790    66,895 
United Kingdom — 2.5%          
Rockhopper Exploration PLC*   7,978    16,980 
Salamander Energy PLC*   7,277    20,693 
Xcite Energy Ltd.*   7,646    11,692 
Total United Kingdom        49,365 
United States — 39.4%          
Alon USA Energy, Inc.   587    9,744 
Bonanza Creek Energy, Inc.*   1,138    39,090 
BPZ Resources, Inc.*   2,846    6,090 
CVR Energy, Inc.   462    22,763 
Gulfport Energy Corp.*   2,311    120,611 
Harvest Natural Resources, Inc.*(a)   1,144    3,752 
Key Energy Services, Inc.*   4,387    26,059 
Kodiak Oil & Gas Corp.*   7,825    61,270 
Lufkin Industries, Inc.   993    87,672 
Northern Tier Energy LP   941    24,824 
Ocean Rig UDW, Inc.   1,621    26,552 
Oceaneering International, Inc.   3,021    211,984 
PetroQuest Energy, Inc.*   1,707    7,306 
Pioneer Energy Services Corp.*   1,797    12,669 
Stone Energy Corp.*   1,430    28,214 
Synergy Resources Corp.*   1,216    8,208 
VAALCO Energy, Inc.*   1,667    11,202 
Western Refining, Inc.(a)   1,772    54,772 
Total United States        762,782 
Total Common Stocks — 99.2%          
(Cost $2,154,233)        1,920,792 
Investment of Cash Collateral For          
Securities Loaned — 13.4%          
Money Market Fund — 13.4%          
BNY Mellon Overnight Government          
Fund, 0.17%          
(Cost $259,751)   259,751    259,751 
Total Investments — 112.6%          
(Cost $2,413,984)       $2,180,543 
Liabilities in Excess of Other          
Assets — (12.6)%        (244,115)
Net Assets — 100.0%       $1,936,428 

 

 
*Non-income producing securities.
(a)All or a portion of security is on loan. The aggregate market value of securities on loan is $255,434; cash collateral of $259,751 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments.

ADR — American Depositary Receipt

K.K. — Kabushiki Kaisha

LP — Limited Partnership

PCL — Public Company Limited

See notes to financial statements.

46
 

Schedules of Investments — IQ US Real Estate Small Cap ETF
April 30, 2013

 

       
   Shares  Value
Common Stocks — 98.7%          
Diversified REITs — 8.0%          
CapLease, Inc.   70,336   $493,759 
Cousins Properties, Inc.   84,200    919,464 
Investors Real Estate Trust   89,373    869,599 
Redwood Trust, Inc.   77,579    1,770,353 
Resource Capital Corp.   93,431    615,710 
Total Diversified REITs        4,668,885 
Hotel REITs — 11.2%          
Ashford Hospitality Trust, Inc.   59,042    760,461 
FelCor Lodging Trust, Inc.*   106,805    638,694 
Hersha Hospitality Trust   172,523    1,031,688 
Pebblebrook Hotel Trust   58,718    1,594,781 
Summit Hotel Properties, Inc.   63,094    630,309 
Sunstone Hotel Investors, Inc.*   150,044    1,862,046 
Total Hotel REITs        6,517,979 
Mortgage REITs — 28.2%          
AG Mortgage Investment Trust, Inc.(a)   25,483    659,245 
Anworth Mortgage Asset Corp.   135,609    855,693 
Apollo Commercial Real Estate          
Finance, Inc.   26,797    475,379 
ARMOUR Residential REIT, Inc.   358,180    2,324,588 
CreXus Investment Corp.(a)   64,874    845,308 
Dynex Capital, Inc.   48,855    525,191 
Gramercy Property Trust, Inc.*   38,771    184,162 
Invesco Mortgage Capital   126,969    2,717,137 
iStar Financial, Inc.*   69,678    813,839 
New York Mortgage Trust, Inc.(a)   47,203    337,029 
Newcastle Investment Corp.   238,290    2,699,826 
NorthStar Realty Finance Corp.   157,192    1,567,204 
PennyMac Mortgage Investment Trust   52,522    1,326,180 
RAIT Financial Trust   56,148    479,504 
Western Asset Mortgage Capital          
Corp.(a)   21,496    481,510 
ZAIS Financial Corp.*(a)   5,474    113,093 
Total Mortgage REITs        16,404,888 
Office REITs — 19.1%          
Brandywine Realty Trust   132,180    1,973,447 
CommonWealth REIT   75,686    1,690,068 
First Industrial Realty Trust, Inc.   92,098    1,652,238 
First Potomac Realty Trust   47,929    766,864 
Franklin Street Properties Corp.   70,055    1,069,740 
Government Properties Income Trust   52,833    1,376,300 
Lexington Realty Trust   160,363    2,054,250 
Parkway Properties, Inc.   29,320    534,503 
Total Office REITs        11,117,410 

 

       
   Shares  Value
Common Stocks (continued)          
Residential REITs — 3.9%          
Associated Estates Realty Corp.   44,370   $792,892 
Education Realty Trust, Inc.   108,702    1,194,635 
Silver Bay Realty Trust Corp.   14,621    278,969 
Total Residential REITs        2,266,496 
Retail REITs — 14.2%          
Acadia Realty Trust   51,079    1,458,305 
Cedar Realty Trust, Inc.   62,534    400,843 
Glimcher Realty Trust   135,770    1,702,556 
Inland Real Estate Corp.   86,224    976,056 
Kite Realty Group Trust   70,918    468,059 
Pennsylvania Real Estate          
Investment Trust   51,398    1,065,481 
Ramco-Gershenson Properties Trust   46,164    806,485 
Spirit Realty Capital, Inc.   65,281    1,405,500 
Total Retail REITs        8,283,285 
Specialized REITs — 14.1%          
CubeSmart   117,759    2,069,026 
DCT Industrial Trust, Inc.   268,387    2,101,470 
Medical Properties Trust, Inc.   129,759    2,087,822 
Sabra Health Care REIT, Inc.   34,811    1,038,064 
STAG Industrial, Inc.   39,841    878,096 
Total Specialized REITs        8,174,478 
Total Common Stocks — 98.7%          
(Cost $51,665,521)        57,433,421 
Short-Term Investment — 1.1%          
Money Market Fund — 1.1%          
Morgan Stanley Institutional Liquidity          
Funds Treasury Portfolio —          
Institutional Class, 0.03%(b)          
(Cost $657,513)   657,513    657,513 
Investment of Cash Collateral For          
Securities Loaned — 2.2%          
Money Market Fund — 2.2%          
BNY Mellon Overnight          
Government Fund, 0.17%          
(Cost $1,265,866)   1,265,866    1,265,866 
Total Investments — 102.0%          
(Cost $53,588,900)       $59,356,800 
Liabilities in Excess of Other          
Assets — (2.0)%        (1,165,175)
Net Assets — 100.0%       $58,191,625 

 

 
*Non-income producing securities.
(a)All or a portion of security is on loan. The aggregate market value of securities on loan is $1,222,842; cash collateral of $1,265,866 (included in liabilities) was received with which the Fund purchased highly liquid short-term investments.
(b)Rate shown represents annualized 7-day yield as of April 30, 2013.

REITs — Real Estate Investment Trusts

See notes to financial statements.

47
 

Statements of Assets and Liabilities
April 30, 2013

 

         
  IQ Hedge
Multi-Strategy
Tracker ETF
  IQ Hedge
Macro
Tracker ETF
  IQ Hedge
Market Neutral
Tracker ETF
  IQ Real
Return ETF
  IQ Global
Resources ETF
  IQ Merger
Arbitrage ETF
Assets                                              
Investments, at cost: $ 389,440,755     $ 75,713,089     $ 5,006,877     $ 67,802,549     $ 90,546,906     $ 14,160,788  
Investments, at value (including                                              
securities on loan)1 $ 396,581,571     $ 76,717,149     $ 5,075,498     $ 68,358,452     $ 87,111,033     $ 14,604,506  
Cash   67,293                         132,398       520  
Foreign currency2                           16,541       12,370  
Cash deposited at broker for                                              
futures collateral   405,325             7,200             817,000       164,100  
Cash deposited at broker for                                              
swap collateral   9,122,662       113,760       106,418                    
Receivable for capital shares                                              
created   5,681,514                                
Receivable for investments sold   3,719,758                                
Dividend, interest and reclaims                                              
receivable   592,385       8,742       4,642       6,308       146,070       4,798  
Total Assets   416,170,508       76,839,651       5,193,758       68,364,760       88,223,042       14,786,294  
 
Liabilities                                              
Collateral for securities on loan   22,216,423       13,528,401       50,663       7,386,500       2,627,801       693,122  
Due to broker   921,418       47,198       146                      
Payable for capital shares                                              
redeemed   4,247,603                                  
Advisory fees payable   227,701       38,688       3,140       23,905       52,705       8,672  
Variation margin payable   73,911             2,740             31,600       6,360  
Trustee fees payable   504       16             201       79       4  
Compliance fees payable   207       15             40       58        
Payable for investments purchased   4,981,411                                
Accrued expenses and other                                              
liabilities   54       54       1       54       54       54  
Total Liabilities   32,669,232       13,614,372       56,690       7,410,700       2,712,297       708,212  
Net Assets $ 383,501,276     $ 63,225,279     $ 5,137,068     $ 60,954,060     $ 85,510,745     $ 14,078,082  
 
Composition of Net Assets                                              
Paid-in capital $ 393,170,478     $ 66,776,911     $ 5,070,425     $ 60,859,619     $ 109,428,151     $ 15,908,049  
Undistributed (accumulated) net                                              
investment income (loss)   (127,863 )     (252,752 )     (175 )     (173,363 )     845,771       240,510  
Undistributed (accumulated) net                                              
realized gain (loss) on                                              
investments, swap transactions,                                              
futures contracts and foreign                                              
currency translations   (17,049,445 )     (4,302,940 )     5,060       (288,099 )     (20,680,753 )     (2,383,494 )
Net unrealized appreciation                                              
(depreciation) on investments,                                              
swap transactions, futures                                              
contracts and foreign currency                                              
translations   7,508,106       1,004,060       61,758       555,903       (4,082,424 )     313,017  
Net Assets $ 383,501,276     $ 63,225,279     $ 5,137,068     $ 60,954,060     $ 85,510,745     $ 14,078,082  
 
NET ASSET VALUE PER SHARE                                              
Shares Outstanding (no par value,                                              
unlimited shares authorized)   13,500,000       2,350,000       200,000       2,300,000       3,000,000       550,000  
Net Asset Value $ 28.41     $ 26.90     $ 25.69     $ 26.50     $ 28.50     $ 25.60  
 
1 Market value of securities
      on loan:
$ 21,860,034     $ 13,273,076     $ 49,923     $ 7,236,890     $ 2,405,793     $ 679,717  
2 Cost of foreign currency: $     $     $     $     $ 13,418     $ 11,979  

 

See notes to financial statements.

48
 

Statements of Assets and Liabilities (continued)
April 30, 2013

 

   
  IQ Australia
Small Cap ETF
  IQ Canada
Small Cap ETF
  IQ Global
Agribusiness
Small Cap ETF
Assets                      
Investments, at cost $ 18,307,923     $ 22,208,112     $ 40,406,622  
Investments, at value (including securities on loan)1 $ 16,602,956     $ 16,183,563     $ 39,518,770  
Cash               47,278  
Foreign currency2   148,945       140,151       566  
Dividend, interest and reclaims receivable   28,453       12,658       117,883  
Total Assets   16,780,354       16,336,372       39,684,497  
 
Liabilities                      
Collateral for securities on loan   2,896,195       316,226       2,684,833  
Advisory fees payable   7,877       9,109       22,341  
Due to custodian   6,360       28,857        
Trustee fees payable   13       12       32  
Compliance fees payable         64       98  
Payable for investments purchased         662        
Accrued expenses and other liabilities   54       54       54  
Total Liabilities   2,910,499       354,984       2,707,358  
Net Assets $ 13,869,855     $ 15,981,388     $ 36,977,139  
 
Composition of Net Assets                      
Paid-in capital $ 20,137,047     $ 34,367,330     $ 41,687,238  
Undistributed (accumulated) net investment income (loss)   233,628       (305,329 )     44,802  
Undistributed (accumulated) net realized gain (loss) on investments,                      
swap transactions, futures contracts and foreign currency translations   (4,795,287 )     (12,059,072 )     (3,865,020 )
Net unrealized appreciation (depreciation) on investments, swap                      
transactions, futures contracts and foreign currency translations   (1,705,533 )     (6,021,541 )     (889,881 )
Net Assets $ 13,869,855     $ 15,981,388     $ 36,977,139  
 
NET ASSET VALUE PER SHARE                      
Shares Outstanding (no par value, unlimited shares authorized)   650,000       750,000       1,400,000  
Net Asset Value $ 21.34     $ 21.31     $ 26.41  
 
1 Market value of securities on loan: $ 2,460,061     $ 306,463     $ 941,252  
2 Cost of foreign currency: $ 149,353     $ 137,306     $ 566  

 

See notes to financial statements.

49
 

Statements of Assets and Liabilities (continued)
April 30, 2013

 

  IQ Global Oil
Small Cap ETF
IQ US
Real Estate
Small Cap ETF
Assets            
Investments, at cost: $ 2,413,984   $ 53,588,900  
Investments, at value (including securities on loan)1 $ 2,180,543   $ 59,356,800  
Foreign currency2   38,179      
Receivable for capital shares created       5,386,920  
Receivable for investments sold   37      
Dividend, interest and reclaims receivable   3,259     71,457  
Total Assets   2,222,018     64,815,177  
 
Liabilities            
Collateral for securities on loan   259,751     1,265,866  
Due to custodian   24,616      
Advisory fees payable   1,159     26,762  
Trustee fees payable       1  
Compliance fees payable   31      
Payable for investments purchased       5,330,887  
Accrued expenses and other liabilities   33     36  
Total Liabilities   285,590     6,623,552  
Net Assets $ 1,936,428   $ 58,191,625  
 
Composition of Net Assets            
Paid-in capital $ 2,386,348   $ 52,837,257  
Undistributed (accumulated) net investment income (loss)   (8,198 )    
Undistributed (accumulated) net realized gain (loss) on investments,            
swap transactions, futures contracts and foreign currency translations   (208,443 )   (413,532 )
Net unrealized appreciation (depreciation) on investments, swap transactions,            
futures contracts and foreign currency translations   (233,279 )   5,767,900  
Net Assets $ 1,936,428   $ 58,191,625  
 
NET ASSET VALUE PER SHARE            
Shares Outstanding (no par value, unlimited shares authorized)   100,000     2,150,000  
Net Asset Value $ 19.36   $ 27.07  
 
1 Market value of securities on loan: $ 255,434   $ 1,222,842  
2 Cost of foreign currency: $ 38,042   $  

 

See notes to financial statements.

50
 

Statements of Operations
For the period ended April 30, 2013

 

  IQ Hedge
Multi-Strategy
Tracker ETF
  IQ Hedge
Macro
Tracker ETF
  IQ Hedge
Market Neutral
Tracker ETF**
  IQ Real
Return ETF
  IQ Global
Resources ETF
  IQ Merger
Arbitrage ETF
Investment Income                                    
Dividend income* $ 5,363,071   $ 1,054,486   $ 39,995   $ 268,418   $ 1,576,593   $ 175,627  
Securities lending income, net   135,373     38,388     741     36,587     30,056     2,993  
Total investment income   5,498,444     1,092,874     40,736     305,005     1,606,649     178,620  
 
Expenses                                    
Advisory fees   2,088,503     382,006     26,372     205,286     562,491     119,460  
Trustee fees   7,312     1,520     146     1,546     2,760     679  
Compliance fees   2,226     393     23     340     600     126  
Miscellaneous   40     14     227     54     923     917  
Total expenses   2,098,081     383,933     26,768     207,226     566,774     121,182  
Net investment income (loss)   3,400,363     708,941     13,968     97,779     1,039,875     57,438  
 
Realized and Unrealized Gain (Loss)                                    
on Investments, Swap transactions,                                    
Futures Contracts and                                    
Foreign Currency Translations                                    
Net realized gain (loss) from:                                    
Investment securities   (4,470,376 )   (1,545,577 )   3,050     (397,021 )   (6,267,365 )   (201,255 )
In-Kind redemptions   7,101,992     1,684,188     57,299     372,944     9,592,342     230,687  
Swap transactions   423,643     (784,913 )   50,020              
Distributions from investments in                                    
other investment companies   304,323     15,702     7,448              
Futures contracts   (352,137 )   (234,099 )   (16,034 )       (2,061,228 )   (185,129 )
Foreign currency translations                   (142,699 )   (30,607 )
Net realized gain (loss)   3,007,445     (864,699 )   101,783     (24,077 )   1,121,050     (186,304 )
Net change in net unrealized                                    
appreciation (depreciation) on:                                    
Investment securities   4,609,189     125,122     68,621     412,304     (2,413,302 )   (468,423 )
Futures contracts   310,694     9,606     (6,863 )       (742,829 )   (150,732 )
Foreign currency translations                   362     156  
Net change in net unrealized                                    
appreciation (depreciation)   4,919,883     134,728     61,758     412,304     (3,155,769 )   (618,999 )
Net realized and unrealized                                    
gain (loss)   7,927,328     (729,971 )   163,541     388,227     (2,034,719 )   (805,303 )
Net Increase (Decrease) in Net                                    
Assets Resulting from Operations $ 11,327,691   $ (21,030 ) $ 177,509   $ 486,006   $ (994,844 ) $ (747,865 )
 
*Net of foreign taxes withheld of: $   $   $   $   $ 89,183   $ 3,816  

 

 

** Commencement of operations was October 4, 2012.

See notes to financial statements.

51
 

Statements of Operations (continued)
For the period ended April 30, 2013

 

  IQ Australia
Small Cap ETF
  IQ Canada
Small Cap ETF
  IQ Global
Agribusiness
Small Cap ETF
Investment Income                  
Dividend income* $ 470,606   $ 397,577   $ 670,017  
Interest income   6         4  
Securities lending income, net   37,180     24,269     48,165  
Total investment income   507,792     421,846     718,186  
 
Expenses                  
Advisory fees   95,455     152,860     270,427  
Trustee fees   535     915     1,379  
Compliance fees   74     117     303  
Miscellaneous   54     213     54  
Total expenses   96,118     154,105     272,163  
Net investment income   411,674     267,741     446,023  
 
Realized and Unrealized Gain (Loss) on Investments, Swap transactions,                  
Futures Contracts and Foreign Currency Translations                  
Net realized gain (loss) from:                  
Investment securities   (1,789,366 )   (4,648,629 )   (1,345,430 )
In-Kind redemptions   (201,234 )   (2,034,717 )   851,952  
Foreign currency translations   6,090     92     (4,509 )
Net realized gain (loss)   (1,984,510 )   (6,683,254 )   (497,987 )
Net change in net unrealized appreciation (depreciation) on:                  
Investment securities   388,215     2,325,760     2,666,885  
Foreign currency translations   (598 )   (5,596 )   (6,132 )
Net change in net unrealized appreciation (depreciation)   387,617     2,320,164     2,660,753  
Net realized and unrealized gain (loss)   (1,596,893 )   (4,363,090 )   2,162,766  
Net Increase (Decrease) in Net Assets Resulting from Operations $ (1,185,219 ) $ (4,095,349 ) $ 2,608,789  
 
* Net of foreign taxes withheld of: $ 5,351   $ 70,515   $ 41,147  

 

See notes to financial statements.

52
 

Statements of Operations (continued)
For the period ended April 30, 2013

 

  IQ Global Oil
Small Cap ETF
IQ US
Real Estate
Small Cap ETF
Investment Income          
Dividend income* $ 41,590   $ 1,205,385
Securities lending income, net   857     5,115
Total investment income   42,447     1,210,500
Expenses          
Advisory fees   19,631     189,854
Trustee fees   99     941
Compliance fees   55     257
Miscellaneous   41     46
Total expenses   19,826     191,098
Net investment income (loss)   22,621     1,019,402
Realized and Unrealized Gain (Loss) on Investments, Swap transactions,          
Futures Contracts and Foreign Currency Translations          
Net realized gain (loss) from:          
Investment securities   (176,188 )   62,416
In-Kind redemptions   105,471     4,633,401
Foreign currency translations   (970 )  
Net realized gain (loss)   (71,687 )   4,695,817
Net change in net unrealized appreciation (depreciation) on:          
Investment securities   168,659     3,970,967
Foreign currency translations   (51 )  
Net change in net unrealized appreciation (depreciation)   168,608     3,970,967
Net realized and unrealized gain (loss)   96,921     8,666,784
Net Increase (Decrease) in Net Assets Resulting from Operations $ 119,542   $ 9,686,186
*Net of foreign taxes withheld of: $ 2,498   $

 

See notes to financial statements.

53
 

Statements of Changes in Net Assets

 

 
IQ Hedge

Multi-Strategy Tracker ETF
  IQ Hedge
Macro Tracker ETF
  IQ Hedge
Market Neutral
Tracker ETF
  IQ Real Return ETF
 

For the
Year Ended April 30,




For the
Year Ended April 30,
For the
Period
October 4,
2012 * to
April 30,
2013
For the
Year Ended April 30,
  2013   2012 2013   2012 2013   2012
Increase (Decrease) in Net                                              
Assets from Operations                                              
Net investment income (loss) $ 3,400,363   $ 2,529,098   $ 708,941     465,375   $ 13,968   $ 97,779     (10,332 )
Net realized gain (loss)   3,007,445     (59,823 )   (864,699 )     (406,433 )   101,783     (24,077 )     495,143  
Net change in net unrealized                                              
appreciation (depreciation)   4,919,883     (482,500 )   134,728       (593,194 )   61,758     412,304       16,786  
Net increase (decrease) in net                                              
assets resulting from operations   11,327,691     1,986,775     (21,030 )     (534,252 )   177,509     486,006       501,597  
 
Dividends and Distributions to                                              
Shareholders from:                                              
Net investment income   (3,493,395 )   (2,465,773 )   (678,020 )     (349,947 )   (19,014 )   (23,359 )      
Net realized gains                               (70,733 )
Total dividends and distributions                                              
to shareholders   (3,493,395 )   (2,465,773 )   (678,020 )     (349,947 )   (19,014 )   (23,359 )     (70,733 )
 
Capital Share Transactions                                              
Proceeds from shares created   290,855,270     180,656,444     49,109,971       43,686,434     13,812,208     43,522,101       38,986,694  
Cost of shares redeemed   (111,603,698 )   (114,838,725 )   (35,661,207 )     (20,628,831 )   (8,833,635 )   (10,573,400 )     (24,689,903 )
Net increase from capital share                                              
transactions   179,251,572     65,817,719     13,448,764       23,057,603     4,978,573     32,948,701       14,296,791  
Total increase in net assets   187,085,868     65,338,721     12,749,714       22,173,404     5,137,068     33,411,348       14,727,655  
 
Net Assets                                              
Beginning of year   196,415,408     131,076,687     50,475,565       28,302,161         27,542,712       12,815,057  
End of year $ 383,501,276   $ 196,415,408   $ 63,225,279   $  50,475,565    $ 5,137,068   $ 60,954,060   $  27,542,712  
Including undistributed                                              
(accumulated) net investment                                              
income (loss) as follows: $ (127,863 )   659,666   $ (252,752   $ 152,347   $ (175 ) $ (173,363   $ (1,837 )
 
Changes in Shares Outstanding                                              
Shares outstanding, beginning                                              
of period   7,100,000     4,704,000     1,850,000       1,000,000         1,050,000       500,000  
Shares created   10,400,000     6,550,000     1,800,000       1,600,000     550,000     1,650,000       1,500,000  
Shares redeemed   (4,000,000 )   (4,154,000 )   (1,300,000 )     (750,000 )   (350,000 )   (400,000 )     (950,000 )
Shares outstanding, end of period   13,500,000     7,100,000     2,350,000       1,850,000     200,000     2,300,000       1,050,000  

 

 

* Commencement of operations.

See notes to financial statements.

54
 

Statements of Changes in Net Assets (continued)

 

                   
   IQ Global Resources ETF  IQ Merger Arbitrage ETF  IQ Australia Small Cap ETF
   For the Year Ended April 30,  For the Year Ended April 30,  For the Year Ended April 30,
   2013  2012  2013  2012  2013  2012
Increase (Decrease) in Net                              
Assets from Operations                              
Net investment income (loss)  $1,039,875   $908,263   $57,438   $(24,536)  $411,674   $579,678 
Net realized gain (loss)   1,121,050    (6,039,373)   (186,304)   (110,416)   (1,984,510)   (2,771,606)
Net change in net unrealized                              
appreciation (depreciation)   (3,155,769)   (4,269,871)   (618,999)   720,507    387,617    (4,782,433)
Net increase (decrease) in net                              
assets resulting from                              
operations   (994,844)   (9,400,981)   (747,865)   585,555    (1,185,219)   (6,974,361)
                               
Dividends and Distributions to                              
Shareholders from:                              
Net investment income   (931,541)   (448,866)   (24,415)   —      (254,722)   (1,324,792)
Net realized gains   —      (735,042)   —      —      —      (637,635)
Total dividends and distributions                              
to shareholders   (931,541)   (1,183,908)   (24,415)   —      (254,722)   (1,962,427)
                               
Capital Share Transactions                              
Proceeds from shares created   95,451,489    78,029,100    3,815,973    13,762,318    —      5,004,467 
Cost of shares redeemed   (76,052,862)   (79,259,307)   (14,984,498)   (11,249,742)   (967,252)   (23,113,382)
Net increase (decrease) from                              
capital share transactions   19,398,627    (1,230,207)   (11,168,525)   2,512,576    (967,252)   (18,108,915)
Total increase (decrease)                              
in net assets   17,472,242    (11,815,096)   (11,940,805)   3,098,131    (2,407,193)   (27,045,703)
                               
Net Assets                              
Beginning of period   68,038,503    79,853,599    26,018,887    22,920,756    16,277,048    43,322,751 
End of period  $85,510,745   $68,038,503   $14,078,082   $26,018,887   $13,869,855   $16,277,048 
Including undistributed                              
(accumulated) net investment                              
income (loss) as follows:  $845,771   $507,525   $240,510   $(126,487)  $233,628   $44,532 
                               
Changes in Shares Outstanding                              
Shares outstanding, beginning                              
of period   2,350,000    2,400,000    1,000,000    900,000    700,000    1,400,000 
Shares created   3,250,000    2,650,000    150,000    550,000    —      200,000 
Shares redeemed   (2,600,000)   (2,700,000)   (600,000)   (450,000)   (50,000)   (900,000)
Shares outstanding, end                              
of period   3,000,000    2,350,000    550,000    1,000,000    650,000    700,000 

 

See notes to financial statements.

55
 

Statements of Changes in Net Assets (continued)

 

    IQ Canada
Small Cap ETF
  IQ Global
Agribusiness Small Cap ETF
  IQ Global
Oil Small Cap ETF
    For the
Year Ended April 30,
  For the
Year Ended April 30,
  For the
Year Ended

April 30, 2013
  For the Period
May 4, 2011*
to

April 30, 2012
    2013   2012   2013   2012    
Increase (Decrease) in Net                                                
Assets from Operations                                                
Net investment income (loss)   $ 267,741     $ 277,034     $ 446,023     $ 388,751     $ 22,621     $ 23,587  
Net realized gain (loss)     (6,683,254 )     (7,617,624 )     (497,987 )     (1,171,219 )     (71,687 )     70,073  
Net change in net unrealized                                                
appreciation (depreciation)     2,320,164       (14,985,721 )     2,660,753       (4,992,733 )     168,608       (401,887 )
Net increase (decrease) in net                                                
assets resulting from                                                
operations     (4,095,349 )     (22,326,311 )     2,608,789       (5,775,201 )     119,542       (308,227 )
                                                 
Dividends and Distributions to                                                
Shareholders from:                                                
Net investment income     (739,738 )     (400,361 )     (519,028 )     (331,760 )     (45,351 )     (12,378 )
Total dividends and distributions                                                
to shareholders     (739,738 )     (400,361 )     (519,028 )     (331,760 )     (45,351 )     (12,378 )
                                                 
Capital Share Transactions                                                
Proceeds from shares created     —         6,200,746       7,431,880       18,729,999       3,527,959       5,640,912  
Cost of shares redeemed     (10,592,646 )     (72,557,289 )     (12,253,168 )     (27,753,609 )     (4,302,358 )     (2,683,671 )
Net increase (decrease) from                                                
capital share transactions     (10,592,646 )     (66,356,543 )     (4,821,288 )     (9,023,610 )     (774,399 )     2,957,241  
Total increase (decrease) in                                                
net assets     (15,427,733 )     (89,083,215 )     (2,731,527 )     (15,130,571 )     (700,208 )     2,636,636  
                                                 
Net Assets                                                
Beginning of period     31,409,121       120,492,336       39,708,666       54,839,237       2,636,636       —    
End of period   $ 15,981,388     $ 31,409,121     $ 36,977,139     $ 39,708,666     $ 1,936,428     $ 2,636,636  
Including undistributed                                                
(accumulated) net investment                                                
income (loss) as follows:   $ (305,329 )   $ 59,348     $ 44,802     $ 83,218     $ (8,198 )   $ 10,305  
                                                 
Changes in Shares Outstanding                                                
Shares outstanding, beginning                                                
of period     1,200,000       3,400,000       1,600,000       2,000,000       150,000       —    
Shares created     —         200,000       300,000       750,000       200,000       300,000  
Shares redeemed     (450,000 )     (2,400,000 )     (500,000 )     (1,150,000 )     (250,000 )     (150,000 )
Shares outstanding, end                                                
of period     750,000       1,200,000       1,400,000       1,600,000       100,000       150,000  

 

 

* Commencement of operations.

See notes to financial statements.

56
 

Statements of Changes in Net Assets (continued)

 

  IQ US Real Estate Small Cap ETF
  For the
Year Ended
April 30, 2013
For the
Period
June 13, 2011*
to
April 30, 2012
Increase (Decrease) in Net Assets from Operations            
Net investment income (loss) $ 1,019,402   $ 482,815  
Net realized gain (loss)   4,695,817     580,016  
Net change in net unrealized appreciation (depreciation)   3,970,967     1,796,933  
Net increase (decrease) in net assets resulting from operations   9,686,186     2,859,764  
               
Dividends and Distributions to Shareholders from:            
Net investment income   (1,240,905 )   (328,571 )
Total dividends and distributions to shareholders   (1,240,905 )   (328,571 )
               
Capital Share Transactions            
Proceeds from shares created   58,516,286     42,206,389  
Cost of shares redeemed   (41,438,793 )   (12,068,731 )
Net increase (decrease) from capital share transactions   17,077,493     30,137,658  
Total increase (decrease) in net assets   25,522,774     32,668,851  
               
Net Assets            
Beginning of period   32,668,851      
End of period $ 58,191,625   $ 32,668,851  
Including undistributed (accumulated) net investment income (loss) as follows:     $ 154,244  
               
Changes in Shares Outstanding            
Shares outstanding, beginning of period   1,600,000      
Shares created   2,450,000     2,250,000  
Shares redeemed   (1,900,000 )   (650,000 )
Shares outstanding, end of period   2,150,000     1,600,000  

 

 

* Commencement of operations.

See notes to financial statements.

57
 

Financial Highlights
Selected Data for a Share of Capital Stock Outstanding

 

  IQ Hedge Multi-Strategy Tracker ETF    IQ Hedge Macro Tracker ETF
 


For the Year Ended April 30,






For the
Period
March 24,
20091 to
April 30,
2009
For the Year Ended April 30, For the
Period
June 8,
20091 to
April 30,
2010
  2013 2012 2011 2010 2013 2012 2011
Net asset value, beginning                                                      
of period $ 27.66   $ 27.86   $ 27.21   $ 25.41   $ 25.00   $ 27.28   $ 28.30   $ 26.54   $ 25.00  
 
Income from Investment                                                      
Operations                                                      
Net investment income (loss)2   0.34     0.43     0.61     0.52     0.02     0.38     0.39     0.38     0.26  
Net realized and unrealized gain                                                      
(loss) on investments   0.69     (0.27 )   0.45     1.51     0.39     (0.29 )   (1.14 )   1.53     1.53  
Distributions of net realized gains                                                      
from investments in other                                                      
investment companies   0.03     0.01     0.003             0.01     0.003     0.003      
Net increase (decrease) in net                                                      
assets resulting from investment                                                      
operations   1.06     0.17     1.06     2.03     0.41     0.10     (0.75 )   1.91     1.79  
 
Distributions from:                                                      
Net investment income   (0.31 )   (0.37 )   (0.41 )   (0.23 )       (0.48 )   (0.27 )   (0.15 )   (0.25 )
Net realized gains                                    
Total distributions from net                                                      
investment income and                                                      
realized gains   (0.31 )   (0.37 )   (0.41 )   (0.23 )       (0.48 )   (0.27 )   (0.15 )   (0.25 )
Net asset value, end of period $ 28.41   $ 27.66   $ 27.86   $ 27.21   $ 25.41   $ 26.90   $ 27.28   $ 28.30   $ 26.54  
 
Total Return                                                      
Total investment return based on                                                      
net asset value5   3.85 %   0.65 %   3.95 %   8.00 %   1.64 %   0.36 %   (2.61 )%   7.21 %   7.16 %
 
Ratios/Supplemental Data                                                      
Net assets, end of period                                                      
(000's omitted) $ 383,501   $ 196,415   $ 131,077   $ 92,639   $ 11,536   $ 63,225   $ 50,476   $ 28,302   $ 10,614  
Ratio to average net assets of:                                                      
Expenses   0.75 %   0.75 %   0.77 %   0.77 %   0.13 %6   0.75 %   0.75 %   0.77 %   0.76 %6
Net investment income (loss)   1.22 %   1.57 %   2.23 %   1.93 %   0.08 %6   1.39 %   1.44 %   1.41 %   1.10 %6
Portfolio turnover rate7   159 %   90 %   145 %   169 %   0 %8   146 %   108 %   54 %   77 %

 

 

See footnotes on page 62

See notes to financial statements.

58
 

Financial Highlights (continued)
Selected Data for a Share of Capital Stock Outstanding

 

  IQ Hedge Market
Neutral Tracker ETF
IQ Real Return ETF
  For the Period
October 4, 20121
to April 30, 2013

For the Year Ended April 30,


For the Period
October 26, 20091
to April 30, 2010
  2013 2012 2011
Net asset value, beginning of period $ 24.98   $ 26.23     $ 25.63   $ 24.99   $ 25.00  
 
Income from Investment Operations                                
Net investment income (loss)2   0.06     0.06       (0.01 )   (0.08 )   (0.02 )
Net realized and unrealized gain (loss)                                
on investments   0.68     0.23       0.66     0.72     0.01  
Distributions of net realized gains from investments                                
in other investment companies   0.03                    
Net increase (decrease) in net assets resulting                                
from investment operations   0.77     0.29       0.65     0.64     (0.01 )
 
Distributions from:                                
Net investment income   (0.06 )   (0.02 )         (0.00 )4    
Net realized gains             (0.05 )        
Total distributions from net investment income                                
and realized gains   (0.06 )   (0.02 )     (0.05 )   (0.00 )4    
Net asset value, end of period $ 25.69   $ 26.50     $ 26.23   $ 25.63   $ 24.99  
 
Total Return                                
Total investment return based on net                                
asset value5   3.10 %   1.09 %     2.56 %   2.58 %   (0.04 )%
 
Ratios/Supplemental Data                                
Net assets, end of period (000's omitted) $ 5,137   $ 60,954     $ 27,543   $ 12,815   $ 13,744  
Ratio to average net assets of:                                
Expenses   0.76 %6   0.48 %     0.48 %   0.49 %   0.50 %6
Net investment income (loss)   0.40 %6   0.23 %     (0.05 )%   (0.32 )%   (0.14 )%6
Portfolio turnover rate7   29 %   72 %     62 %   52 %   44 %

 

 

See footnotes on page 62

See notes to financial statements.

59
 

Financial Highlights (continued)
Selected Data for a Share of Capital Stock Outstanding

 

  IQ Global Resources ETF IQ Merger Arbitrage ETF
  For the Year Ended April 30, For the
Period
October 26,
20091 to
April 30,
2010
For the Year Ended April 30, For the
Period
November 16,
20091 to
April 30,
2010
  2013 2012   2011 2013 2012 2011
Net asset value, beginning of period $ 28.95   $ 33.27     $ 27.50   $ 25.00   $ 26.02   $ 25.47   $ 26.34   $ 25.00  
 
Income from Investment Operations                                                  
Net investment income (loss)2   0.40     0.39       0.29     0.12     0.09     (0.03 )   0.01     0.03  
Net realized and unrealized gain (loss)                                                  
on investments   (0.48 )   (4.17 )     5.78     2.42     (0.46 )   0.58     (0.55 )   1.31  
Net increase (decrease) in net assets                                                  
resulting from investment operations   (0.08 )   (3.78 )     6.07     2.54     (0.37 )   0.55     (0.54 )   1.34  
 
Distributions from:                                                  
Net investment income   (0.37 )   (0.20 )     (0.12 )   (0.04 )   (0.05 )       (0.01 )   (0.00 )4
Net realized gains       (0.34 )     (0.18 )               (0.32 )    
Total distributions from net investment                                                  
income and realized gains   (0.37 )   (0.54 )     (0.30 )   (0.04 )   (0.05 )       (0.33 )   (0.00 )4
Net asset value, end of period $ 28.50   $ 28.95     $ 33.27   $ 27.50   $ 25.60   $ 26.02   $ 25.47   $ 26.34  
 
Total Return                                                  
Total investment return based on net                                                  
asset value5   (0.35 )%   (11.30 )%     22.17 %   10.18 %   (1.42 )%   2.16 %   (2.03 )%   5.37 %
 
Ratios/Supplemental Data                                                  
Net assets, end of period
(000's omitted)
$ 85,511   $ 68,039   $ 79,854   $ 8,249   $ 14,078   $ 26,019   $ 22,921   $ 31,602  
Ratio to average net assets of:                                                  
Expenses   0.76 %   0.75 %     0.76 %   0.79 %6   0.76 %   0.75 %   0.76 %   0.77 %6
Net investment income (loss)   1.39 %   1.31 %     0.94 %   0.93 %6   0.36 %   (0.11 )%   0.04 %   0.22 %6
Portfolio turnover rate7   119 %   178 %     117 %   158 %   374 %   365 %   365 %   141 %

 

 

See footnotes on page 62

See notes to financial statements.

60
 

Financial Highlights (continued)
Selected Data for a Share of Capital Stock Outstanding

 

  IQ Australia Small Cap ETF IQ Canada Small Cap ETF
 



For the Year Ended April 30,








For the
Period
March 22,
20101 to
April 30,
2010
For the Year Ended April 30, For the
Period
March 22,
20101 to
April 30,
2010
  2013 2012 2011 2013 2012   2011
Net asset value, beginning of period $ 23.25   $ 30.94   $ 25.64   $ 25.00   $ 26.17   $ 35.44     $ 26.02   $ 25.00  
 
Income from Investment Operations                                                  
Net investment income (loss)2   0.62     0.64     1.03     0.03     0.28     0.16       0.14     (0.01 )
Net realized and unrealized gain (loss)                                                  
on investments   (2.14 )   (5.71 )   4.76     0.61     (4.27 )   (9.12 )     9.75     1.03  
Net increase (decrease) in net assets resulting                                                  
from investment operations   (1.52 )   (5.07 )   5.79     0.64     (3.99 )   (8.96 )     9.89     1.02  
 
Distributions from:                                                  
Net investment income   (0.39 )   (1.77 )   (0.45 )       (0.87 )   (0.31 )     (0.47 )    
Net realized gains       (0.85 )   (0.04 )                      
Total distributions from net investment                                                  
income and realized gains   (0.39 )   (2.62 )   (0.49 )       (0.87 )   (0.31 )     (0.47 )    
Net asset value, end of period $ 21.34   $ 23.25   $ 30.94   $ 25.64   $ 21.31   $ 26.17     $ 35.44   $ 26.02  
 
Total Return                                                  
Total investment return based on net                                                  
asset value5   (6.51 )%   (15.08 )%   22.71 %   2.56 %   (15.49 )%   (25.24 )%     38.15 %   4.08 %
 
Ratios/Supplemental Data                                                  
Net assets, end of period (000's omitted) $ 13,870   $ 16,277   $ 43,323   $ 8,973   $ 15,981   $ 31,409   $ 120,492   $ 9,107  
Ratio to average net assets of:                                                  
Expenses   0.69 %   0.69 %   0.69 %   0.71 %6   0.70 %   0.69 %     0.69 %   0.71 %6
Net investment income (loss)   2.98 %   2.49 %   3.72 %   1.09 %6   1.21 %   0.55 %     0.44 %   (0.20 )%6
Portfolio turnover rate7   29 %   42 %   49 %   0 %8   41 %   37 %     52 %   0 %

 

 

See footnotes on page 62

See notes to financial statements.

61
 

Financial Highlights (continued)
Selected Data for a Share of Capital Stock Outstanding

 

  IQ Global
Agribusiness Small Cap ETF
IQ Global
Oil Small Cap ETF
IQ US
Real Estate
Small Cap ETF
  For the Year Ended
April 30,
For the
Period
March 21,
20111 to
April 30,
2011
For the
Year
Ended
April 30,
2013
For the
Period
May 4,
20111 to
April 30,
2012
For the
Year
Ended
April 30,
2013
For the
Period
June 13,
20111 to
April 30,
2012
  2013 2012
Net asset value, beginning of period $ 24.82   $ 27.42   $ 25.40   $ 17.58   $ 19.56   $ 20.42   $ 19.91  
 
Income from Investment Operations                                          
Net investment income (loss)2   0.31     0.22     0.06     0.15     0.21     0.83     0.73  
Net realized and unrealized gain (loss) on                                          
investments   1.64     (2.61 )   1.96     1.93     (2.07 )   7.00     0.37  
Net increase (decrease) in net assets resulting                                          
from investment operations   1.95     (2.39 )   2.02     2.08     (1.86 )   7.83     1.10  
 
Distributions from:                                          
Net investment income   (0.36 )   (0.21 )       (0.30 )   (0.12 )   (1.18 )   (0.59 )
Net realized gains                            
Total distributions from net investment income                                          
and realized gains   (0.36 )   (0.21 )       (0.30 )   (0.12 )   (1.18 )   (0.59 )
Net asset value, end of period $ 26.41   $ 24.82   $ 27.42   $ 19.36   $ 17.58   $ 27.07   $ 20.42  
 
Total Return                                          
Total investment return based on net                                          
asset value5   7.91 %   (8.64 )%   7.95 %   12.09 %   (9.40 )%   39.85 %   6.05 %
 
Ratios/Supplemental Data                                          
Net assets, end of period (000's omitted) $ 36,977   $ 39,709   $ 54,839   $ 1,936   $ 2,637   $ 58,192   $ 32,669  
Ratio to average net assets of:                                          
Expenses   0.75 %   0.75 %   0.75 %6   0.76 %   0.75 %6   0.69 %   0.69 %6
Net investment income (loss)   1.24 %   0.89 %   1.96 %6   0.86 %   1.22 %6   3.70 %   4.43 %6
Portfolio turnover rate7   17 %   26 %   0 %   30 %   10 %   16 %   11 %

 

 
1Commencement of operations.
2Based on average shares outstanding.
3Less than $0.005 per share.
4Greater than $(0.005) per share.
5Total investment return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all dividends and distributions, if any, at net asset value during the period, and redemption on the last day of the period. Total return calculated for a period less than one year is not annualized. Total returns may reflect adjustments to conform to generally accepted accounting principles.
6Annualized.
7Portfolio turnover rate is not annualized and excludes the value of portfolio securities received or delivered as in-kind creations or redemptions in connection with the Fund's capital share transactions.
8Portfolio turnover rate for the period was greater than 0% yet less than 0.5%

See notes to financial statements.

62
 

Notes to Financial Statements
April 30, 2013

 

1. ORGANIZATION

IndexIQ ETF Trust (the “Trust”) was organized as a Delaware statutory trust on July 1, 2008 and is registered with the Securities and Exchange Commission (“SEC”) as a non-diversified, open-end, management investment company, as defined by the Investment Company Act of 1940, as amended (the “1940 Act”). The Trust is currently comprised of eleven active funds (collectively, the “Funds” and each individually, a “Fund”): IQ Hedge Multi-Strategy Tracker ETF, IQ Hedge Macro Tracker ETF, IQ Hedge Market Neutral Tracker ETF, IQ Real Return ETF, IQ Global Resources ETF, IQ Merger Arbitrage ETF, IQ Australia Small Cap ETF, IQ Canada Small Cap ETF, IQ Global Agribusiness Small Cap ETF, IQ Global Oil Small Cap ETF and IQ U.S. Real Estate Small Cap ETF. The Funds are exchange-traded funds (“ETFs”), whose shares are listed on a stock exchange and traded like equity securities at market prices. The IQ Hedge Multi-Strategy Tracker ETF commenced operations on March 24, 2009; IQ Hedge Macro Tracker ETF commenced operations on June 8, 2009; IQ Hedge Market Neutral Tracker ETF commenced operations on October 4, 2012; IQ Real Return ETF and IQ Global Resources ETF commenced operations on October 26, 2009; IQ Merger Arbitrage ETF commenced operations on November 16, 2009; IQ Australia Small Cap ETF and IQ Canada Small Cap ETF commenced operations on March 22, 2010; IQ Global Agribusiness Small Cap ETF commenced operations on March 21, 2011; IQ Global Oil Small Cap ETF commenced operations on May 4, 2011; and IQ US Real Estate Small Cap ETF commenced operations on June 13, 2011.

The investment objective of the IQ Hedge Multi-Strategy Tracker ETF is to seek investment results that correspond, before fees and expenses, generally to the price and yield performance of the IQ Hedge Multi-Strategy Index, developed by Financial Development Holdco LLC (“IndexIQ”), the parent company of IndexIQ Advisors, LLC (the “Advisor”), the Funds’ investment advisor. The objective of the IQ Hedge Multi-Strategy Index is to track the “beta” portion of the returns (i.e., that portion of the returns of hedge funds that are non-idiosyncratic, or unrelated to manager skill) of hedge funds that employ various hedge fund investment styles, which may include but are not limited to global macro, long/short, event-driven, market neutral, emerging markets, fixed-income arbitrage and other strategies commonly used by hedge fund managers.

The investment objective of the IQ Hedge Macro Tracker ETF is to seek investment results that correspond, before fees and expenses, generally to the price and yield performance of the IQ Hedge Macro Index, developed by IndexIQ. The objective of the IQ Hedge Macro Index is to track the “beta” portion of the returns (i.e., that portion of the returns of hedge funds that are non-idiosyncratic, or unrelated to manager skill) of a combination of hedge funds pursuing a macro strategy and hedge funds pursuing an emerging markets strategy.

The investment objective of the IQ Hedge Market Neutral Tracker ETF is to seek results that correspond, before fees and expenses, generally to the price and yield performance of the IQ Hedge Market Neutral Index, developed by IndexIQ. The objective of the IQ Hedge Market Neutral Index is to track the “beta” portion of the returns (i.e., that portion of the returns of hedge funds that are non-idiosyncratic, or unrelated to manager skill) of hedge funds pursuing a market neutral strategy.

The investment objective of the IQ Real Return ETF is to seek investment results that correspond, before fees and expenses, generally to the price and yield performance of the IQ Real Return Index, developed by IndexIQ. The objective of the IQ Real Return Index is to provide investors with a hedge against the U.S. inflation rate by providing a “real return” or a return above the rate of inflation, as represented by the Consumer Price Index, a leading government measure of inflation in the U.S. economy.

The investment objective of the IQ Global Resources ETF is to seek investment results that correspond, before fees and expenses, generally to the price and yield performance of the IQ Global Resources Index, developed by IndexIQ. The objective of the IQ Global Resources Index is to use momentum and valuation factors to identify global companies that operate in commodity-specific market segments and whose equity securities trade in developed markets, including the U.S.

The investment objective of the IQ Merger Arbitrage ETF is to seek investment results that correspond, before fees and expenses, generally to the price and yield performance of the IQ Merger Arbitrage Index, developed by IndexIQ. The objective of the IQ Merger Arbitrage Index is to seek to identify investment opportunities in the acquisition and merger market segment globally.

The investment objective of the IQ Australia Small Cap ETF is to seek investment results that correspond, before fees and expenses, generally to the price and yield performance of the IQ Australia Small Cap Index, developed

63
 

Notes to Financial Statements (continued)
April 30, 2013

 

by IndexIQ. The objective of the IQ Australia Small Cap Index is to track the overall performance of the small capitalization sector of publicly traded companies domiciled and primarily listed on an exchange in Australia.

The investment objective of the IQ Canada Small Cap ETF is to seek investment results that correspond, before fees and expenses, generally to the price and yield performance of the IQ Canada Small Cap Index, developed by IndexIQ. The objective of the IQ Canada Small Cap Index is to track the overall performance of the small capitalization sector of publicly traded companies domiciled and primarily listed on an exchange in Canada.

The investment objective of the IQ Global Agribusiness Small Cap ETF is to seek investment results that correspond, before fees and expenses, generally to the price and yield performance of the IQ Global Agribusiness Small Cap Index, developed by IndexIQ. The objective of the IQ Global Agribusiness Small Cap Index is to track the overall performance of the global small capitalization sector of publicly traded companies engaged in the agribusiness sector.

The investment objective of the IQ Global Oil Small Cap ETF is to seek investment results that correspond, before fees and expenses, generally to the price and yield performance of the IQ Global Oil Small Cap Index, developed by IndexIQ. The objective of the IQ Global Oil Small Cap Index is to track the overall performance of the global small cap companies engaged in the oil sector, including in the areas of exploration and production, refining and marketing, and equipment, services and drilling.

The investment objective of the IQ U.S. Real Estate Small Cap ETF is to seek investment results that correspond, before fees and expenses, generally to the price and yield performance of the IQ US Real Estate Small Cap Index, developed by IndexIQ. The objective of the IQ U.S. Real Estate Small Cap Index is to track the overall performance of the small capitalization U.S. real estate companies.

Investors may find the financial statements of any issuer whose securities represent a significant amount of a Fund’s assets on the SEC’s website (www.sec.gov).

2. SIGNIFICANT ACCOUNTING POLICIES

Use of Estimates

These financial statements are 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 of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of increases and decreases in the net assets from operations during the reporting period. Actual results could differ from those estimates. The following is a summary of significant accounting policies followed by the Funds:

Indemnification

In the normal course of business, the Funds may enter into contracts that contain a variety of representations which provide general indemnifications for certain liabilities. Each Fund’s maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.

Investment Valuation

The Net Asset Value (“NAV”) of each Fund is determined as of the close of trading (generally, 4:00 PM Eastern Time) on each day the New York Stock Exchange Arca (“NYSE”) is open for trading. NAV per share is calculated by dividing a fund’s net assets by the number of fund shares outstanding. Securities, investment funds and futures traded on any recognized national or foreign stock exchange are valued at the last quoted sale price, or if no sale price is available, at the bid price. Events occurring after the close of trading in non-U.S. exchanges may result in adjustments to the valuation of foreign securities to more accurately reflect their fair value as of the close of regular trading on the NYSE. Securities not listed on a national or foreign stock exchange may be valued on the basis of prices furnished by approved pricing services or at the closing bid price on the over-the-counter market.

If market quotations are not readily available, or if it is determined that a quotation of a security does not represent fair value, then the security is valued at fair value as determined in good faith using procedures adopted by the Trust’s Board of Trustees (the “Board”). Market prices may not represent fair value, for example, if a security is thinly traded or if an event occurs between the market quotation and the time the security is to

64
 

Notes to Financial Statements (continued)
April 30, 2013

 

be valued which is expected to affect the value of the security. The circumstances in which the Board may fair value a security include, among others: the occurrence of events that are significant to a particular issuer, such as mergers, restructurings or defaults; the occurrence of events that are significant to an entire market, such as natural disasters in a particular region or government actions; trading restrictions on securities; thinly traded securities; and market events such as trading halts and early market closings. Short-term securities with 60 days or less remaining to maturity are valued using the amortized cost method, which approximates current market value. Investments in open end regulated investment companies are valued at net asset value. Price information on ETFs is taken from the exchange where the security is primarily traded. Under normal conditions, the Funds invest cash collateral from securities lending activities into BNY Mellon Overnight Government Fund (“BNY Mellon Overnight Government”). The BNY Mellon Overnight Government’s investment objective is the maximization of current income to the extent consistent with preservation of capital and the maintenance of liquidity. BNY Mellon Overnight Government has no redemption restrictions, and is valued at NAV.

Due to the inherent uncertainty of valuations, fair values may differ significantly from the values that would have been used had an active market existed. Fair valuation could result in a different NAV than a NAV determined by using market quotes.

Fair Value Measurement

Accounting Standards Codification (“ASC”) Topic 820, Fair Value Measurements and Disclosures (“ASC 820”) defines fair value, establishes a framework for measuring fair value in accordance with U.S. GAAP, and requires disclosure about fair value measurements. It also provides guidance on determining when there has been a significant decrease in the volume and level of activity for an asset or liability, when a transaction is not orderly, and how that information must be incorporated into fair value measurement. Under ASC 820, various inputs are used in determining the value of the Funds’ investments. These inputs are summarized in the following hierarchy:

Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities that the Funds have the ability to access.
Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Funds’ own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. With respect to the valuation of Level 3 securities, IndexIQ may employ a market-based valuation approach which may use related or comparable securities, recent transactions, market multiples, book values, and other relevant information to determine fair value. IndexIQ may also use an income-based valuation approach in which anticipated future cash flows of the financial instrument are discounted to calculate fair value. IndexIQ representatives meet regularly to review and discuss the appropriateness of such fair values using more current information such as, recent security news, recent market transactions, updated corporate action information and/or other macro or security specific events.

All other securities and investments for which market values are not readily available, including restricted securities, and those securities for which it is inappropriate to determine prices in accordance with the aforementioned procedures, are valued at fair value as determined in good faith under procedures adopted by the Board, although the actual calculations may be done by others. Factors considered in making this determination may include, but are not limited to, information obtained by contacting the issuer, analysts, or the appropriate stock exchange (for exchange-traded securities), analysis of the issuer’s financial statements or other available documents and, if necessary, available information concerning other securities in similar circumstances.

65
 

Notes to Financial Statements (continued)
April 30, 2013

 

Transfers between levels, if any, are considered to have occurred at the beginning of the reporting period. Transfers between levels and the reasons for these transfers are detailed in the tables below.

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following summarizes inputs used as of April 30, 2013 in valuing the Funds’ assets and liabilities carried at fair value:

  Level 1   Level 2 Level 3 Total
IQ Hedge Multi-Strategy Tracker ETF                    
Assets                    
Investment Companies* $ 337,216,818   $ $ $ 337,216,818  
Other Financial Instruments**   503,533         503,533  
Short-Term Investments   59,364,753         59,364,753  
Total $ 397,085,104   $   $ 397,085,104  
Liabilities                    
Other Financial Instruments**   (136,243 )       (136,243 )
Total $ (136,243 ) $ $ $ (136,243 )
IQ Hedge Macro Tracker ETF                    
Assets                    
Investment Companies* $ 62,641,047   $ $ $ 62,641,047  
Short-Term Investments   14,076,102         14,076,102  
Total $ 76,717,149   $ $ $ 76,717,149  
IQ Hedge Market Neutral Tracker ETF                    
Assets                    
Investment Companies* $ 4,711,330   $ $ $ 4,711,330  
Short-Term Investments   364,168         364,168  
Total $ 5,075,498   $ $ $ 5,075,498  
Liabilities                    
Other Financial Instruments**   (6,863 )       (6,863 )
Total $ (6,863 ) $ $ $ (6,863 )
IQ Real Return ETF                    
Assets                    
Investment Companies* $ 60,762,455   $ $ $ 60,762,455  
Short-Term Investments   7,595,997         7,595,997  
Total $ 68,358,452   $ $ $ 68,358,452  
IQ Global Resources ETF                    
Assets                    
Common Stocks $ 76,949,897   $ 365,825 $ $ 77,315,722  
Short-Term Investments   9,795,311         9,795,311  
Total $ 86,745,208   $ 365,825 $ $ 87,111,033  
Liabilities                    
Other Financial Instruments**   (649,264 )       (649,264 )
Total $ (649,264 ) $ $ $ (649,264 )
IQ Merger Arbitrage ETF                    
Assets                    
Common Stocks* $ 11,663,535   $ $ $ 11,663,535  
Short-Term Investments   2,940,971         2,940,971  
Total   14,604,506         14,604,506  
Liabilities                    
Other Financial Instruments**   (131,132 )       (131,132 )
Total $ (131,132 ) $ $ $ (131,132 )
66
 

Notes to Financial Statements (continued)
April 30, 2013

 

  Level 1 Level 2 Level 3 Total
IQ Australia Small Cap ETF                
Assets                
Common Stocks* $ 13,685,829 $ 20,932 $ $ 13,706,761
Short-Term Investments   2,896,195       2,896,195
Total $ 16,582,024 $ 20,932 $ $ 16,602,956
IQ Canada Small Cap ETF                
Assets                
Common Stocks* $ 15,863,746 $ 3,591 $ $ 15,867,337
Short-Term Investments   316,226       316,226
Total $ 16,179,972 $ 3,591 $ $ 16,183,563
IQ Global Agribusiness Small Cap ETF                
Assets                
Common Stocks $ 36,492,013 $ 151,471 $ $ 36,643,484
Short-Term Investments   2,875,286       2,875,286
Total $ 39,367,299 $ 151,471 $ $ 39,518,770
IQ Global Oil Small Cap ETF                
Assets                
Common Stocks $ 1,920,792 $ $ $ 1,920,792
Short-Term Investments   259,751       259,751
Total $ 2,180,543 $ $ $ 2,180,543
IQ US Real Estate Small Cap ETF                
Assets                
Common Stocks* $ 57,433,421 $ $ $ 57,433,421
Short-Term Investments   1,923,379       1,923,379
Total $ 59,356,800 $ $ $ 59,356,800

 

 
*Please refer to the Schedule of Investments to view securities segregated by industry type.
**Derivative instruments, including swap transactions and futures contracts, are valued at the net unrealized appreciation (depreciation) on the instrument.
Please refer to the Schedule of Investments to view securities segregated by country.

The following is a summary of transfers between Level 1 and Level 2 fair value measurements that occurred during the year ended April 30, 2013.

  Transfers from Level 1 to Level 21
IQ Global Resources ETF $ 337,199
IQ Australia Small Cap ETF $ 127,155
IQ Canada Small Cap ETF $ 317,753
IQ Global Agribusiness Small Cap ETF $ 104,299

 

 
1Transfers from Level 1 to Level 2 are as a result of the unavailability of a quoted price in an active market.

The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value. All transfers in or out of Level 3 are done using the beginning of period method.

IQ Global Agribusiness Small Cap ETF Common Stock
Balance as of April 30, 2012 $ **
Sales   (23,005 )
Realized gain (loss)   (526,082 )
Change in unrealized depreciation   549,087  
Balance as of April 30, 2013 $  
Net change in unrealized appreciation/depreciation from investments still held      
as of April 30, 2013 was: $  

 

 

** Included Level 3 security valued at $0

67
 

Notes to Financial Statements (continued)
April 30, 2013

 

Tax Information, Dividends and Distributions to Shareholders and Uncertain Tax Positions

Each Fund intends to qualify as a regulated investment company by complying with the requirements under Subchapter M of the Internal Revenue Code of 1986, as amended (“the Code”), by distributing substantially all of its net investment income and net realized gains to shareholders. Certain Funds also utilize earnings and profits distributed to shareholders on redemptions of shares as part of the dividends’ paid deduction. Net investment income and net capital gains, if any, are typically distributed to shareholders at least annually. Dividends may be declared and paid more frequently to improve index tracking or to comply with the distribution requirements of the Code. In addition, the Funds may determine to distribute at least annually amounts representing the full dividend yield net of expenses on the underlying investment securities, as if the Funds owned the underlying investment securities for the entire dividend period in which case some portion of each distribution may result in a return of capital. 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 within the components of net assets based on their Federal tax basis treatment; temporary differences do not require reclassification. Dividends and distributions, which exceed earnings and profit for tax purposes are reported as a tax return of capital.

Management evaluates tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as an expense in the current year. If applicable, the Funds will recognize interest expense and penalties in “Miscellaneous” expenses on the Statement of Operations. The Funds have concluded that there is no tax liability resulting from uncertain income tax positions taken or expected to be taken. The Funds are required to analyze all open tax years. Open tax years are those years that are open for examination by the relevant income taxing authority. The returns of the Funds for the period from April 30, 2010 through April 30, 2013 are open for examination.

Cash Equivalents

Cash equivalents consist of highly liquid investments, with maturities of three months or less when acquired, and are disclosed as Short-Term Investments in the Schedules of Investments.

Security Transactions

Security transactions are recorded as of the trade date. Realized gains and losses on sales of investment securities are calculated using the identified cost method.

Foreign Currency Translation

The books and records of the Funds are maintained in U.S. dollars. Foreign currency amounts are translated into U.S. dollars at the prevailing exchange rates of such currencies against the U.S. dollar. The market value of investment securities and the other assets and liabilities are translated at the exchange rate as of the valuation date. Purchases and sales of investment securities, income and expenses are translated at the exchange rate prevailing on the respective dates of such transactions.

Although the net assets of the Funds are presented at the foreign exchange rates and market values at the close of the period, the Funds do not isolate that portion of the results of operations arising as a result of changes in the foreign exchange rates from the fluctuations arising from changes in the market prices of securities held or sold during the period. Accordingly, such foreign currency gains/(losses) are included in the reported net realized and unrealized gains/(losses) on investment transactions.

Reported realized foreign currency gains or losses arise from the disposition of foreign currency, currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on each Fund’s books on the transaction date and the U.S. dollar equivalent of the amounts actually received or paid. Unrealized foreign exchange gains and losses arise from changes (due to the changes in the exchange rate) in the value of foreign currency and other assets and liabilities denominated in foreign currencies, which are held at period end.

68
 

Notes to Financial Statements (continued)
April 30, 2013

 

Securities Lending

Each Fund may lend portfolio securities to certain creditworthy borrowers, including the Funds’ securities lending agent. It is the Funds’ policy that, at origination, all loans are secured by collateral of at least 102% of the value of U.S. securities loaned and 105% of the value of foreign securities loaned. Collateral in the form of cash and /or high grade debt obligations, equivalent to at least 100% of the market value of securities loaned, is maintained at all times. Cash collateral can be invested in certain money market mutual funds which also have exposure to the fluctuations of the market. Each Fund receives compensation for lending its securities from interest or dividends earned on the cash or U.S. government securities held as collateral, net of fee rebates paid to the borrower plus reasonable administrative and custody fees. The dividend and interest income earned on the securities loaned is accounted for in the same manner as other dividend and interest income. The borrower pays to the Funds an amount equal to any dividends or interest received on loaned securities. Lending portfolio securities could result in a loss or delay in recovering the Fund’s securities if the borrower defaults.

The securities lending income earned by the Funds is disclosed on the Statements of Operations. The value of loaned securities and related collateral outstanding at April 30, 2013 are shown in the Schedules of Investments and Statements of Assets and Liabilities.

Investment Income and Expenses

Dividend income is recognized on the ex-dividend date. Interest income is accrued daily. Distributions of realized capital gains by underlying funds are recorded as realized capital gains on the ex-date. Expenses of the Trust arising in connection with a specific fund are allocated to that fund. Other Trust expenses which cannot be directly attributed to a fund are apportioned among the funds in the Trust based upon the relative net assets or other appropriate measures. The Funds distribute substantially all of their net investment income to shareholders in the form of dividends.

Recent Accounting Pronouncements

In December 2011, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2011-11 “Disclosures about Offsetting Assets and Liabilities”(“ASU 2011-11”). These disclosures are intended to help investors and other financial statement users to better assess the effect or potential effect of offsetting arrangements on a company’s financial position. They also improve transparency in the reporting of how companies mitigate credit risk, including disclosure of related collateral pledged or received. In addition, ASU 2011-11 facilitates comparisons between those entities that prepare their financial statements on the basis of US GAAP and those entities that prepare their financial statements on the basis of international financial reporting standards. ASU 2011-11 requires entities to disclose (i) gross and net information about both instruments and transactions eligible for offset in the financial statements and (ii) instruments and transactions subject to an agreement similar to a master netting agreement. ASU 2011-11 is effective for fiscal years beginning on or after January 1, 2013, and interim periods within those annual periods.

On January 31, 2013, FASB issued Accounting Standards Update No. 2013-01 “Clarifying the Scope of Disclosures about Offsetting Assets and Liabilities” (“ASU 2013-01”). ASU 2013-01 limits the scope of the new balance sheet offsetting disclosures to the following financial instruments, to the extent they are offset in the financial statements or subject to an enforceable master netting arrangement or similar agreement: (i) recognized derivative instruments accounted for under ASC 815 (Derivatives and Hedging); (ii) repurchase agreements and reverse repurchase agreements; and (iii) securities borrowing and securities lending transactions. The disclosures are required irrespective of whether the transactions are offset in the statement of assets and liabilities. The effective date and transition of the disclosure requirements in ASU 2011-11 remain unchanged.

At this time, management is evaluating the implications of ASU 2011-11 and ASU 2013-01 and their impact on the Funds’ financial statements.

69
 

Notes to Financial Statements (continued)
April 30, 2013

 

3. INVESTMENT MANAGEMENT AND OTHER AGREEMENTS

Advisory Agreement

Under the terms of the Investment Advisory Agreement (the “Advisory Agreement”) the Funds pay the Advisor an advisory fee, based on the average daily net assets of each Fund, at the following annual rates:

Fund Rate
IQ Hedge Multi-Strategy Tracker ETF 0.75 %
IQ Hedge Macro Tracker ETF 0.75 %
IQ Hedge Market Neutral Tracker ETF 0.75 %
IQ Real Return ETF 0.48 %
IQ Global Resources ETF 0.75 %
IQ Merger Arbitrage ETF 0.75 %
IQ Australia Small Cap ETF 0.69 %
IQ Canada Small Cap ETF 0.69 %
IQ Global Agribusiness Small Cap ETF 0.75 %
IQ Global Oil Small Cap ETF 0.75 %
IQ US Real Estate Small Cap ETF 0.69 %

 

Such fee is accrued daily and paid monthly.

The Advisor has agreed to pay all expenses of the Funds, except brokerage and other transaction expenses; extraordinary legal fees or expenses, such as those for litigation or arbitration; compensation and expenses of the Independent Trustees, counsel to the Independent Trustees, and the Funds’ chief compliance officer; extraordinary expenses; distribution fees and expenses paid by the Funds under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act; and the advisory fee payable to the Advisor hereunder.

Distribution

ALPS Distributors, Inc. serves as the Funds’ distributor (the “Distributor”) pursuant to a Distribution Services Agreement. The Trust has adopted a Distribution and Service Plan pursuant to Rule 12b-1 under the 1940 Act (“Rule 12b-1 Plan”). In accordance with the Rule 12b-1 Plan, the Funds are authorized to pay an amount up to 0.10% of each Fund’s average daily net assets each year for certain distribution-related activities. As authorized by the Board, no Rule 12b-1 fees are currently paid by the Funds and there are no plans to impose these fees. However, in the event Rule 12b-1 fees are charged in the future, they will be paid out of each Fund’s assets. The Advisor and its affiliates may, out of their own resources, pay amounts to third parties for distribution or marketing services on behalf of the Funds.

Administrator, Custodian and Transfer Agent

The Bank of New York Mellon (in each capacity, the “Administrator,” “Custodian” or “Transfer Agent”) serves as the Funds’ Administrator, Custodian and Transfer Agent pursuant to the Fund Administration and Accounting Agreement. Under the terms of this agreement, the Advisor pays the Funds’ Administrative, Custody and Transfer Agency fees. The Bank of New York Mellon is a subsidiary of The Bank of New York Mellon Corporation, a financial holding company.

4. ORGANIZATIONAL AND OFFERING COSTS

Expenses incurred in connection with organizing and the offering of the Trust and the Funds were paid by the Advisor. The Funds do not have an obligation to reimburse the Advisor or its affiliates for organizational and offering expenses paid on their behalf.

5. CAPITAL SHARE TRANSACTIONS

As of April 30, 2013, there was an unlimited number of no par value shares of beneficial interest authorized by the Trust. Shares are created and redeemed on a continuous basis at NAV only in groups of 50,000 shares called Creation Units. Except when aggregated in Creation Units, shares are not redeemable. Transactions in shares of the Funds are disclosed in detail in the Statements of Changes in Net Assets. Only “Authorized Participants” may purchase or redeem shares directly from the Funds. An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of National Securities Clearing

70
 

Notes to Financial Statements (continued)
April 30, 2013

 

Corporation or (ii) a Depository Trust Company (“DTC”) participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors will not qualify as Authorized Participants or have the resources to create and redeem whole Creation Units. Therefore, they will be unable to purchase or redeem the shares directly from the Funds. Rather, most retail investors will purchase shares in the secondary market with the assistance of a broker and will be subject to customary brokerage commissions or fees.

6. FEDERAL INCOME TAX

At April 30, 2013, the cost of investments on a tax basis including the adjustments for financial reporting purposes as of the most recently completed Federal income tax reporting year was as follows:

Fund Cost Gross
Unrealized
Appreciation
Gross
Unrealized
Depreciation
Net Unrealized
Appreciation/
(Depreciation)
IQ Hedge Multi-Strategy Tracker ETF 389,461,575 7,742,602 (622,606 ) 7,119,996  
IQ Hedge Macro Tracker ETF 76,004,112 993,942 (280,905 ) 713,037  
IQ Hedge Market Neutral Tracker ETF 5,008,855 387,513 (320,870 ) 66,643  
IQ Real Return ETF 67,950,374 1,183,184 (775,106 ) 408,078  
IQ Global Resources ETF 90,746,402 3,135,899 (6,771,268 ) (3,635,369 )
IQ Merger Arbitrage ETF 14,157,589 577,335 (130,418 ) 446,917  
IQ Australia Small Cap ETF 18,451,023 1,915,521 (3,763,588 ) (1,848,067 )
IQ Canada Small Cap ETF 22,481,633 1,136,092 (7,434,162 ) (6,298,070 )
IQ Global Agribusiness Small Cap ETF 40,577,636 4,098,868 (5,157,734 ) (1,058,866 )
IQ Global Oil Small Cap ETF 2,430,800 153,272 (403,529 ) (250,257 )
IQ US Real Estate Small Cap ETF 53,613,741 5,887,194 (144,135 ) 5,743,059  

 

The differences between book and tax basis cost of investments and net unrealized appreciation (depreciation) are primarily attributable to wash sale loss deferrals, pass through investments and the realization for tax purposes of unrealized gains on investments in passive foreign investment companies held at April 30, 2013.

At April 30, 2013, the components of earnings/loss on a tax-basis were as follows:

Fund Undistributed
Net Investment
Income
Other Losses Net Unrealized
Appreciation/
(Depreciation)
Total Earnings/
(Losses)
IQ Hedge Multi-Strategy Tracker ETF $   $ (16,789,198 ) $ 7,119,996   $ (9,669,202 )
IQ Hedge Macro Tracker ETF       (4,264,669 )   713,037     (3,551,632 )
IQ Hedge Market Neutral Tracker ETF           66,643     66,643  
IQ Real Return ETF       (313,637 )   408,078     94,441  
IQ Global Resources ETF   876,002 *   (21,160,854 )   (3,632,554 )   (23,917,406 )
IQ Merger Arbitrage ETF   237,311     (2,514,626 )   447,348     (1,829,967 )
IQ Australia Small Cap ETF   359,748     (4,778,307 )   (1,848,633 )   (6,267,192 )
IQ Canada Small Cap ETF       (12,090,880 )   (6,295,062 )   (18,385,942 )
IQ Global Agribusiness Small Cap ETF   210,278     (3,859,482 )   (1,060,895 )   (4,710,099 )
IQ Global Oil Small Cap ETF   4,900     (204,725 )   (250,095 )   (449,920 )
IQ US Real Estate Small Cap ETF       (388,691 )   5,743,059     5,354,368  

 

The differences between book and tax basis components of net assets are primarily attributable to wash sale loss deferrals and other book and tax differences including foreign currency contracts, swap contracts and post-October losses.

 

* Amount includes other temporary difference of $5,647 due to nondeductible expenses.

71
 

Notes to Financial Statements (continued)
April 30, 2013

 

At April 30, 2013, the effect of permanent book/tax reclassifications resulted in increases(decreases) to the components of net assets were as follows:

Fund Undistributed
Net Investment
Income/
(Accumulated Net
Investment Loss)
Accumulated
Net Realized
Gain/(Loss)
on Investments
Paid-in Capital
IQ Hedge Multi-Strategy Tracker ETF $ (694,497 ) $ (4,516,192 ) $ 5,210,689  
IQ Hedge Macro Tracker ETF   (436,020 )   (1,192,572 )   1,628,592  
IQ Hedge Market Neutral Tracker ETF   4,871     (96,723 )   91,852  
IQ Real Return ETF   (245,946 )   (113,618 )   359,564  
IQ Global Resources ETF   229,912     (9,567,144 )   9,337,232  
IQ Merger Arbitrage ETF   333,974     (548,953 )   214,979  
IQ Australia Small Cap ETF   32,144     187,854     (219,998 )
IQ Canada Small Cap ETF   107,320     2,194,197     (2,301,517 )
IQ Global Agribusiness Small Cap ETF   34,589     (815,261 )   780,672  
IQ Global Oil Small Cap ETF   4,227     (55,921 )   51,694  
IQ US Real Estate Small Cap ETF   67,259     (4,897,767 )   4,830,508  

 

For financial reporting purposes, capital accounts are adjusted to reflect the tax character of permanent book/tax differences. Reclassifications are primarily due to the tax treatment of foreign currency reclassifications.

The tax character of distributions paid during the years ended April 30, 2013 and 2012 were as follows:

  2013 2012
Fund Ordinary Income Long-Term
Capital Gains  
Ordinary Income   Long-Term
Capital Gains 
IQ Hedge Multi-Strategy Tracker ETF $ 3,493,395 $ $ 2,465,773 $
IQ Hedge Macro Tracker ETF   678,020     349,947  
IQ Hedge Market Neutral Tracker ETF   19,014      
IQ Real Return ETF   23,359       70,733
IQ Global Resources ETF   931,541     1,183,908  
IQ Merger Arbitrage ETF   24,415      
IQ Australia Small Cap ETF   254,722     1,908,146   54,281
IQ Canada Small Cap ETF   739,738     400,361  
IQ Global Agribusiness Small Cap ETF   519,028     331,760  
IQ Global Oil Small Cap ETF   45,351     12,378  
IQ US Real Estate Small Cap ETF   1,240,905     328,571  

 

Capital losses incurred after October 31 (“Post-October Losses”) and certain late year ordinary income losses within the taxable year can be deemed to arise on the first business day of the Funds’ next taxable year. For the year ended April 30, 2013, the Funds incurred and elected to defer to May 1, 2013 post-October losses and late year ordinary losses of:

Fund Late Year
Ordinary Losses
Short-Term
Post October
Losses
Long-Term
Post October
Losses
IQ Hedge Multi-Strategy Tracker ETF $ 127,694 $ 1,521,503 $
IQ Hedge Macro Tracker ETF   40,081   1,254,319  
IQ Hedge Market Neutral Tracker ETF      
IQ Real Return ETF   48,456   102,850  
IQ Global Resources ETF     2,441,181   1,945,747
IQ Merger Arbitrage ETF     102,481   237,097
IQ Australia Small Cap ETF     77,503   493,002
IQ Canada Small Cap ETF   70,538   219,356   2,232,521
IQ Global Agribusiness Small Cap ETF     87,697   488,534
IQ Global Oil Small Cap ETF     6,711   35,838
IQ US Real Estate Small Cap ETF     69,304  
72
 

Notes to Financial Statements (continued)
April 30, 2013

 

On December 22, 2010, the Regulated Investment Company (“RIC”) Modernization Act of 2010 (the “Act”) was enacted. The Act modernizes several of the federal income and excise tax provisions related to RICs, and, with certain exceptions, is effective for taxable years beginning after December 22, 2010. Among the changes made are changes to the capital loss carryforward rules allowing for RICs to carry forward capital losses indefinitely and to retain the character of capital loss carryforwards as short-term or long-term. Rules in effect previously limited the carryforward period to eight years and all carryforwards were considered short-term in character. Capital loss carryforwards generated in taxable years beginning after the effective date of the Act must be fully used before capital loss carryforwards generated in taxable years prior to the effective date of the Act; therefore, under certain circumstances, capital loss carryforwards available as of the report date, if any, may expire unused.

At April 30, 2013, the Funds listed below had net capital loss carryforwards for Federal income tax purposes which are available for offset against future taxable net capital gains. The amounts were determined after adjustments for certain differences between financial reporting and tax purposes, such as wash sale losses. Accordingly, no capital gain distributions are expected to be paid to shareholders of these Funds until future net capital gains have been realized in excess of the available capital loss carryforwards. There is no assurance that any Fund will be able to utilize all of its capital loss carryforwards before they expire. For the year ended April 30, 2013, there were no capital loss carryforwards utilized or expired. These loss carryforwards expire in amounts and fiscal years as follows:

Fund April 30, 2018 April 30, 2019 Short-Term
Post RIC MOD
No Expiration
Long-Term
Post RIC MOD
No Expiration
IQ Hedge Multi-Strategy Tracker ETF $ 841,667 $ 5,603,304 $ 8,695,030 $
IQ Hedge Macro Tracker ETF   80,017   531,209   2,244,867   114,175
IQ Hedge Market Neutral Tracker ETF        
IQ Real Return ETF       162,331  
IQ Global Resources ETF       15,305,140   1,468,786
IQ Merger Arbitrage ETF     971,183   937,181   266,684
IQ Australia Small Cap ETF       2,144,946   2,062,855
IQ Canada Small Cap ETF     161,421   7,869,548   1,537,496
IQ Global Agribusiness Small Cap ETF       2,639,843   643,408
IQ Global Oil Small Cap ETF       86,032   76,144
IQ US Real Estate Small Cap ETF       319,387  

 

7. INVESTMENT TRANSACTIONS

Purchases and sales of investments (excluding short-term investments) for the year ended April 30, 2013 are as follows:

Fund Purchases Sales Purchases
In-Kind
Sales In-Kind
IQ Hedge Multi-Strategy Tracker ETF $ 419,691,322 $ 378,867,532 $ 230,639,294 $ 105,597,724
IQ Hedge Macro Tracker ETF   81,479,729   72,954,048   38,965,070   33,064,013
IQ Hedge Market Neutral Tracker ETF   2,940,309   1,569,361   7,917,052   4,705,639
IQ Real Return ETF   32,759,200   31,046,976   39,548,772   8,432,784
IQ Global Resources ETF   119,483,622   81,227,514   47,932,925   70,687,238
IQ Merger Arbitrage ETF   49,842,792   47,394,904   1,183,034   12,131,645
IQ Australia Small Cap ETF   4,006,250   3,974,212     966,886
IQ Canada Small Cap ETF   9,062,436   9,520,298     10,495,463
IQ Global Agribusiness Small Cap ETF   8,754,521   6,224,137   3,440,071   10,952,203
IQ Global Oil Small Cap ETF   1,030,527   741,828   2,553,496   3,612,258
IQ US Real Estate Small Cap ETF   7,567,341   4,732,060   52,597,817   38,835,474
73
 

Notes to Financial Statements (continued)
April 30, 2013

 

8. DERIVATIVE FINANCIAL INSTRUMENTS

Futures Contracts

Certain Funds may invest in futures contracts (“futures”) in order to replicate exposures to their respective underlying index components. Investments in futures may increase or leverage exposure to a particular market risk, thereby increasing price volatility of derivative instruments a Fund holds. No price is paid or received by a Fund upon the purchase of a futures contract. Initially, a Fund will be required to deposit with the broker an amount of cash or cash equivalents, known as initial margin, based on the value of the contract. Subsequent payments, called variation margin, to and from the broker, will be made on a daily basis as the price of the underlying instruments fluctuate making the long and short positions in the futures contract more or less valuable, a process known as ‘marking-to-the-market.’ Once a final determination of variation margin is made, additional cash is required to be paid by or released to a Fund, and a Fund will realize a loss or gain. During the year, IQ Hedge Multi-Strategy Tracker ETF utilized futures contracts to effect short exposure to emerging markets equity returns, international currency returns and commodity returns, the IQ Hedge Macro Tracker ETF utilized futures contracts to effect short exposure to U.S. small cap equity returns, international currency returns and commodity returns, and the IQ Hedge Market Neutral Tracker ETF utilized futures contracts to effect short exposure to emerging markets equity returns, to international currency returns and U.S. small cap equity returns. In addition, the IQ Merger Arbitrage ETF and Global Resources ETF both utilized futures contracts to effect short exposure to U.S. and international equity returns.

The open futures contracts at April 30, 2013 are listed in the Schedules of Investments. The variation margin receivable or payable, as applicable, is included in the Statements of Assets and Liabilities.

Swap Transactions

A swap agreement is an agreement between two parties pursuant to which the parties exchange payments at specified dates on the basis of a specified notional amount, with the payments calculated by reference to specified securities, indexes, reference rates, currencies or other instruments. Most swap agreements provide that when the period payment dates for both parties are the same, the payments are made on a net basis (i.e., the two payment streams are netted out, with only the net amount paid by one party to the other). The Funds’ obligations or rights under a swap agreement entered into on a net basis will generally be equal only to the net amount to be paid or received under the agreement, based on the relative values of the positions held by each counterparty. Swap agreements are not entered into or traded on exchanges and there is no central clearing or guaranty function for total return swaps. Total return swaps give the Fund the right to receive the appreciation in the value of a specified security, index or other instrument in return for a fee paid to the counterparty, which will typically be an agreed upon interest rate. Total return swaps can also be used to replicate an exposure to a short position in an asset class where the Fund has the right to receive the depreciation in value of a specified security, index or other instrument (“inverse swaps”). If the underlying asset in a total return swap declines in value (or increases in value, if an inverse swap) over the term of the swap, the Fund may also be required to pay the dollar value of that decline (or increase, if an inverse swap) to the counterparty. Therefore, swaps are subject to credit risk or the risk of default or non-performance by the counterparty. Swaps could result in losses if interest rate or foreign currency exchange rates or credit quality changes are not correctly anticipated by the Funds or if the reference index, security or investments do not perform as expected.

When the Funds have an unrealized loss on a swap agreement, the Funds have instructed the custodian to pledge cash or liquid securities as collateral with a value at least equal to the amount of the unrealized loss. Collateral pledges are monitored and subsequently adjusted if and when the swap valuations fluctuate.

Certain Funds use total return swaps to achieve the same exposures as their underlying index components. Total return swaps give the Funds the right to receive the appreciation in the value of a specified security, index or other instrument in return for a fee paid to the counterparty, which will typically be an agreed upon interest rate. Total return swaps can also be used to replicate an exposure to a short position in an asset class where a Fund has the right to receive the depreciation in value of a specified security, index or other instrument. If the underlying asset in a total return swap increases or decreases over the term of the swap, a Fund may also be required to pay the dollar value of that to the counterparty. The Funds segregate or receive liquid assets, which may include securities, cash, or cash equivalents, to cover the daily marked-to-market net obligations under outstanding swap agreements.

74
 

Notes to Financial Statements (continued)
April 30, 2013

 

During the year, IQ Hedge Multi-Strategy Tracker ETF utilized swaps to effect long exposure to convertible bond returns, short exposure to U.S. real estate returns, and both long and short exposure to mid-term volatility. In addition, IQ Hedge Macro Tracker ETF utilized swaps to effect long exposure to mid-term volatility returns and convertible bond returns, while IQ Hedge Market Neutral Tracker ETF utilized swaps to effect long exposure to convertible bond returns. In all cases, the Funds’ swap exposures were consistent with the exposure of the Funds’ underlying indexes. At April 30, 2013, the IQ Hedge Multi-Strategy Tracker ETF, IQ Hedge Macro Tracker ETF and IQ Hedge Market Neutral Tracker ETF posted $9,122,662, $113,760 and $106,418, respectively, as collateral for swaps.

Pursuant to documentation governing the Funds’ swap transactions with Morgan Stanley Capital Services Inc. (“Morgan Stanley”), Morgan Stanley has the right to terminate the swaps early in the event that the net assets of the given Fund decline below specific levels set forth in the documentation (“net asset contingent features”). In the event of early termination, Morgan Stanley may require the Funds to pay or receive a settlement amount in connection with the terminated swap transaction. As of April 30, 2013, the Funds have not triggered the conditions under such documentation that will give the counterparty the right to call for an early termination. As of such date, the settlement values of these contracts were approximately equal to the fair value of such contracts.

At April 30, 2013, the fair values of derivative instruments reflected on the Statements of Assets and Liabilities were as follows:

Asset Derivatives

  Commodity Risk Currency Risk Equity Risk Total
IQ Hedge Multi-Strategy Tracker ETF                
Unrealized appreciation on futures contracts1 $ 431,207 $ 72,326 $ $ 503,533

 

Liability Derivatives

  Currency Risk Equity Risk Total
IQ Hedge Multi-Strategy Tracker ETF                  
Unrealized depreciation on futures contracts1 $ (136,243 ) $   $ (136,243 )
IQ Hedge Market Neutral Tracker ETF                  
Unrealized depreciation on futures contracts1       (6,863 )   (6,863 )
IQ Global Resources ETF                  
Unrealized depreciation on futures contracts1       (649,264 )   (649,264 )
IQ Merger Arbitrage ETF                  
Unrealized depreciation on futures contracts1       (131,132 )   (131,132 )

 

 
1Includes cumulative appreciation (depreciation) of futures contracts as reported in the Schedules of Investments. Only unsettled variation margin is reported within the Statements of Assets and Liabilities.

Transactions in derivative instruments reflected on the Statements of Operations during the year ended April 30, 2013, were as follows:

  Commodity Risk Currency Risk Equity Risk Total
IQ Hedge Multi-Strategy Tracker ETF                      
Realized gain (loss)                      
Futures contracts $ 111,425 $ 8,928   $ (472,490 ) $ (352,137 )
Swap transactions         423,643     423,643  
Total realized gain (loss) $ 111,425 $ 8,928   $ (48,847 ) $ 71,506  
Change in Unrealized appreciation (depreciation)                      
Futures contracts $ 431,207 $ 72,714   $ (193,227 ) $ 310,694  
IQ Hedge Macro Tracker ETF                      
Realized gain (loss)                      
Futures contracts $ 745 $ (70,342 ) $ (164,502 ) $ (234,099 )
Swap transactions         (784,913 )   (784,913 )
Total realized gain (loss) $ 745 $ (70,342 ) $ (949,415 ) $ (1,019,012 )
Change in Unrealized appreciation (depreciation)                      
Futures contracts $ 327 $ 13,039   $ (3,760 ) $ 9,606  
75
 

Notes to Financial Statements (continued)
April 30, 2013

 

  Commodity Risk Currency Risk Equity Risk Total
IQ Hedge Market Neutral Tracker ETF                      
Realized gain (loss)                      
Futures contracts $ $ (4,309 ) $ (11,725 ) $ (16,034 )
Swap transactions         50,020     50,020  
Total realized gain (loss) $ $ (4,309 ) $ 38,295   $ 33,986  
Change in Unrealized appreciation (depreciation)                      
Futures contracts $ $   $ (6,863 ) $ (6,863 )
IQ Global Resources ETF                      
Realized loss                      
Futures contracts $ $   $ (2,061,228 ) $ (2,061,228 )
Change in Unrealized appreciation (depreciation)                      
Futures contracts $ $   $ (742,829 ) $ (742,829 )
IQ Merger Arbitrage ETF                      
Realized loss                      
Futures contracts $ $   $ (185,129 ) $ (185,129 )
Change in Unrealized appreciation (depreciation)                      
Futures contracts $ $   $ (150,732 ) $ (150,732 )

 

For the year ended April 30, 2013, the monthly average volume of the derivatives held by the Funds was as follows:

Fund Number of
Futures
Contracts
Market Value
of Futures
Contracts
IQ Hedge Multi-Strategy Tracker ETF (256 ) $ (16,748,646 )
IQ Hedge Macro Tracker ETF (26 )   (2,018,507 )
IQ Hedge Market Neutral Tracker ETF (3 )   (258,628 )
IQ Global Resources ETF (202 )   (15,063,434 )
IQ Merger Arbitrage ETF (38 )   (2,789,744 )

 

Fund Notional Amount
of Swap Contracts
IQ Hedge Multi-Strategy Tracker ETF $ 10,266,685
IQ Hedge Macro Tracker ETF   792,008
IQ Hedge Market Neutral Tracker ETF   475,627

 

9. RISKS INVOLVED WITH INVESTING IN THE FUNDS

The Funds are subject to the principal risks described below. Some or all of these risks may adversely affect a Fund’s NAV, trading price, yield, total return and ability to meet its investment objective. As with any investment, an investment in a Fund could result in a loss or the performance of a Fund could be inferior to that of other investments.

Fund of Funds Risk*

Certain of the Funds’ investment performance, because they are funds of funds, depends on the investment performance of the underlying ETFs in which they invest. An investment in any such Fund is subject to the risks associated with the underlying ETFs that comprise its underlying Index. Such a Fund will indirectly pay a proportional share of the asset-based fees, if any, of the underlying ETFs in which it invests.

Exchange Traded Vehicle Risk*

Unlike an investment in a mutual fund, the value of the Funds’ investments in ETFs, exchange-traded vehicles (“ETVs”) and exchange-traded notes (“ETNs”) is based on stock market prices and the Fund could lose money due to stock market developments, the failure of an active trading market to develop, or exchange trading halts or de-listings. Federal law prohibits the Funds from acquiring investment company shares, including shares of ETFs,

76
 

Notes to Financial Statements (continued)
April 30, 2013

 

in excess of specific thresholds unless exempted by rule, regulation or exemptive order. These prohibitions may prevent the Funds from allocating their investments to ETFs in an optimal manner.

Index Risk

The Funds’ underlying indexes and the Funds rebalance only on a monthly or quarterly basis, which may cause the performance of the underlying indexes and the Funds to deviate from that of the market exposure that they are trying to achieve.

Industry Concentration Risk

A Fund will not invest 25% or more of the value of the Fund’s total assets in the securities of one or more issuers conducting their principal business activities in the same industry or group of industries; except that, to the extent that the underlying Index is concentrated in a particular industry, the Fund also will be concentrated in that industry. The risk of concentrating Fund investments in a limited number of issuers conducting business in the same industry or group of industries will subject the Fund to a greater risk of loss as a result of adverse economic, business or other developments than if its investments were diversified across different industry sectors.

Tracking Error Risk

Each Fund’s performance may not match its underlying Index during any period of time. Although each Fund attempts to track the performance of its underlying Index, a Fund may not be able to duplicate its exact composition or return for any number of reasons, including but not limited to risk that the strategies used by the Advisor to match the performance of the underlying Indexes may fail to produce the intended results, liquidity risk and new fund risk, as well as the incurring of Fund expenses, which the underlying Index does not incur.

Foreign Securities Risk

Certain of the Funds invest directly or indirectly (through underlying ETFs) in the securities of non-U.S. issuers, which involves risks beyond those associated with investments in U.S. securities. These additional risks include greater market volatility, the availability of less reliable financial information, higher transactional and custody costs, taxation by foreign governments, decreased market liquidity and political instability.

Small Capitalization Companies Risk**

Certain of the Funds invest primarily in the stocks of small capitalization companies, which may be more volatile than those of larger companies. Stock prices of small capitalization companies are also more vulnerable than those of large capitalization companies to adverse business and economic developments, and the stocks of small capitalization companies may be thinly traded, making it difficult to buy and sell them.

New Fund Risk***

Certain of the Funds are new funds. As new funds, there can be no assurance that the Funds will grow to or maintain an economically viable size, in which case the Funds may experience greater tracking error to their Underlying Indexes than they otherwise would be at higher asset levels or they could ultimately liquidate.

 
*Applies to IQ Hedge Multi-Strategy Tracker ETF, IQ Hedge Macro Tracker ETF, IQ Hedge Market Neutral Tracker ETF and IQ Real Return ETF.
**Applies to IQ Australia Small Cap ETF, IQ Canada Small Cap ETF, IQ Global Agribusiness Small Cap ETF, IQ Global Oil Small Cap ETF and IQ US Real Estate Small Cap ETF.
***Applies to IQ Hedge Market Neutral Tracker ETF, IQ Global Agribusiness Small Cap ETF, IQ Global Oil Small Cap ETF and IQ US Real Estate Small Cap ETF.

10. SUBSEQUENT EVENTS

The Funds have evaluated subsequent events through the date of issuance of this report and have determined that there are no other material events that would require disclosure.

77
 

Report of Independent Registered Public Accounting Firm

 

To the Board of Trustees and Shareholders of IndexIQ ETF Trust:

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of IndexIQ ETF Trust (comprising, respectively, IQ Hedge Multi-Strategy Tracker ETF, IQ Hedge Macro Tracker ETF, IQ Hedge Market Neutral Tracker ETF, IQ Real Return ETF, IQ Global Resources ETF, IQ Merger Arbitrage ETF, IQ Australia Small Cap ETF, IQ Canada Small Cap ETF, IQ Global Agribusiness Small Cap ETF, IQ Global Oil Small Cap ETF and IQ US Real Estate Small Cap ETF) (collectively, the “Funds”) as of April 30, 2013, and the related statements of operations and changes in net assets, and the financial highlights for each of the periods indicated therein. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits 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 Funds’ 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 Funds’ 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 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 April 30, 2013, by correspondence with the custodian and others, or by other appropriate auditing procedures where replies from others 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 each of the respective Funds constituting the IndexIQ ETF Trust at April 30, 2013, and the results of their operations, changes in their net assets, and the financial highlights for each of the periods indicated therein, in conformity with U.S. generally accepted accounting principles.

New York, New York
June 28, 2013


78
 

Supplemental Information (unaudited)

 

Federal Tax Status of Dividends Declared During the Tax Year

Qualified Dividend Income — Certain dividends paid by the fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Relief Reconciliation Act of 2003. The percentage of ordinary income distributions for the fiscal year ended April 30, 2013 taxed at a maximum rate of 15% is as follows:

IQ Hedge Multi-Strategy Tracker ETF 25.92 %
IQ Hedge Macro Tracker ETF 7.13 %
IQ Hedge Market Neutral Tracker ETF 16.85 %
IQ Real Return ETF 72.12 %
IQ Global Resources ETF 57.70 %
IQ Merger Arbitrage ETF 100.00 %
IQ Australia Small Cap ETF 100.00 %
IQ Canada Small Cap ETF 38.98 %
IQ Global Agribusiness Small Cap ETF 83.80 %
IQ Global Oil Small Cap ETF 22.49 %
IQ US Real Estate Small Cap ETF 0.41 %

 

Dividends Received Deduction — For corporate shareholders, the percentage of ordinary income distributions for the year ended April 30, 2013 that qualifies for the dividends received deduction is as follows:

IQ Hedge Multi-Strategy Tracker ETF 15.45 %
IQ Hedge Macro Tracker ETF 1.54 %
IQ Hedge Market Neutral Tracker ETF 0.00 %
IQ Real Return ETF 100.00 %
IQ Global Resources ETF 32.62 %
IQ Merger Arbitrage ETF 100.00 %
IQ Australia Small Cap ETF 0.00 %
IQ Canada Small Cap ETF 0.00 %
IQ Global Agribusiness Small Cap ETF 9.27 %
IQ Global Oil Small Cap ETF 9.96 %
IQ US Real Estate Small Cap ETF 0.41 %

 

Foreign Taxes Paid — The following Funds elect under the Internal Revenue Code Section 853 to pass through foreign taxes paid to its shareholders. The total amount of foreign taxes passed through to shareholders on a per share basis for the year ended April 30, 2013, are as follows:

  Foreign Taxes
Per Share
Income
Per Share
IQ Hedge Multi-Strategy Tracker ETF
IQ Hedge Macro Tracker ETF
IQ Hedge Market Neutral Tracker ETF
IQ Real Return ETF
IQ Global Resources ETF 0.0170 0.2157
IQ Merger Arbitrage ETF
IQ Australia Small Cap ETF 0.0075 0.5275
IQ Canada Small Cap ETF 0.0579 0.3833
IQ Global Agribusiness Small Cap ETF 0.0284 0.4377
IQ Global Oil Small Cap ETF 0.0200 0.2027
IQ US Real Estate Small Cap ETF

 

In January 2014, you will be advised on IRS Form 1099 DIV as to the Federal tax status of the distributions received by you in calendar year 2013.

79
 

Board Review of Investment Advisory Agreement (unaudited)

 

At the March 13, 2013 meeting of the Board of Trustees (the “Board”) of IndexIQ ETF Trust (the “Trust”), the Board, including those Trustees who are not “interested persons” of the Trust (the “Independent Trustees”), as that term is defined in the Investment Company Act of 1940, as amended (“1940 Act”), approved IndexIQ Advisors LLC (“IndexIQ”) to continue to serve as investment adviser to the Fund and approved the continuation of the investment advisory agreement between IndexIQ and the Trust with respect to the Fund (the “Investment Advisory Agreement”), upon the same terms and conditions set forth therein, for the period February 2, 2013 until February 2, 2014. In connection with considering approval of the Investment Advisory Agreement, the Independent Trustees met in executive session with counsel to the Trust, who provided assistance and advice.

In considering the approval of the continuation of the Investment Advisory Agreement, the Independent Trustees reviewed the materials provided for the Meeting by IndexIQ, including: (i) a copy of the Investment Advisory Agreement with IndexIQ; (ii) information describing the nature, quality, and extent of the services that IndexIQ provides to the Funds, and the fees that IndexIQ receives from the Funds; (iii) information concerning business and operations, compliance program and portfolio management team of IndexIQ; (iv) a copy of the current Form ADV for IndexIQ; and (v) memoranda from Katten Muchin Rosenman LLP on the fiduciary responsibilities of trustees, including the Independent Trustees, in considering advisory arrangements under the 1940 Act. The independent Trustees also considered the information presented at Board meetings throughout the year. In addition, the Independent Trustees received data comparing the advisory fees, expenses and performance of the Funds with expenses and performance of other exchange-traded funds (“ETFs”) with similar investment objectives and policies.

During their review of this information, the Independent Trustees focused on and analyzed the factors they deemed relevant, including: (1) the nature, quality, and extent of the services provided to the Funds; (2) the personnel and operations of IndexIQ; (3) the investment performance of each Fund; (4) IndexIQ’s financial condition and profitability; (5) potential “fall-out” benefits to IndexIQ and its affiliates (i.e., ancillary benefits that may be realized by IndexIQ and its affiliates from IndexIQ’s relationship with the Funds); and (6) possible conflicts of interest.

In particular, the Board considered and discussed the following with respect to each Fund:

(a)The nature, extent, and quality of services provided to the Funds by IndexIQ. The Board reviewed the services that IndexIQ provides to the Funds. The Board noted the responsibilities that IndexIQ has as the Funds’ investment adviser, including overall supervisory responsibility for the general management and investment of each Fund’s securities portfolio, daily monitoring of tracking error and quarterly reporting to the Board, and the implementation of Board directives as they relate to the Funds.

The Board reviewed the experience, resources, and strengths of IndexIQ in managing the Operating Funds, the IndexIQ Trust’s mutual fund, as well as separately managed accounts. Based on their consideration and review of the foregoing information, the Board determined that the Funds were likely to continue to benefit from the nature, quality, and extent of these services, as well as IndexIQ’s ability to render such services based on its experience, operations, and resources.

(b)Comparison of services provided and fees charged by IndexIQ and other investment advisers to similar clients, and the cost of the services provided and profits realized by IndexIQ from its relationship with the Funds. The Board then compared both the services rendered and the fees paid pursuant to the Investment Advisory Agreement to contracts of other registered investment advisers providing services to similar ETFs. In particular, the Board compared each Fund’s advisory fee and expense ratio to other investment companies considered to be in each such Fund’s peer group.

After comparing each Fund’s fees with those of other ETFs in the Fund’s peer group, and in light of the nature, quality, and extent of services provided by IndexIQ and the costs incurred by IndexIQ in rendering those services, the Board concluded that the level of fees paid to IndexIQ with respect to each Fund were fair and reasonable.

(c)IndexIQ’s profitability and the extent to which economies of scale would be realized as the Fund grows and whether fee levels would reflect such economies of scale. The Board discussed with IndexIQ the costs and profitability of IndexIQ in connection with its serving as investment adviser to each Fund, including operational costs.
80
 

Board Review of Investment Advisory Agreement (unaudited) (continued)

 

(d)Investment performance of IndexIQ. The Board considered the investment performance of the Funds, including tracking error. In particular, the Board considered the investment performance of the Funds relative to their stated objectives and the success of IndexIQ in reaching such objectives. The Board considered each Fund’s investment performance compared to the benchmark index that each Fund uses for comparison in its prospectus and shareholder reports. The Board also considered each Fund’s investment performance compared to the average of the respective Fund’s peer group.

The Board also received and considered information about the premium/discount history of the Funds, which illustrated the number of times that the market price of the Funds trading on the secondary market closed above or below the NAV of the Funds, and by how much, measured in basis points.

Conclusion. No single factor was determinative to the decision of the Board. Based on the foregoing and such other matters as were deemed relevant, the Board concluded that the advisory fee rates and total expense ratios were reasonable in relation to the services provided by IndexIQ to the Funds, as well as the costs incurred and benefits gained by IndexIQ in providing such services. The Board also found the investment advisory fees to be reasonable in comparison to the fees charged by investment advisers to other comparable ETFs of similar size. As a result, the Board determined that the continuation of the Investment Advisory Agreement with IndexIQ was in the best interests of each Fund and its shareholders.

81
 

Board of Trustees and Officers (unaudited)

 

The business of the Trust is managed under the direction of the Trust’s Board of Trustees. The Board elects the officers of the Trust who are responsible for administering the Trust’s day-to-day operations. Each Trustee serves until his or her successor is duly elected or appointed and qualified.

The name, year of birth, address and principal occupations during the past five years for each Trustee and Officer of the Trust is set forth below, along with the other public directorships held by the Trustees.

Independent Trustees

 

Name and
Year of Birth1
Position(s)
Held with
Trust
Term of
Office and
Length of
Time Served2
Principal Occupation(s) During Past 5 Years3 Number of
Portfolios
in Fund
Complex
Overseen
by Trustee4
Other
Directorships
Held by
Trustee
 
Reena Aggarwal
1957
Trustee Since
August
2008
Deputy Dean, McDonough School of Business,
Georgetown University (2006 to 2008); Visiting
Professor of Finance, Sloan School of
Management, MIT (2005 to 2006); Robert E.
McDonough Professor (2003-present) and
Professor of Finance, McDonough School of
Business, Georgetown University (2000-present).
12 FBR Funds
(2006-2011)
 
Gene Chao
1970
Trustee Since
August
2008
Vice President, Global Industries Strategy &
Solutions, Juniper Networks (2011 to present);Vice
President and GM, Global Network, Hewlett-
Packard (2010 to 2011); Vice President, Strategic
Services, Dimension Data, Americas (2007 to 2010);
Senior Vice President, Strategic Outsourcing,
France Telecom Americas (2004 to 2007).
12 None
 
Interested Trustee5
 
Adam S. Patti
1970
Chairman
and
Trustee
President
and
Principal
Executive
Officer
Since
November
2008
Since
July
2008
Chairman, Trustee, President and Principal
Executive, IndexIQ Trust (2008 to present); Chief
Executive Officer, the Advisor (2007 to present);
Chief Executive Officer, IndexIQ (2006 to present);
Associate Publisher, Time Inc. (2006).
12 None

 

Officers of the Trust

 

Name and
Year of Birth1
Position(s)
Held with Trust
Term of Office
and Length of
Time Served2
Principal Occupation(s) During Past 5 Years
 
Gregory D. Bassuk
1972
Secretary Since
July 2008
Chief Compliance Officer, the Advisor (2008 to present); Secretary,
IndexIQ Trust (2008 to present); Chairman and Trustee, IndexIQ ETF
Trust (July 2008 to November 2008); Chairman and Trustee, IndexIQ
Trust (February 2008 to November 2008); Chief Operating Officer, the
Advisor (2007 to present); Chief Operating Officer, IndexIQ (2006 to
present); Director, Time Inc. (2004 to 2006).
       
David Fogel
1971

Treasurer,
Principal
Financial
Officer and
Chief
Compliance
Officer
Executive Vice
President

Since
October 2008
Executive Vice President, IndexIQ Trust (2011 to present); Treasurer,
Principal Financial Officer and Chief Compliance Officer, IndexIQ Trust
(2008 to present); Executive Vice President, IndexIQ (2006 to present);
Vice President, Groton Partners LLC (2005 to 2006).
  Since June
2011
 

 

 
1The address of each Trustee or Officer is c/o IndexIQ, 800 Westchester Avenue, Suite N-611, Rye Brook, New York 10573.
2Trustees and Officers serve until their successors are duly elected and qualified.
3Principal occupations(s) of the Trustees may cover more than the past five years.
4The Funds are part of a “fund complex” as defined in the 1940 Act. The fund complex includes all open-end funds (including all of their portfolios) advised by the Advisor and any funds that have an investment advisor that is an affiliated person of the Advisor.
5Mr. Patti is an “interested person” of the Trust (as that term is defined in the 1940 Act) because of his affiliations with the Advisor.
82
 


 
 

ANNUAL REPORT | APRIL 30, 2013

IndexIQ ETF Trust


IQ Hedge Multi-Strategy Tracker ETF
IQ Hedge Macro Tracker ETF
IQ Hedge Market Neutral Tracker ETF
IQ Real Return ETF
IQ Global Resources ETF
IQ Merger Arbitrage ETF
IQ Australia Small Cap ETF
IQ Canada Small Cap ETF
IQ Global Agribusiness Small Cap ETF
IQ Global Oil Small Cap ETF
IQ US Real Estate Small Cap ETF

Investment Advisor
IndexIQ Advisors LLC
800 Westchester Avenue,
Suite N-611
Rye Brook, NY 10573

Distributor
ALPS Distributors, Inc.
1290 Broadway, Suite 1100
Denver, CO 80203

Custodian/Fund Administrator/Transfer Agent
The Bank of New York Mellon
One Wall Street
New York, NY 10286

Legal Counsel
Katten Muchin Rosenman, LLP
575 Madison Avenue
New York, New York 10022

Independent Registered Public Accounting Firm
Ernst & Young LLP
5 Times Square
New York, NY 10036

 
 

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.

The Registrant’s Board of Trustees has one audit committee financial expert serving on its audit committee, an “independent” Trustee, Reena Aggarwal. Under applicable securities laws, a person who is determined to be an audit committee financial expert will not be deemed an “expert” for any purpose, including without limitation for the purposes of Section 11 of the Securities Act of 1933, as a result of being designated or identified as an audit committee financial expert. The designation or identification of a person as an audit committee financial expert does not impose on such person any duties, obligations, or liabilities that are greater than the duties, obligations, and liabilities imposed on such person as a member of the audit committee and Board of Trustees in the absence of such designation or identification.

 

 

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 $190,000 for 2013 and $185,000 for 2012.
 
 

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 2013 and $0 for 2012.

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 $56,000 for 2013 and $53,200 for 2012.

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 2013 and $0 for 2012.
(e)(1)Per Rule 2-01(c)(7)(A), the Audit Committee pre-approves all of the Audit, Audit-Related, Tax and Other Fees of the Registrant.
(e)(2)100% of services described in each of Items 4(b) through (d) were approved by the audit committee pursuant to paragraph (c)(7)(A) of Rule 2-01 of Regulation S-X.
(f)No response required.
(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 $56,000 for 2013 and $53,200 for 2012.
(h)Not applicable.

 

 

Item 5. Audit Committee of Listed registrants.

(a)The Fund has a designated Audit Committee in accordance with Section 3(a)(58)(A) of the Securities and Exchange Act of 1934 (the “Exchange Act”) and the members of such committee are Reena Aggarwal and Gene Chao.

 

(b)Not applicable.
 
 

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 have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of directors, where those changes were implemented after the registrant last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.

 

 

Item 11. Controls and Procedures.

(a)The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).

 

(b)There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d)) that occurred during the registrant’s second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

 
 

Item 12. Exhibits.

(a)(1)Code of ethics, or any 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)       IndexIQ ETF Trust
   
By (Signature and Title)*      /s/ Adam S. Patti
       Adam S. Patti, Principal Executive Officer
   
Date      6/28/13

 

 

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/ Adam S. Patti
       Adam S. Patti, Principal Executive Officer
   
Date      6/28/13
   
By (Signature and Title)*      /s/ David L. Fogel
       David L. Fogel, Principal Financial Officer
   
Date 6/28/13

 

 

 

 

* Print the name and title of each signing officer under his or her signature.