Notes
to Financial Statements
December
31, 2007 (Unaudited)
1)
ORGANIZATION
The
Ameristock ETF Trust (the “Trust”) currently consists of five separate
investment portfolios (each a “Fund” and collectively the “Funds”):
Ameristock/Ryan
1 Year Treasury ETF, Ameristock/Ryan 2 Year Treasury ETF, Ameristock/Ryan
5 Year Treasury ETF, Ameristock
/Ryan
10
Year Treasury ETF, and
Ameristock/Ryan 20 Year Treasury ETF.
Each
Fund
seeks investment results, before fees and expenses, that correspond generally
to
performance of a particular U.S. Treasury securities index owned and
compiled by
Ryan Holdings LLC and Ryan ALM, Inc. The Trust was organized as a Delaware
statutory trust on June 5, 2006, is authorized to have multiple series
or
portfolios, and may establish additional series or portfolios in the
future. The
Trust is an open-end management investment company, registered under
the
Investment Company Act of 1940, as amended (the “1940 Act”). Each Fund issues
shares of beneficial interest with $0.001 par value.
2)
SIGNIFICANT ACCOUNTING POLICIES
Security
Valuation
Securities
are valued at closing bid price. Other portfolio securities and assets
for which
market quotations are not readily available are valued based on fair
value as
determined in accordance with procedures adopted by the Board of Trustees.
Investments in money market mutual funds are stated at net asset
value.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management
to make
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. Actual results could differ from those
estimates.
Expenses
Expenses
of the Trust, which are directly identifiable to a specific Fund, are
applied to
that Fund except those expenses paid directly by the advisor. Expenses
which are
not readily identifiable to a specific Fund are allocated in such a manner
as
deemed equitable, taking into consideration the nature and type of expense
and
the relative net assets of each Fund.
Investment
Transactions
Investment
transactions are recorded on the trade date. Realized gains and losses
from the
sale or disposition of securities are calculated on the identified cost
basis.
Federal
Income Taxes
Each
Fund
intends to qualify as a “regulated investment company” under Subchapter M of the
Internal Revenue Code of 1986, as amended, and, if so qualified, will
not be
liable for federal income taxes to the extent earnings are distributed
to
shareholders on a timely basis. Therefore, no provision for federal income
taxes
is required.
Distributions
to Shareholders
Distributions
to shareholders, which are determined in accordance with income tax regulations,
are recorded on the ex-dividend date. The Funds declare and pay dividends
from
net investment income quarterly and distribute from net realized capital
gains
at least annually.
AMERISTOCK
ETF TRUST
Notes
to Financial Statements (continued)
December
31, 2007 (Unaudited)
Indemnification
The
Trust
will indemnify its officers and trustees for certain liabilities that
may arise
from the performance of their duties to the Trust. Additionally, in the
normal course of business, the Trust enters into contracts that contain
a
variety of representations and warranties and which provide general indemnities.
A Fund’s maximum exposure under these arrangements is unknown, as this
would involve future claims that may be made against the Fund that have
not yet
occurred. However, based on experience, the Trust expects the risk of loss
due to these warranties and indemnities to be remote.
Other
The
Funds
follow industry practice and record security transactions on the trade
date.
Dividend income is recognized on the ex-dividend date, and interest income
is
recognized on an accrual basis. Discounts and premiums on securities
purchased
are amortized over the lives of the respective securities.
3)
INVESTMENT ADVISORY AND OTHER AGREEMENTS
Investment
Adviser
The
Ameristock Corporation (the “Adviser”) is the investment adviser to each Fund
and as such has overall responsibility for the general management and
administration of the Trust. The Adviser provides an investment program
for each
Fund and manages the investment of its assets.
Under
the
Investment Advisory Agreement, the Adviser is responsible for all expenses
of
the Trust, including the cost of transfer agency, custody, fund administration,
legal, audit and other services, except independent trustee fees and
expenses,
interest expense, taxes, brokerage expenses, distribution or “12b-1” fees (if
any), and extraordinary expenses. For the six months ended December 31,
2007,
the investment adviser earned and was owed $2,959 from the Ameristock/Ryan
1
Year Treasury ETF, $2,985 from the Ameristock/Ryan 2 Year Treasury ETF,
$3,035
from the Ameristock/Ryan 5 Year Treasury ETF, $3,058 from the Ameristock/Ryan
10
Year Treasury ETF, and $3,084 from the Ameristock/Ryan 20 Year Treasury
ETF.
The
Adviser receives management fees from each Fund based on an annual percentage
rate of each Fund’s average daily net assets, as shown in the following table:
|
Fund
|
Management Fee
|
|
Ameristock/Ryan
1 Year Treasury ETF
|
0.15%
|
|
Ameristock/Ryan
2 Year Treasury ETF
|
0.15%
|
|
Ameristock/Ryan
5 Year Treasury ETF
|
0.15%
|
|
Ameristock/Ryan
10 Year Treasury ETF
|
0.15%
|
|
Ameristock/Ryan
20 Year Treasury ETF
|
0.15%
|
The
Adviser has agreed to waive its management fees and/or make payments
to limit
Fund expenses in the amount of any independent trustee fees and expenses
otherwise payable by the Fund until at least June 30, 2008.
Administrator,
Custodian and Transfer Agent
Brown
Brothers Harriman & Co. (“BBH”) serves as administrator, custodian and
transfer agent for the Funds. Under the Administrative Agency Agreement
with the
Trust, BBH performs certain administrative, accounting, transfer agency
and
dividend disbursing services for the Funds and prepares certain SEC reports
on
behalf of the Trust and the Funds. Under the Custodian Agreement with
the Trust,
BBH maintains in separate accounts cash, securities and other assets
of each
Fund, keeps all necessary accounts
and
records, and provides other services. BBH is required, upon the order
of the
Trust, to deliver securities held by BBH and to make payments for securities
purchased by the Trust for each Fund. As compensation for the foregoing
services, BBH receives certain out-of-pocket costs, transaction fees,
and
asset-based fees which are paid by the Adviser.
AMERISTOCK
ETF TRUST
Notes
to Financial Statements (continued)
December
31, 2007 (Unaudited)
Distributor
ALPS
Distributors, Inc. (the “Distributor”) is the distributor of shares of the
Trust. The Distributor has entered into a Distribution Agreement with
the Trust
pursuant to which it distributes shares of each Fund in creation unit
aggregations. The Distributor is a broker-dealer registered under the
Securities
Exchange Act of 1934 and a member of the National Association of Securities
Dealers, Inc. Fees under the Distribution Agreement are also paid by
the
Adviser, and the Adviser may, from time to time and from its own resources,
make
other distribution-related payments to the Distributor or other persons.
Consulting
Services and Licensing Agreement
The
Adviser has entered into a Consulting Services and Licensing Agreement
(the
“Consulting Agreement”) with Ryan Holdings LLC, Ryan ALM, Inc., and Ryan ALM
Advisers, LLC (the “Ryan Parties”). Under the Consulting Agreement, Ryan ALM
Advisers, LLC provides consulting services with respect to the calculation
and make-up of the indices the performance of which the Funds attempt
to closely
match (the “Underlying Indices”) and with respect to the markets for and trading
in U.S. government securities. Also under the Consulting Agreement, Ryan
Holdings LLC and Ryan ALM, Inc. license the use of certain trademarks,
service
marks and trade names of the Ryan Parties and the Underlying Indices
for use by
the Adviser. Fees under Consulting Agreement are paid by the Adviser,
which in
turn has entered into a sub-license agreement with the Trust permitting
the
Funds to use such marks and names without charge.
Certain
officers and/or trustees of the Adviser and Administrator are also officers/
trustees of the Trust.
4)
INVESTMENT TRANSACTIONS - PURCHASES AND SALES
Excluding
short-term securities and in-kind transactions, the aggregate cost of
purchases
and proceeds from sales of securities for the six months ended December
31, 2007
are as follows:
|
|
Purchases
|
Sales
|
|
Ameristock/Ryan
1 Year Treasury ETF
|
$7,080,115
|
$7,068,959
|
|
Ameristock/Ryan
2 Year Treasury ETF
|
$7,126,770
|
$7,123,304
|
|
Ameristock/Ryan
5 Year Treasury ETF
|
$8,097,168
|
$8,124,044
|
|
Ameristock/Ryan
10 Year Treasury ETF
|
$4,272,319
|
$4,303,031
|
|
Ameristock/Ryan
20 Year Treasury ETF
|
$3,760,842
|
$3,808,630
|
5)
CAPITAL
Shares
are issued and redeemed by the Trust only in creation unit size blocks
of
100,000 shares or multiples thereof at net asset value. Such transactions
are
generally permitted on an in-kind basis, with a balancing cash component
to
equate the transaction to the net asset value per share of each portfolio
of the
Trust on
the
transaction date. An investor who wishes to create or redeem Creation
Units at
net asset value is subject to a standard transaction fee of $1,000 on
the date
of such creation or redemption, regardless of the number of Creation
Units
created or redeemed on that day.
AMERISTOCK
ETF TRUST
Notes
to Financial Statements (continued)
December
31, 2007 (Unaudited)
6)
BENEFICIAL OWNERSHIP
The
beneficial ownership, either directly or indirectly, of more than 25%
of the
voting securities of a Fund creates a presumption of control of the Fund,
under
Section 2(a)(9) of the Investment Company Act of 1940. As of December
31, 2007,
Merrill Lynch owned beneficially more than 25% of the voting shares of
each
Fund.
7)
TRUSTEES’ FEES
The
Trust compensates each Trustee who is not an employee of the Adviser
o
r
its affiliates. Each independent Trustee receives $10,000 annually as
compensation for serving on the Board. The Chairman of the Board receives
$5,000
annually in additional compensation. For the six months ended December
31, 2007,
each Trustee was paid $7,500 and the Chairman of the Board was paid an
additional $3,750.
8)
RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
On
September 20, 2006, the Financial Accounting Standards Board (“FASB”) released
Statement of Financial Accounting Standards No. 157, “Fair Value Measurements”
(“FAS 157”). FAS 157 defines fair value, establishes an authoritative definition
of fair value (which, for purposes of FAS 157, includes both valuation
based on
market quotations and fair value determinations when market quotations
are not
readily available), sets out a framework for measuring fair value, and
requires
additional disclosures about fair-value measurements. The application
of FAS157
is required for fiscal years beginning after November 15, 2007, and interim
periods with those fiscal years. Management is currently evaluating the
impact
the adoption of SFAS 157 will have on the Funds’ financial statement
disclosures.
The
Funds
adopted Financial Accounting Standards Board (FASB) issued FASB Interpretation
No. 48 “Accounting for Uncertainty in Income Taxes - an Interpretation of FASB
statement No. 109” (FIN 48), on December 31, 2007. FIN 48 clarifies the
accounting for uncertainty in tax positions taken or expected to be taken
in a
tax return. FIN 48 provides guidance on the measurement, recognition,
classification and disclosure of tax positions, along with accounting
for the
related interest and penalties. Management has reviewed the tax positions
of the
Funds and has determined that the implementation of FIN 48 did not have
a
material impact on the Funds’ financial statements.
9)
PORTFOLIO HOLDINGS
The
Funds
file their complete schedule of portfolio holdings with the Commission
for the
first and third quarters of each fiscal year on Form N-Q within 60 days
after
the end of the period. Copies of the Funds’ Forms N-Q will be available (after
the Funds’ initial Form N-Q filings in November 2008) without a charge, upon
request, by contacting the Funds at 1-866-821-5592 and on the Commission’s
website at hhtp://www.sec.gov. You may also review and copy Form N-Q
at the
Commission’s Public Reference Room in Washington, D.C. For more information
about the operation of the Public Reference Room, please call the Commission
at
1-800-SEC-0330. Funds’ holding information is also available on the Funds’
website at
http://www.ameristock.com/ryan_etf/
.
AMERISTOCK
ETF TRUST
Notes
to Financial Statements (continued)
December
31, 2007 (Unaudited)
10)
PROXY VOTING POLICY
The
Adviser is responsible for voting proxies on securities held by the Funds.
Under
the Adviser's Proxy Voting Guidelines, proxies are voted in the best
long-range
financial interest of each Fund as determined by the Funds’ portfolio managers.
In general, routine matters are voted in accordance with management
recommendations. Because the Funds invest almost exclusively in Treasury
Securities, which do not carry voting rights, the Adviser will vote proxies
on
securities held by the Funds only rarely. Further, because the Adviser's
only
clients are investment companies, the Adviser does not expect conflicts
between
the interests of the Funds and those of the Adviser to arise frequently.
While
no proxies for the Funds’ portfolio securities were voted during the six months
ended December 31, 2007, information regarding how proxies were voted
for the
Funds during each 12-month period ended on June 30 will be available
(1) without
charge through the Funds' website at http://www.ameristock.com and (2)
on the
Commission's website at
http://www.sec.gov
.
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Investment
Adviser
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Ameristock
Corporation
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1320
Harbor Bay Parkway, Suite 145
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Alameda,
California 94502
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Administrator,
Bookkeeping and Pricing Agent and Transfer
Agent
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Brown
Brothers Harriman & Co.
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40
Water Street
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Boston,
MA 02109
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Distributor
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ALPS
Distributors, Inc.
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1290
Broadway, Suite 1100
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Denver,
CO 80203
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Custodian
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Brown
Brothers Harriman & Co.
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40
Water Street
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Boston,
MA 02109
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Independent
Registered Public Accounting Firm
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Cohen
Fund Audit Services, Ltd.
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800
Westpoint Parkway, Suite 1100
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Westlake,
OH 44145-1524
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Legal
Counsel
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Sutherland
Asbill & Brennan LLP
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1275
Pennsylvania Avenue, N.W.
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Washington,
D.C. 20004-2415
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Trustees
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Alev
M. Efendioglu
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Nicholas
D. Gerber
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Stephen
J. Marsh
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Andrew
F. Ngim
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Steven
A. Wood
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ALPS
Distributors, Inc.
,
distributor
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For
more information or to obtain a prospectus, please call 1(866)
821-5592 or
visit
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www.ameristock.com.
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