Global X China Consumer
ETF NYSE Arca, Inc: CHIQ Global X MSCI Argentina ETF NYSE Arca, Inc: ARGT Global
X China Energy ETF NYSE Arca, Inc: CHIE Global X Southeast Asia ETF NYSE Arca,
Inc: ASEA Global X China Financials ETF NYSE Arca, Inc: CHIX Global X FTSE
Bangladesh Index ETF* NYSE Arca, Inc: [ ] Global X China Industrials ETF NYSE
Arca, Inc: CHII Global X MSCI Colombia ETF NYSE Arca, Inc: GXG Global X China
Materials ETF NYSE Arca, Inc: CHIM Global X Next Emerging & Frontier ETF
NYSE Arca, Inc: EMFM Global X China Mid Cap ETF* NYSE Arca, Inc: CHIA Global X
FTSE Greece 20 ETF NYSE Arca, Inc: GREK Global X NASDAQ China Technology ETF
NASDAQ: QQQC Global X FTSE Nordic Region ETF NYSE Arca, Inc: GXF Global X Brazil
Consumer ETF NYSE Arca, Inc: BRAQ Global X MSCI Norway ETF NYSE Arca, Inc: NORW
Global X Brazil Financials ETF NYSE Arca, Inc: BRAF Global X FTSE Portugal 20
ETF NYSE Arca, Inc: PGAL Global X Brazil Industrials ETF* NYSE Arca, Inc: [ ]
Global X Czech Republic Index ETF* NYSE Arca, Inc: [ ] Global X Brazil Materials
ETF* NYSE Arca, Inc: [ ] Global X MSCI Nigeria ETF NYSE Arca, Inc: NGE Global X
Brazil Mid Cap ETF NYSE Arca, Inc: BRAZ Global X MSCI Pakistan ETF * NYSE Arca,
Inc: PAK Global X Brazil Utilities ETF* NYSE Arca, Inc: BRAU Global X Central
Asia & Mongolia Index ETF NYSE Arca, Inc: AZIA Global X FTSE Andean 40 ETF
NYSE Arca, Inc: AND Prospectus March 1, 2015 *Not open for investment. The
Securities and Exchange Commission (“SEC”) has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense. Shares in a Fund are not guaranteed or
insured by the Federal Deposit Insurance Corporation (“FDIC”) or any other
agency of the U.S. Government, nor are shares deposits or obligations of any
bank. Such shares in a Fund involve investment risks, including the loss of
principal.
i TABLE OF CONTENTS FUND
SUMMARIES ADDITIONAL INFORMATION ABOUT THE FUNDS’ STRATEGIES AND RISKS PORTFOLIO
HOLDINGS INFORMATION FUND MANAGEMENT DISTRIBUTOR BUYING AND SELLING FUND SHARES
FREQUENT TRADING DISTRIBUTION AND SERVICE PLAN DIVIDENDS AND DISTRIBUTIONS TAXES
DETERMINATION OF NET ASSET VALUE PREMIUM/DISCOUNT INFORMATION TOTAL RETURN
INFORMATION INFORMATION REGARDING THE INDICES AND THE INDEX PROVIDERS OTHER
SERVICE PROVIDERS FINANCIAL HIGHLIGHTS OTHER INFORMATION 1 158 179 179 181 181
182 182 182 183 185 186 186 189 194 195 201
1 FUND SUMMARIES Global X
China Consumer ETF Ticker: CHIQ Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE
The Global X China Consumer ETF (“Fund”) seeks to provide investment results
that correspond generally to the price and yield performance, before fees and
expenses, of the Solactive China Consumer Total Return Index (“Underlying
Index”). FEES AND EXPENSES This table describes the fees and expenses that you
may pay if you buy and hold shares (“Shares”) of the Fund. You will also incur
usual and customary brokerage commissions when buying and selling Shares. Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment): Management Fees: 0.65% Distribution and Service
(12b-1) Fees: None Other Expenses: 0.00% Total Annual Fund Operating Expenses:
0.65% Example: The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be: One Year Three Years
Five Years Ten Years $66 $208 $362 $810 Portfolio Turnover: The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or
"turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. During the most
recent fiscal year, the Fund’s portfolio turnover rate was 18.89% of the average
value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES The Fund invests at
least 80% of its total assets in the securities of the Underlying Index and in
American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs")
based on the securities in the Underlying Index. The Fund also invests at least
80% of its total assets in securities of consumer companies that are domiciled
in, principally traded in or whose revenues are primarily from China. For
purposes of this policy, consumer companies include those engaged in producing
or selling goods or services to consumers. Examples include producers of food,
beverages, apparel, household and leisure goods, cars and related items, media
content, operators of retails stores, and companies offering services to private
consumers. The Fund’s 80% investment policies are non-fundamental and require 60
days’ prior written notice to shareholders before they can be changed. The Fund
may lend securities representing up to one-third of the value of the Fund’s
total assets (including the value of the collateral received). The Underlying
Index is designed to measure the equity performance of the investable universe
of companies in the consumer sector of the Chinese economy, as defined by
Solactive AG, the provider of the Underlying Index ("Index Provider"). The
Fund’s investment objective and Underlying Index may be changed without
shareholder approval.
2 The Underlying Index is
sponsored by the Index Provider, which is an organization that is independent of
the Fund and Global X Management Company LLC, the investment adviser for the
Fund (“Adviser”). The Index Provider determines the relative weightings of the
securities in the Underlying Index and publishes information regarding the
market value of the Underlying Index. The Adviser uses a “passive” or indexing
approach to try to achieve the Fund’s investment objective. Unlike many
investment companies, the Fund does not try to outperform the Underlying Index
and does not seek temporary defensive positions when markets decline or appear
overvalued. The Fund generally will use a replication strategy. A replication
strategy is an indexing strategy that involves investing in the securities of
the Underlying Index in approximately the same proportions as in the Underlying
Index. However, the Fund may utilize a representative sampling strategy with
respect to the Underlying Index when a replication strategy might be detrimental
or disadvantageous to shareholders, such as when there are practical
difficulties or substantial costs involved in compiling a portfolio of equity
securities to replicate the Underlying Index, in instances in which a security
in the Underlying Index becomes temporarily illiquid, unavailable or less
liquid, or as a result of legal restrictions or limitations (such as tax
diversification requirements) that apply to the Fund but not the Underlying
Index. The Adviser expects that, over time, the correlation between the Fund’s
performance and that of the Underlying Index, before fees and expenses, will
exceed 95%. A correlation percentage of 100% would indicate perfect correlation.
If the Fund uses a replication strategy, it can be expected to have greater
correlation to the Underlying Index than if it uses a representative sampling
strategy. The Fund concentrates its investments (i.e., holds 25% or more of its
total assets) in a particular industry or group of industries to approximately
the same extent that the Underlying Index is concentrated. As of December 31,
2014, the Underlying Index was concentrated in the Consumer Discretionary and
Consumer Staples Sectors. SUMMARY OF PRINCIPAL RISKS As with any investment, you
could lose all or part of your investment in the Fund, and the Fund's
performance could trail that of other investments. There is no guarantee that
the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
Asian Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the Chinese economy. Asset Class Risk:
Securities in the Underlying Index or the Fund's portfolio may underperform in
comparison to the general securities markets or other asset classes.
Concentration Risk: Because the Fund's investments are concentrated in Chinese
securities and in the consumer sector, the Fund will be susceptible to loss due
to adverse occurrences affecting this country and sector. To the extent that the
Underlying Index concentrates in the securities of issuers in a particular
country, industry, market, asset class, or sector, the Fund will also
concentrate its investments to approximately the same extent. By concentrating
its investments in a country, industry, market, asset class, or sector, the Fund
faces more risks than if it were diversified broadly over numerous countries,
industries, markets, asset classes, or sectors. Such risks, any of which may
adversely affect the companies in which the Fund invests, may include, but are
not limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a particular country,
industry, market, asset class, or sector. In addition, at times, such country,
industry, market, asset class, or sector may be out of favor and underperform
other similar categories or the market as a whole. For additional details on
these risks, please see Risks Related to Investing in China, Risks Related to
Investing in the Consumer Discretionary Sector, and Risks Related to Investing
in the Consumer Staples Sector.
3 Currency Risk: Because
the Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
China's currency depreciates against the U.S. dollar. Custody Risk: Less
developed markets are more likely to experience problems with the clearing and
settling of trades and the holding of securities by local banks, agents and
depositories. Emerging Market Risk: China is an emerging market country, which
may be subject to a greater risk of loss than investments in developed markets.
Securities markets of emerging market countries are less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries. Equity Securities Risk: Equity securities
are subject to changes in value and their values may be more volatile than other
asset classes, as a result of such factors as a company’s business performance,
investor perceptions, stock market trends and general economic conditions.
Foreign Security Risk: Investments in the securities of foreign issuers
(including investments in ADRs and GDRs) are subject to the risks associated
with investing in those foreign markets, such as heightened risks of inflation
or nationalization. In addition, securities of foreign issuers may lose value
due to political, economic and geographic events affecting a foreign issuer or
market. During periods of social, political or economic instability in a country
or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Geographic Risk: A natural disaster could occur in China,
which could affect the economy or particular business operations of companies
economically tied to China. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Management Risk: The Fund is subject to the risk that the
Adviser’s investment management strategy may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. Market Risk: The Fund's NAV could decline over
short periods due to short-term market movements and over longer periods during
market downturns. Market Trading Risk: The Fund faces numerous market trading
risks, including the potential lack of an active market for Shares, losses from
trading in secondary markets, and disruption in the creation/redemption process
of the Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller number of issuers or may
invest a larger proportion of its assets in a single issuer. As a result, the
gains and losses on a single investment may have a greater impact on the Fund’s
NAV and may make the Fund more volatile than more diversified funds. Passive
Investment Risk: The Fund is not actively managed and the Adviser does not
attempt to take defensive positions in declining markets. Unlike many investment
companies, the Fund does not utilize an investing strategy that seeks returns in
excess of its Underlying Index. Therefore, it would not necessarily buy or sell
a security unless that security is added or removed, respectively, from the
Underlying Index, even if that security generally is underperforming.
4 Privatization Risk:
China has privatized certain entities and industries. Privatized entities may
lose money or be re-nationalized. Reliance on Trading Partners Risk: The Fund
invests in the Chinese economy, which is heavily dependent upon trading with key
partners. Any reduction in this trading, including as a result of adverse
economic conditions in a trading partner’s economy, may cause an adverse impact
on the economy in which the Fund invests. Risks Related to Investing in China:
Investment exposure to China subjects the Fund to risks specific to China. China
may be subject to considerable degrees of economic, political and social
instability. China is a developing market and demonstrates significantly higher
volatility from time to time in comparison to developed markets. Over the past
25 years, the Chinese government has undertaken reform of economic and market
practices and expansion of the sphere for private ownership of property in
China. However, Chinese markets generally continue to experience inefficiency,
volatility and pricing anomalies resulting from governmental influence, a lack
of publicly available information and/or political and social instability.
Internal social unrest or confrontations with other neighboring countries,
including military conflicts in response to such events, may also disrupt
economic development in China and result in a greater risk of currency
fluctuations, currency convertibility, interest rate fluctuations and higher
rates of inflation. Export growth continues to be a major driver of China’s
rapid economic growth. Reduction in spending on Chinese products and services,
institution of tariffs or other trade barriers, or a downturn in any of the
economies of China’s key trading partners may have an adverse impact on the
Chinese economy. Risks Related to Investing in the Consumer Discretionary
Sector: The consumer discretionary sector may be affected by changes in domestic
and international economies, exchange and interest rates, competition,
consumers’ disposable income and consumer preferences, social trends and
marketing campaigns. Risks Related to Investing in the Consumer Staples Sector:
The consumer staples sector may be affected by marketing campaigns, changes in
consumer demands, government regulations and changes in commodity prices.
Securities Lending Risk: Securities lending involves a risk of loss because the
borrower may fail to return the securities in a timely manner or at all. If the
Fund is not able to recover the securities loaned, it may sell the collateral
and purchase a replacement security in the market. Lending securities entails a
risk of loss to the Fund if and to the extent that the market value of the
loaned securities increases and the collateral is not increased accordingly.
Additionally, the Fund will bear any loss on the investment of cash collateral
it receives. These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a risk that
the Fund may not be able to recall the securities in sufficient time to vote on
material proxy matters. Securities Market Risk: Because certain securities
markets in China are small in size, underdeveloped, and are less regulated and
less correlated to global economic cycles than those markets located in more
developed countries, the securities markets in China are subject to greater
risks associated with market volatility, lower market capitalization, lower
trading volume, illiquidity, inflation, greater price fluctuations and
uncertainty regarding the existence of trading markets. Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying Index. Trading
Halt Risk: An exchange or market may close or issue trading halts on specific
securities, or the ability to buy or sell certain securities or financial
instruments may be restricted, which may result in the Fund being unable to buy
or sell certain securities or financial instruments. In such circumstances, the
Fund may be unable to rebalance its portfolio, may be unable to accurately price
its investments and/or may incur substantial trading losses. U.S. Economic Risk:
A decrease in U.S. imports, new trade regulations, changes in the U.S. dollar
exchange rates or an economic slowdown in the United States may have an adverse
impact on China's economy and, as a result, securities to which the Fund has
exposure. Valuation Risk: The sales price the Fund could receive for a security
may differ from the Fund’s valuation of the security and may differ from the
value used by the Underlying Index, particularly for securities that trade in
low value or volatile markets or that are valued using a fair value methodology.
The value of the securities in the Fund's portfolio may change on days when
shareholders will not be able to purchase or sell the Fund's Shares. PERFORMANCE
INFORMATION The bar chart and table that follow show how the Fund performed on a
calendar year basis and provide an indication of the risks of investing in the
Fund by showing changes in the Fund’s performance from year to year and by
showing how the Fund’s average
5 annual returns for the
indicated periods compare with the Fund’s benchmark index and a broad measure of
market performance. The Fund’s past performance (before and after taxes) is not
necessarily indicative of how the Fund will perform in the future. Updated
performance information is available online at www.globalxfunds.com.
6 Annual Total Returns
(Years Ended December 31,) Best Quarter: 09/30/10 23.75% Worst Quarter: 09/30/11
-27.33% Average Annual Total Returns (for the Periods Ended December 31, 2014)
One Year Ended December 31, 2014 Five Years Ended December 31, 2014 Since
Inception (11/30/2009) Global X China Consumer ETF: ·Return before taxes ·Return
after taxes on distributions1 ·Return after taxes on distributions and sale of
Fund Shares1 -17.25% -17.75% -9.54% -4.07% -4.37% -3.06% -2.93% -3.23% -2.23%
Solactive China Consumer Total Retun Index (net) (Index returns do not reflect
deductions for fees, expenses, or taxes) -17.27% -3.46% -2.57% S&P 500 Index
(Index returns do not reflect deductions for fees, expenses, or taxes) 13.69%
15.45% 15.60% 1 After-tax returns are calculated using the historical highest
individual U.S. federal marginal income tax rates and do not reflect the impact
of state and local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown above. After-tax returns
are not relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts (IRAs).
FUND MANAGEMENT Investment Adviser: Global X Management Company LLC. Portfolio
Managers: The professionals primarily responsible for the day-to-day management
of the Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang
Kim, CFA (“Portfolio Managers”). Messrs. del Ama and Gonzalez have been
7 Portfolio Managers of
the Fund since November 30, 2009. Messrs. Berruga and Kim have been Portfolio
Managers of the Fund since February 15, 2014. OTHER IMPORTANT INFORMATION
REGARDING FUND SHARES For important information about purchase and sale of Fund
Shares, tax information and financial intermediary compensation, please turn to
the sections of this Prospectus entitled “Purchase and Sale of Fund Shares,”
“Tax Information,” and “Payments to Broker-Dealers and Other Financial
Intermediaries” on page 157 of the Prospectus.
8 Global X China Energy
ETF Ticker: CHIE Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The Global X
China Energy ETF (“Fund”) seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
Solactive China Energy Total Return Index (“Underlying Index”). FEES AND
EXPENSES This table describes the fees and expenses that you may pay if you buy
and hold shares (“Shares”) of the Fund. You will also incur usual and customary
brokerage commissions when buying and selling Shares. Annual Fund Operating
Expenses (expenses that you pay each year as a percentage of the value of your
investment): Management Fees: 0.65% Distribution and Service (12b-1) Fees: None
Other Expenses: 0.00% Total Annual Fund Operating Expenses: 0.65% Example: The
following example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other funds. This example does not take into
account customary brokerage commissions that you pay when purchasing or selling
Shares of the Fund in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be: One Year Three Years Five Years Ten
Years $66 $208 $362 $810 Portfolio Turnover: The Fund pays transaction costs,
such as commissions, when it buys and sells securities (or "turns over" its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund’s performance. During the most recent fiscal year, the
Fund’s portfolio turnover rate was 12.65% of the average value of its portfolio.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests at least 80% of its total
assets in the securities of the Underlying Index and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund also invests at least 80% of its
total assets in securities of energy companies that are domiciled in,
principally traded in or whose revenues are primarily from China. For purposes
of this policy, energy companies include those engaged in the production and/or
distribution of energy, both conventional and renewable, or the production
and/or mining of commodities used in energy production. The Fund’s 80%
investment policies are non-fundamental and require 60 days’ prior written
notice to shareholders before they can be changed. The Underlying Index is
designed to measure the equity performance of the investable universe of
companies in the energy sector of the Chinese economy, as defined by Solactive
AG, the provider of the Underlying Index ("Index Provider"). The Fund’s
investment objective and Underlying Index may be changed without shareholder
approval. The Underlying Index is sponsored by the Index Provider, which is an
organization that is independent of the Fund and Global X Management Company
LLC, the investment adviser for the Fund (“Adviser”). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying Index.
9 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Energy and Utilities Sectors. SUMMARY OF PRINCIPAL RISKS As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund's performance could trail that of other investments. There is no guarantee
that the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
Asian Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the Chinese economy. Asset Class Risk:
Securities in the Underlying Index or the Fund's portfolio may underperform in
comparison to the general securities markets or other asset classes.
Concentration Risk: Because the Fund's investments are concentrated in Chinese
securities and in the energy and utilities sectors, the Fund will be susceptible
to loss due to adverse occurrences affecting this country and sector. To the
extent that the Underlying Index concentrates in the securities of issuers in a
particular country, industry, market, asset class, or sector, the Fund will also
concentrate its investments to approximately the same extent. By concentrating
its investments in a country, industry, market, asset class, or sector, the Fund
faces more risks than if it were diversified broadly over numerous countries,
industries, markets, asset classes, or sectors. Such risks, any of which may
adversely affect the companies in which the Fund invests, may include, but are
not limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a particular country,
industry, market, asset class, or sector. In addition, at times, such country,
industry, market, asset class, or sector may be out of favor and underperform
other similar categories or the market as a whole. For additional details on
these risks, please see Risks Related to Investing in China, Risks Related to
Investing in the Energy Sector, and Risks Related to Investing in the Utilities
Sector. Currency Risk: Because the Fund's NAV is determined in U.S. dollars, the
Fund's NAV could decline if China's currency depreciates against the U.S.
dollar. Custody Risk: Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
10 Emerging Market Risk:
China is an emerging market country, which may be subject to a greater risk of
loss than investments in developed markets. Securities markets of emerging
market countries are less liquid, subject to greater price volatility, have
smaller market capitalizations, have less government regulation, and are not
subject to as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries. Equity
Securities Risk: Equity securities are subject to changes in value and their
values may be more volatile than other asset classes, as a result of such
factors as a company’s business performance, investor perceptions, stock market
trends and general economic conditions. Foreign Security Risk: Investments in
the securities of foreign issuers (including investments in ADRs and GDRs) are
subject to the risks associated with investing in those foreign markets, such as
heightened risks of inflation or nationalization. In addition, securities of
foreign issuers may lose value due to political, economic and geographic events
affecting a foreign issuer or market. During periods of social, political or
economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges, nonetheless, could be affected by, among other things,
increasing price volatility, illiquidity, or the closure of the primary market
on which the security (or the security underlying the ADR or GDR) is traded. You
may lose money due to political, economic and geographic events affecting a
foreign issuer or market. Geographic Risk: A natural disaster could occur in
China, which could affect the economy or particular business operations of
companies economically tied to China. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Management Risk: The Fund is subject to the risk that the
Adviser’s investment management strategy may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. Market Risk: The Fund's NAV could decline over
short periods due to short-term market movements and over longer periods during
market downturns. Market Trading Risk: The Fund faces numerous market trading
risks, including the potential lack of an active market for Shares, losses from
trading in secondary markets, and disruption in the creation/redemption process
of the Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller number of issuers or may
invest a larger proportion of its assets in a single issuer. As a result, the
gains and losses on a single investment may have a greater impact on the Fund’s
NAV and may make the Fund more volatile than more diversified funds. Passive
Investment Risk: The Fund is not actively managed and the Adviser does not
attempt to take defensive positions in declining markets. Unlike many investment
companies, the Fund does not utilize an investing strategy that seeks returns in
excess of its Underlying Index. Therefore, it would not necessarily buy or sell
a security unless that security is added or removed, respectively, from the
Underlying Index, even if that security generally is underperforming.
Premium/Discount Risk: Disruptions to creations and redemptions, the existence
of extreme market volatility or potential lack of an active trading market for
Shares may result in Shares trading at a significant premium or discount to NAV.
If a shareholder purchases Shares at a time when the market price is at a
premium to the NAV or sells Shares at a time when the market price is at a
discount to the NAV, the shareholder may sustain losses.
11 Privatization Risk:
China has privatized certain entities and industries. Privatized entities may
lose money or be re-nationalized. Reliance on Trading Partners Risk: The Fund
invests in the Chinese economy, which is heavily dependent upon trading with key
partners. Any reduction in this trading, including as a result of adverse
economic conditions in a trading partner’s economy, may cause an adverse impact
on the economy in which the Fund invests. Risks Related to Investing in China:
Investment exposure to China subjects the Fund to risks specific to China. China
may be subject to considerable degrees of economic, political and social
instability. China is a developing market and demonstrates significantly higher
volatility from time to time in comparison to developed markets. Over the past
25 years, the Chinese government has undertaken reform of economic and market
practices and expansion of the sphere for private ownership of property in
China. However, Chinese markets generally continue to experience inefficiency,
volatility and pricing anomalies resulting from governmental influence, a lack
of publicly available information and/or political and social instability.
Internal social unrest or confrontations with other neighboring countries,
including military conflicts in response to such events, may also disrupt
economic development in China and result in a greater risk of currency
fluctuations, currency convertibility, interest rate fluctuations and higher
rates of inflation. Export growth continues to be a major driver of China’s
rapid economic growth. Reduction in spending on Chinese products and services,
institution of tariffs or other trade barriers, or a downturn in any of the
economies of China’s key trading partners may have an adverse impact on the
Chinese economy. Risks Related to Investing in the Energy Sector: The value of
securities issued by companies in the energy sector may decline for many
reasons, including, without limitation, changes in energy prices; international
politics; energy conservation; the success of exploration projects; natural
disasters or other catastrophes; changes in exchange rates, interest rates, or
economic conditions; changes in demand for energy products and services; and tax
and other governmental regulatory policies. Risks Related to Investing in the
Utilities Sector: Companies in the utilities sector may be adversely affected by
changes in exchange rates, domestic and international competition and
governmental regulations on rates charged to customers. Privatization in the
utilities sector may subject companies to greater competition and losses in
profitability. Companies in the utilities industry may have difficulty obtaining
an adequate return on invested capital, raising capital, or financing large
construction programs during periods of inflation or unsettled capital markets.
Securities Market Risk: Because certain securities markets in China are small in
size, underdeveloped, and are less regulated and less correlated to global
economic cycles than those markets located in more developed countries, the
securities markets in China are subject to greater risks associated with market
volatility, lower market capitalization, lower trading volume, illiquidity,
inflation, greater price fluctuations and uncertainty regarding the existence of
trading markets. Tracking Error Risk: The performance of the Fund may diverge
from that of the Underlying Index. Trading Halt Risk: An exchange or market may
close or issue trading halts on specific securities, or the ability to buy or
sell certain securities or financial instruments may be restricted, which may
result in the Fund being unable to buy or sell certain securities or financial
instruments. In such circumstances, the Fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses. U.S. Economic Risk: A decrease in U.S. imports, new
trade regulations, changes in the U.S. dollar exchange rates or an economic
slowdown in the United States may have an adverse impact on China's economy and,
as a result, securities to which the Fund has exposure. Valuation Risk: The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology. The value of the securities
in the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares. PERFORMANCE INFORMATION The bar chart and
table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the indicated periods compare with the Fund’s
benchmark index and a broad measure of market performance. The Fund’s past
performance (before and after taxes) is not necessarily indicative of how the
Fund will perform in the future. Updated performance information is available
online at www.globalxfunds.com.
12 Annual Total Returns
(Years Ended December 31,) Best Quarter: 09/30/10 17.40% Worst Quarter: 09/30/11
-26.13% Average Annual Total Returns (for the Periods Ended December 31, 2014)
One Year Ended December 31, 2014 Five Years Ended December 31, 2014 Since
Inception (12/15/2009) Global X China Energy ETF: ·Return before taxes ·Return
after taxes on distributions1 ·Return after taxes on distributions and sale of
Fund Shares1 -9.71% -9.99% -4.84% -0.47% -0.61% -0.08% -0.51% -0.64% -0.11%
Solactive China Energy Total Return Index (net) (Index returns do not reflect
deductions for fees, expenses, or taxes) -8.14% 0.78% 0.52% S&P 500 Index
(Index returns do not reflect deductions for fees, expenses, or taxes) 13.69%
15.45% 15.47% 1 After-tax returns are calculated using the historical highest
individual U.S. federal marginal income tax rates and do not reflect the impact
of state and local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown above. After-tax returns
are not relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts (IRAs).
FUND MANAGEMENT Investment Adviser: Global X Management Company LLC. Portfolio
Managers: The professionals primarily responsible for the day-to-day management
of the Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang
Kim, CFA (“Portfolio Managers”). Messrs. del Ama and Gonzalez have been
Portfolio Managers of the Fund since December 15, 2009. Messrs. Berruga and Kim
have been Portfolio Managers of the Fund
13 since February 15,
2014. OTHER IMPORTANT INFORMATION REGARDING FUND SHARES For important
information about purchase and sale of Fund Shares, tax information and
financial intermediary compensation, please turn to the sections of this
Prospectus entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and
“Payments to Broker-Dealers and Other Financial Intermediaries” on page 157 of
the Prospectus.
14 Global X China
Financials ETF Ticker: CHIX Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The
Global X China Financials ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Solactive China Financials Total Return Index (“Underlying
Index”). FEES AND EXPENSES This table describes the fees and expenses that you
may pay if you buy and hold shares (“Shares”) of the Fund. You will also incur
usual and customary brokerage commissions when buying and selling Shares. Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment): Management Fees: 0.65% Distribution and Service
(12b-1) Fees: None Other Expenses: 0.00% Total Annual Fund Operating Expenses:
0.65% Example: The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be: One Year Three Years
Five Years Ten Years $66 $208 $362 $810 Portfolio Turnover: The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or
"turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. During the most
recent fiscal year, the Fund’s portfolio turnover rate was 6.90% of the average
value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES The Fund invests at
least 80% of its total assets in the securities of the Underlying Index and in
American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs")
based on the securities in the Underlying Index. The Fund also invests at least
80% of its total assets in securities of financials companies that are domiciled
in, principally traded in or whose revenues are primarily from China. For
purposes of this policy, financials companies include those engaged in banking,
lending, insurance, investments and/or financing. The Fund’s 80% investment
policies are non-fundamental and require 60 days’ prior written notice to
shareholders before they can be changed. The Underlying Index is designed to
measure the equity performance of the investable universe of companies in the
financials sector of the Chinese economy, as defined by Solactive AG, the
provider of the Underlying Index ("Index Provider"). The Fund’s investment
objective and Underlying Index may be changed without shareholder approval. The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of the Fund and Global X Management Company LLC, the
investment adviser for the Fund (“Adviser”). The Index Provider determines the
relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
15 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Financials Sector. SUMMARY OF PRINCIPAL RISKS As with any investment, you
could lose all or part of your investment in the Fund, and the Fund's
performance could trail that of other investments. There is no guarantee that
the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
Asian Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the Chinese economy. Asset Class Risk:
Securities in the Underlying Index or the Fund's portfolio may underperform in
comparison to the general securities markets or other asset classes.
Concentration Risk: Because the Fund's investments are concentrated in Chinese
securities and in the financials sector, the Fund will be susceptible to loss
due to adverse occurrences affecting this country and sector. To the extent that
the Underlying Index concentrates in the securities of issuers in a particular
country, industry, market, asset class, or sector, the Fund will also
concentrate its investments to approximately the same extent. By concentrating
its investments in a country, industry, market, asset class, or sector, the Fund
faces more risks than if it were diversified broadly over numerous countries,
industries, markets, asset classes, or sectors. Such risks, any of which may
adversely affect the companies in which the Fund invests, may include, but are
not limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a particular country,
industry, market, asset class, or sector. In addition, at times, such country,
industry, market, asset class, or sector may be out of favor and underperform
other similar categories or the market as a whole. For additional details on
these risks, please see Risks Related to Investing in China and Risks Related to
Investing in the Financials Sector. Currency Risk: Because the Fund's NAV is
determined in U.S. dollars, the Fund's NAV could decline if China's currency
depreciates against the U.S. dollar. Custody Risk: Less developed markets are
more likely to experience problems with the clearing and settling of trades and
the holding of securities by local banks, agents and depositories.
16 Emerging Market Risk:
China is an emerging market country, which may be subject to a greater risk of
loss than investments in developed markets. Securities markets of emerging
market countries are less liquid, subject to greater price volatility, have
smaller market capitalizations, have less government regulation, and are not
subject to as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries. Equity
Securities Risk: Equity securities are subject to changes in value and their
values may be more volatile than other asset classes, as a result of such
factors as a company’s business performance, investor perceptions, stock market
trends and general economic conditions. Foreign Security Risk: Investments in
the securities of foreign issuers (including investments in ADRs and GDRs) are
subject to the risks associated with investing in those foreign markets, such as
heightened risks of inflation or nationalization. In addition, securities of
foreign issuers may lose value due to political, economic and geographic events
affecting a foreign issuer or market. During periods of social, political or
economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges, nonetheless, could be affected by, among other things,
increasing price volatility, illiquidity, or the closure of the primary market
on which the security (or the security underlying the ADR or GDR) is traded. You
may lose money due to political, economic and geographic events affecting a
foreign issuer or market. Geographic Risk: A natural disaster could occur in
China, which could affect the economy or particular business operations of
companies economically tied to China. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Management Risk: The Fund is subject to the risk that the
Adviser’s investment management strategy may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. Market Risk: The Fund's NAV could decline over
short periods due to short-term market movements and over longer periods during
market downturns. Market Trading Risk: The Fund faces numerous market trading
risks, including the potential lack of an active market for Shares, losses from
trading in secondary markets, and disruption in the creation/redemption process
of the Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller number of issuers or may
invest a larger proportion of its assets in a single issuer. As a result, the
gains and losses on a single investment may have a greater impact on the Fund’s
NAV and may make the Fund more volatile than more diversified funds. Passive
Investment Risk: The Fund is not actively managed and the Adviser does not
attempt to take defensive positions in declining markets. Unlike many investment
companies, the Fund does not utilize an investing strategy that seeks returns in
excess of its Underlying Index. Therefore, it would not necessarily buy or sell
a security unless that security is added or removed, respectively, from the
Underlying Index, even if that security generally is underperforming.
Privatization Risk: China has privatized certain entities and industries.
Privatized entities may lose money or be re-nationalized. Reliance on Trading
Partners Risk: The Fund invests in the Chinese economy, which is heavily
dependent upon trading with key partners. Any reduction in this trading,
including as a result of adverse economic conditions in a trading partner’s
economy, may cause an adverse impact on the economy in which the Fund invests.
17 Risks Related to
Investing in China: Investment exposure to China subjects the Fund to risks
specific to China. China may be subject to considerable degrees of economic,
political and social instability. China is a developing market and demonstrates
significantly higher volatility from time to time in comparison to developed
markets. Over the past 25 years, the Chinese government has undertaken reform of
economic and market practices and expansion of the sphere for private ownership
of property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Internal social unrest or confrontations with other neighboring
countries, including military conflicts in response to such events, may also
disrupt economic development in China and result in a greater risk of currency
fluctuations, currency convertibility, interest rate fluctuations and higher
rates of inflation. Export growth continues to be a major driver of China’s
rapid economic growth. Reduction in spending on Chinese products and services,
institution of tariffs or other trade barriers, or a downturn in any of the
economies of China’s key trading partners may have an adverse impact on the
Chinese economy. Risks Related to Investing in the Financials Sector:
Performance of companies in the financials sector may be adversely impacted by
many factors, including, among others, government regulations, economic
conditions, credit rating downgrades, changes in interest rates, and decreased
liquidity in credit markets. Chinese financial sector regulation and ownership
may be more intrusive than in the United States and other developed countries,
especially with respect to the regulation of non-Chinese banks and other
non-Chinese financial companies. Greater Chinese governmental involvement in the
financial sector may pose additional risks for investors. Market conditions in
China may be particularly subject to change based on government policy. This
sector has experienced significant losses in the recent past, and the impact of
more stringent capital requirements and of recent or future regulation on any
individual financial company or on the sector as a whole cannot be predicted.
Securities Market Risk: Because certain securities markets in China are small in
size, underdeveloped, and are less regulated and less correlated to global
economic cycles than those markets located in more developed countries, the
securities markets in China are subject to greater risks associated with market
volatility, lower market capitalization, lower trading volume, illiquidity,
inflation, greater price fluctuations and uncertainty regarding the existence of
trading markets. Tracking Error Risk: The performance of the Fund may diverge
from that of the Underlying Index. Trading Halt Risk: An exchange or market may
close or issue trading halts on specific securities, or the ability to buy or
sell certain securities or financial instruments may be restricted, which may
result in the Fund being unable to buy or sell certain securities or financial
instruments. In such circumstances, the Fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses. U.S. Economic Risk: A decrease in U.S. imports, new
trade regulations, changes in the U.S. dollar exchange rates or an economic
slowdown in the United States may have an adverse impact on China's economy and,
as a result, securities to which the Fund has exposure. Valuation Risk: The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology. The value of the securities
in the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares. PERFORMANCE INFORMATION The bar chart and
table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the indicated periods compare with the Fund’s
benchmark index and a broad measure of market performance. The Fund’s past
performance (before and after taxes) is not necessarily indicative of how the
Fund will perform in the future. Updated performance information is available
online at www.globalxfunds.com.
18 Annual Total Returns
(Years Ended December 31,) Best Quarter: 12/31/14 24.46% Worst Quarter: 09/30/11
-34.66% Average Annual Total Returns (for the Periods Ended December 31, 2014)
One Year Ended December 31, 2014 Five Years Ended December 31, 2014 Since
Inception (12/10/2009) Global X China Financials ETF: ·Return before taxes
·Return after taxes on distributions1 ·Return after taxes on distributions and
sale of Fund Shares1 18.81% 18.63% 10.99% 2.92% 2.82% 2.44% 2.23% 2.13% 1.90%
Solactive China Financials Total Return Index (net) (Index returns do not
reflect deductions for fees, expenses, or taxes) 19.33% 3.70% 2.58% S&P 500
Index (Index returns do not reflect deductions for fees, expenses, or taxes)
13.69% 15.45% 15.54% 1 After-tax returns are calculated using the historical
highest individual U.S. federal marginal income tax rates and do not reflect the
impact of state and local taxes. Your actual after-tax returns will depend on
your specific tax situation and may differ from those shown above. After-tax
returns are not relevant to investors who hold Shares of the Fund through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts (IRAs). FUND MANAGEMENT Investment Adviser: Global X Management Company
LLC. Portfolio Managers: The professionals primarily responsible for the
day-to-day management of the Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis
Berruga and Chang Kim, CFA (“Portfolio Managers”). Messrs. del Ama and Gonzalez
have been
19 Portfolio Managers of
the Fund since December 10, 2009. Messrs. Berruga and Kim have been Portfolio
Managers of the Fund since February 15, 2014. OTHER IMPORTANT INFORMATION
REGARDING FUND SHARES For important information about purchase and sale of Fund
Shares, tax information and financial intermediary compensation, please turn to
the sections of this Prospectus entitled “Purchase and Sale of Fund Shares,”
“Tax Information,” and “Payments to Broker-Dealers and Other Financial
Intermediaries” on page 157 of the Prospectus.
20 Global X China
Industrials ETF Ticker: CHII Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The
Global X China Industrials ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Solactive China Industrials Total Return Index (“Underlying
Index”). FEES AND EXPENSES This table describes the fees and expenses that you
may pay if you buy and hold shares (“Shares”) of the Fund. You will also incur
usual and customary brokerage commissions when buying and selling Shares. Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment): Management Fees: 0.65% Distribution and Service
(12b-1) Fees: None Other Expenses: 0.00% Total Annual Fund Operating Expenses:
0.65% Example: The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be: One Year Three Years
Five Years Ten Years $66 $208 $362 $810 Portfolio Turnover: The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or
"turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. During the most
recent fiscal year, the Fund’s portfolio turnover rate was 10.61% of the average
value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES The Fund invests at
least 80% of its total assets in the securities of the Underlying Index and in
American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs")
based on the securities in the Underlying Index. The Fund also invests at least
80% of its total assets in securities of industrials companies that are
domiciled in, principally traded in or whose revenues are primarily from China.
For purposes of this policy, industrials companies include those engaged in
heavy construction, production of construction materials, waste and water
management, freight transportation or production and manufacturing of industrial
goods, vessels, vehicles, containers, electrical equipment and machinery. The
Fund’s 80% investment policies are non-fundamental and require 60 days’ prior
written notice to shareholders before they can be changed. The Underlying Index
is designed to measure the equity performance of the investable universe of
companies in the industrials sector of the Chinese economy, as defined by
Solactive AG, the provider of the Underlying Index ("Index Provider"). The
Fund’s investment objective and Underlying Index may be changed without
shareholder approval. The Underlying Index is sponsored by the Index Provider,
which is an organization that is independent of the Fund and Global X Management
Company LLC, the investment adviser for the Fund (“Adviser”). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying Index.
21 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Industrials Sector. SUMMARY OF PRINCIPAL RISKS As with any investment, you
could lose all or part of your investment in the Fund, and the Fund's
performance could trail that of other investments. There is no guarantee that
the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
Asian Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the Chinese economy. Asset Class Risk:
Securities in the Underlying Index or the Fund's portfolio may underperform in
comparison to the general securities markets or other asset classes.
Concentration Risk: Because the Fund's investments are concentrated in Chinese
securities and in the industrials sector, the Fund will be susceptible to loss
due to adverse occurrences affecting this country and sector. To the extent that
the Underlying Index concentrates in the securities of issuers in a particular
country, industry, market, asset class, or sector, the Fund will also
concentrate its investments to approximately the same extent. By concentrating
its investments in a country, industry, market, asset class, or sector, the Fund
faces more risks than if it were diversified broadly over numerous countries,
industries, markets, asset classes, or sectors. Such risks, any of which may
adversely affect the companies in which the Fund invests, may include, but are
not limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a particular country,
industry, market, asset class, or sector. In addition, at times, such country,
industry, market, asset class, or sector may be out of favor and underperform
other similar categories or the market as a whole. For additional details on
these risks, please see Risks Related to Investing in China and Risks Related to
Investing in the Industrials Sector. Currency Risk: Because the Fund's NAV is
determined in U.S. dollars, the Fund's NAV could decline if China's currency
depreciates against the U.S. dollar. Custody Risk: Less developed markets are
more likely to experience problems with the clearing and settling of trades and
the holding of securities by local banks, agents and depositories.
22 Emerging Market Risk:
China is an emerging market country, which may be subject to a greater risk of
loss than investments in developed markets. Securities markets of emerging
market countries are less liquid, subject to greater price volatility, have
smaller market capitalizations, have less government regulation, and are not
subject to as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries. Equity
Securities Risk: Equity securities are subject to changes in value and their
values may be more volatile than other asset classes, as a result of such
factors as a company’s business performance, investor perceptions, stock market
trends and general economic conditions. Foreign Security Risk: Investments in
the securities of foreign issuers (including investments in ADRs and GDRs) are
subject to the risks associated with investing in those foreign markets, such as
heightened risks of inflation or nationalization. In addition, securities of
foreign issuers may lose value due to political, economic and geographic events
affecting a foreign issuer or market. During periods of social, political or
economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges, nonetheless, could be affected by, among other things,
increasing price volatility, illiquidity, or the closure of the primary market
on which the security (or the security underlying the ADR or GDR) is traded. You
may lose money due to political, economic and geographic events affecting a
foreign issuer or market. Geographic Risk: A natural disaster could occur in
China, which could affect the economy or particular business operations of
companies economically tied to China. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Management Risk: The Fund is subject to the risk that the
Adviser’s investment management strategy may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. Market Risk: The Fund's NAV could decline over
short periods due to short-term market movements and over longer periods during
market downturns. Market Trading Risk: The Fund faces numerous market trading
risks, including the potential lack of an active market for Shares, losses from
trading in secondary markets, and disruption in the creation/redemption process
of the Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller number of issuers or may
invest a larger proportion of its assets in a single issuer. As a result, the
gains and losses on a single investment may have a greater impact on the Fund’s
NAV and may make the Fund more volatile than more diversified funds. Passive
Investment Risk: The Fund is not actively managed and the Adviser does not
attempt to take defensive positions in declining markets. Unlike many investment
companies, the Fund does not utilize an investing strategy that seeks returns in
excess of its Underlying Index. Therefore, it would not necessarily buy or sell
a security unless that security is added or removed, respectively, from the
Underlying Index, even if that security generally is underperforming.
Privatization Risk: China has privatized certain entities and industries.
Privatized entities may lose money or be re-nationalized. Reliance on Trading
Partners Risk: The Fund invests in the Chinese economy, which is heavily
dependent upon trading with key partners. Any reduction in this trading,
including as a result of adverse economic conditions in a trading partner’s
economy, may cause an adverse impact on the economy in which the Fund invests.
23 Risks Related to
Investing in China: Investment exposure to China subjects the Fund to risks
specific to China. China may be subject to considerable degrees of economic,
political and social instability. China is a developing market and demonstrates
significantly higher volatility from time to time in comparison to developed
markets. Over the past 25 years, the Chinese government has undertaken reform of
economic and market practices and expansion of the sphere for private ownership
of property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Internal social unrest or confrontations with other neighboring
countries, including military conflicts in response to such events, may also
disrupt economic development in China and result in a greater risk of currency
fluctuations, currency convertibility, interest rate fluctuations and higher
rates of inflation. Export growth continues to be a major driver of China’s
rapid economic growth. Reduction in spending on Chinese products and services,
institution of tariffs or other trade barriers, or a downturn in any of the
economies of China’s key trading partners may have an adverse impact on the
Chinese economy. Risks Related to Investing in the Industrials Sector:
Investments in securities in the industrials sector are subject to fluctuations
in supply and demand for their specific product or service. The products of
manufacturing companies may face product obsolescence due to rapid technological
developments. Government regulation, world events and economic conditions affect
the performance of companies in the industrials sector. Companies also may be
adversely affected by environmental damage and product liability claims.
Securities Market Risk: Because certain securities markets in China are small in
size, underdeveloped, and are less regulated and less correlated to global
economic cycles than those markets located in more developed countries, the
securities markets in China are subject to greater risks associated with market
volatility, lower market capitalization, lower trading volume, illiquidity,
inflation, greater price fluctuations and uncertainty regarding the existence of
trading markets. Tracking Error Risk: The performance of the Fund may diverge
from that of the Underlying Index. Trading Halt Risk: An exchange or market may
close or issue trading halts on specific securities, or the ability to buy or
sell certain securities or financial instruments may be restricted, which may
result in the Fund being unable to buy or sell certain securities or financial
instruments. In such circumstances, the Fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses. U.S. Economic Risk: A decrease in U.S. imports, new
trade regulations, changes in the U.S. dollar exchange rates or an economic
slowdown in the United States may have an adverse impact on China's economy and,
as a result, securities to which the Fund has exposure. Valuation Risk: The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology. The value of the securities
in the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares. PERFORMANCE INFORMATION The bar chart and
table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the indicated periods compare with the Fund’s
benchmark index and a broad measure of market performance. The Fund’s past
performance (before and after taxes) is not necessarily indicative of how the
Fund will perform in the future. Updated performance information is available
online at www.globalxfunds.com.
24 Annual Total Returns
(Years Ended December 31,) Best Quarter: 09/30/10 24.96% Worst Quarter: 09/30/11
-39.82% Average Annual Total Returns (for the Periods Ended December 31, 2014)
One Year Ended December 31, 2014 Five Years Ended December 31, 2014 Since
Inception (11/30/2009) Global X China Industrials ETF: ·Return before taxes
·Return after taxes on distributions1 ·Return after taxes on distributions and
sale of Fund Shares1 15.42% 15.28% 8.93% -1.01% -1.14% -0.66% -0.90% -1.02%
-0.58% Solactive China Industrials Total Return Index (net) (Index returns do
not reflect deductions for fees, expenses, or taxes) 17.49% 0.11% -0.07% S&P
500 Index (Index returns do not reflect deductions for fees, expenses, or taxes)
13.69% 15.45% 15.60% 1 After-tax returns are calculated using the historical
highest individual U.S. federal marginal income tax rates and do not reflect the
impact of state and local taxes. Your actual after-tax returns will depend on
your specific tax situation and may differ from those shown above. After-tax
returns are not relevant to investors who hold Shares of the Fund through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts (IRAs). FUND MANAGEMENT Investment Adviser: Global X Management Company
LLC. Portfolio Managers: The professionals primarily responsible for the
day-to-day management of the Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis
Berruga and Chang Kim, CFA (“Portfolio Managers”). Messrs. del Ama and Gonzalez
have been Portfolio Managers of the Fund since November 30, 2009. Messrs.
Berruga and Kim have been Portfolio Managers of the Fund
25 since February 15,
2014. OTHER IMPORTANT INFORMATION REGARDING FUND SHARES For important
information about purchase and sale of Fund Shares, tax information and
financial intermediary compensation, please turn to the sections of this
Prospectus entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and
“Payments to Broker-Dealers and Other Financial Intermediaries” on page 157 of
the Prospectus.
26 Global X China
Materials ETF Ticker: CHIM Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The
Global X China Materials ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Solactive China Materials Total Return Index (“Underlying
Index”). FEES AND EXPENSES This table describes the fees and expenses that you
may pay if you buy and hold shares (“Shares”) of the Fund. You will also incur
usual and customary brokerage commissions when buying and selling Shares. Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment): Management Fees: 0.65% Distribution and Service
(12b-1) Fees: None Other Expenses: 0.00% Total Annual Fund Operating Expenses:
0.65% Example: The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be: One Year Three Years
Five Years Ten Years $66 $208 $362 $810 Portfolio Turnover: The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or
"turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. During the most
recent fiscal year, the Fund’s portfolio turnover rate was 13.51% of the average
value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES The Fund invests at
least 80% of its total assets in the securities of the Underlying Index and in
American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs")
based on the securities in the Underlying Index. The Fund also invests at least
80% of its total assets in securities of materials companies that are domiciled
in, principally traded in or whose revenues are primarily from China. For
purposes of this policy, materials companies include those engaged in
developing, producing or selling physical substances and raw materials. The
Fund’s 80% investment policies are non-fundamental and require 60 days’ prior
written notice to shareholders before they can be changed. The Underlying Index
is designed to measure the equity performance of the investable universe of
companies in the materials sector of the Chinese economy, as defined by
Solactive AG, the provider of the Underlying Index ("Index Provider"). The
Fund’s investment objective and Underlying Index may be changed without
shareholder approval. The Underlying Index is sponsored by the Index Provider,
which is an organization that is independent of the Fund and Global X Management
Company LLC, the investment adviser for the Fund (“Adviser”). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying Index.
27 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Materials Sector. SUMMARY OF PRINCIPAL RISKS As with any investment, you
could lose all or part of your investment in the Fund, and the Fund's
performance could trail that of other investments. There is no guarantee that
the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
Asian Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the Chinese economy. Asset Class Risk:
Securities in the Underlying Index or the Fund's portfolio may underperform in
comparison to the general securities markets or other asset classes.
Concentration Risk: Because the Fund's investments are concentrated in Chinese
securities and in the materials sector, the Fund will be susceptible to loss due
to adverse occurrences affecting this country and sector. To the extent that the
Underlying Index concentrates in the securities of issuers in a particular
country, industry, market, asset class, or sector, the Fund will also
concentrate its investments to approximately the same extent. By concentrating
its investments in a country, industry, market, asset class, or sector, the Fund
faces more risks than if it were diversified broadly over numerous countries,
industries, markets, asset classes, or sectors. Such risks, any of which may
adversely affect the companies in which the Fund invests, may include, but are
not limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a particular country,
industry, market, asset class, or sector. In addition, at times, such country,
industry, market, asset class, or sector may be out of favor and underperform
other similar categories or the market as a whole. For additional details on
these risks, please see Risks Related to Investing in China and Risks Related to
Investing in the Materials Sector. Currency Risk: Because the Fund's NAV is
determined in U.S. dollars, the Fund's NAV could decline if China's currency
depreciates against the U.S. dollar. Custody Risk: Less developed markets are
more likely to experience problems with the clearing and settling of trades and
the holding of securities by local banks, agents and depositories.
28 Emerging Market Risk:
China is an emerging market country, which may be subject to a greater risk of
loss than investments in developed markets. Securities markets of emerging
market countries are less liquid, subject to greater price volatility, have
smaller market capitalizations, have less government regulation, and are not
subject to as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries. Equity
Securities Risk: Equity securities are subject to changes in value and their
values may be more volatile than other asset classes, as a result of such
factors as a company’s business performance, investor perceptions, stock market
trends and general economic conditions. Foreign Security Risk: Investments in
the securities of foreign issuers (including investments in ADRs and GDRs) are
subject to the risks associated with investing in those foreign markets, such as
heightened risks of inflation or nationalization. In addition, securities of
foreign issuers may lose value due to political, economic and geographic events
affecting a foreign issuer or market. During periods of social, political or
economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges, nonetheless, could be affected by, among other things,
increasing price volatility, illiquidity, or the closure of the primary market
on which the security (or the security underlying the ADR or GDR) is traded. You
may lose money due to political, economic and geographic events affecting a
foreign issuer or market. Geographic Risk: A natural disaster could occur in
China, which could affect the economy or particular business operations of
companies economically tied to China. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Management Risk: The Fund is subject to the risk that the
Adviser’s investment management strategy may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. Market Risk: The Fund's NAV could decline over
short periods due to short-term market movements and over longer periods during
market downturns. Market Trading Risk: The Fund faces numerous market trading
risks, including the potential lack of an active market for Shares, losses from
trading in secondary markets, and disruption in the creation/redemption process
of the Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller number of issuers or may
invest a larger proportion of its assets in a single issuer. As a result, the
gains and losses on a single investment may have a greater impact on the Fund’s
NAV and may make the Fund more volatile than more diversified funds. Passive
Investment Risk: The Fund is not actively managed and the Adviser does not
attempt to take defensive positions in declining markets. Unlike many investment
companies, the Fund does not utilize an investing strategy that seeks returns in
excess of its Underlying Index. Therefore, it would not necessarily buy or sell
a security unless that security is added or removed, respectively, from the
Underlying Index, even if that security generally is underperforming.
Privatization Risk: China has privatized certain entities and industries.
Privatized entities may lose money or be re-nationalized. Reliance on Trading
Partners Risk: The Fund invests in the Chinese economy, which is heavily
dependent upon trading with key partners. Any reduction in this trading,
including as a result of adverse economic conditions in a trading partner’s
economy, may cause an adverse impact on the economy in which the Fund invests.
29 Risks Related to
Investing in China: Investment exposure to China subjects the Fund to risks
specific to China. China may be subject to considerable degrees of economic,
political and social instability. China is a developing market and demonstrates
significantly higher volatility from time to time in comparison to developed
markets. Over the past 25 years, the Chinese government has undertaken reform of
economic and market practices and expansion of the sphere for private ownership
of property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Internal social unrest or confrontations with other neighboring
countries, including military conflicts in response to such events, may also
disrupt economic development in China and result in a greater risk of currency
fluctuations, currency convertibility, interest rate fluctuations and higher
rates of inflation. Export growth continues to be a major driver of China’s
rapid economic growth. Reduction in spending on Chinese products and services,
institution of tariffs or other trade barriers, or a downturn in any of the
economies of China’s key trading partners may have an adverse impact on the
Chinese economy. Risks Related to Investing in the Materials Sector: Investments
in securities in the materials sector are subject to changes in commodity
prices, exchange rates, import controls and worldwide competition. At times,
worldwide production of industrial materials has exceeded demand, leading to
poor investment returns or outright losses. Issuers in the materials sector are
at risk of depletion of resources, technical progress, labor relations,
governmental regulations and environmental damage and product liability claims.
Securities Market Risk: Because certain securities markets in China are small in
size, underdeveloped, and are less regulated and less correlated to global
economic cycles than those markets located in more developed countries, the
securities markets in China are subject to greater risks associated with market
volatility, lower market capitalization, lower trading volume, illiquidity,
inflation, greater price fluctuations and uncertainty regarding the existence of
trading markets. Tracking Error Risk: The performance of the Fund may diverge
from that of the Underlying Index. Trading Halt Risk: An exchange or market may
close or issue trading halts on specific securities, or the ability to buy or
sell certain securities or financial instruments may be restricted, which may
result in the Fund being unable to buy or sell certain securities or financial
instruments. In such circumstances, the Fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses. U.S. Economic Risk: A decrease in U.S. imports, new
trade regulations, changes in the U.S. dollar exchange rates or an economic
slowdown in the United States may have an adverse impact on China's economy and,
as a result, securities to which the Fund has exposure. Valuation Risk: The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology. The value of the securities
in the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares. PERFORMANCE INFORMATION The bar chart and
table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the indicated periods compare with the Fund’s
benchmark index and a broad measure of market performance. The Fund’s past
performance (before and after taxes) is not necessarily indicative of how the
Fund will perform in the future. Updated performance information is available
online at www.globalxfunds.com.
30 Annual Total Returns
(Years Ended December 31,) Best Quarter: 12/31/12 17.65% Worst Quarter: 09/30/11
-38.38% Average Annual Total Returns (for the Periods Ended December 31, 2014)
Year Ended December 31, 2014 Since Inception (01/12/2010) Global X China
Materials ETF: ·Return before taxes ·Return after taxes on distributions1
·Return after taxes on distributions and sale of Fund Shares1 -0.50% -0.71%
0.10% -12.33% -12.51% -8.68% Solactive China Materials Total Return Index (net)
(Index returns do not reflect deductions for fees, expenses, or taxes) 2.80%
-11.21% S&P 500 Index (Index returns do not reflect deductions for fees,
expenses, or taxes) 13.69% 15.11% 1 After-tax returns are calculated using the
historical highest individual U.S. federal marginal income tax rates and do not
reflect the impact of state and local taxes. Your actual after-tax returns will
depend on your specific tax situation and may differ from those shown above.
After-tax returns are not relevant to investors who hold Shares of the Fund
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts (IRAs). FUND MANAGEMENT Investment Adviser: Global X Management Company
LLC. Portfolio Managers: The professionals primarily responsible for the
day-to-day management of the Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis
Berruga and Chang Kim, CFA (“Portfolio Managers”). Messrs. del Ama and Gonzalez
have been Portfolio Managers of the Fund since January 12, 2010. Messrs. Berruga
and Kim have been Portfolio Managers of the Fund since February 15, 2014.
31 OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and financial intermediary compensation,
please turn to the sections of this Prospectus entitled “Purchase and Sale of
Fund Shares,” “Tax Information,” and “Payments to Broker-Dealers and Other
Financial Intermediaries” on page 157 of the Prospectus.
32 Global X China Mid Cap
ETF Ticker: CHIA Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The Global X
China Mid Cap ETF (“Fund”) seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
Solactive China Mid Cap Index (“Underlying Index”). FEES AND EXPENSES This table
describes the fees and expenses that you may pay if you buy and hold shares
(“Shares”) of the Fund. You will also incur usual and customary brokerage
commissions when buying and selling Shares. Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment): Management Fees: 0.65% Distribution and Service (12b-1) Fees: None
Other Expenses:1 0.00% Total Annual Fund Operating Expenses: 0.65% 1 “Other
Expenses” reflect estimated expenses for the Fund’s first fiscal year of
operations. Example: The following example is intended to help you compare the
cost of investing in the Fund with the cost of investing in other funds. This
example does not take into account customary brokerage commissions that you pay
when purchasing or selling Shares of the Fund in the secondary market. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your Shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be: One Year Three
Years $66 $208 Portfolio Turnover: The Fund pays transaction costs, such as
commissions, when it buys and sells securities (or "turns over" its portfolio).
A higher portfolio turnover rate may indicate higher transaction costs and may
result in higher taxes when Shares are held in a taxable account. These costs,
which are not reflected in annual fund operating expenses or in the example,
affect the Fund’s performance. The Fund had not yet commenced operations as of
the most recent fiscal year end. Thus, no portfolio turnover rate is provided
for the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund will invest at least 80%
of its total assets in the securities of the Underlying Index and in American
Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on
the securities in the Underlying Index. The Fund will invest at least 80% of its
total assets in mid-market capitalization ("mid cap") securities on companies
that are domiciled in, principally traded in or whose revenues are primarily
from China. For purposes of this policy, the Fund considers mid-cap companies to
be those companies included in, or similar in size to those included in, the
Solactive China Mid Cap Index, as of the latest reconstitution date, at the time
of purchase. As of January 1, 2015 the market capitalization of the Solactive
China Mid Cap Index was between $500 million and $15 billion. The Fund’s
capitalization range will change over time. The Fund’s 80% investment policies
are non- fundamental and require 60 days’ prior written notice to shareholders
before they can be changed. The Underlying Index is designed to measure the
equity performance of the investable universe of Chinese mid-market
capitalization companies, as defined by Solactive AG, the provider of the
Underlying Index ("Index Provider"). The Fund’s investment objective and
Underlying Index may be changed without shareholder approval.
33 The Underlying Index
is sponsored by the Index Provider, which is an organization that is independent
of the Fund and Global X Management Company LLC, the investment adviser for the
Fund (“Adviser”). The Index Provider determines the relative weightings of the
securities in the Underlying Index and publishes information regarding the
market value of the Underlying Index. The Adviser uses a “passive” or indexing
approach to try to achieve the Fund’s investment objective. Unlike many
investment companies, the Fund does not try to outperform the Underlying Index
and does not seek temporary defensive positions when markets decline or appear
overvalued. The Fund generally will use a replication strategy. A replication
strategy is an indexing strategy that involves investing in the securities of
the Underlying Index in approximately the same proportions as in the Underlying
Index. However, the Fund may utilize a representative sampling strategy with
respect to the Underlying Index when a replication strategy might be detrimental
or disadvantageous to shareholders, such as when there are practical
difficulties or substantial costs involved in compiling a portfolio of equity
securities to replicate the Underlying Index, in instances in which a security
in the Underlying Index becomes temporarily illiquid, unavailable or less
liquid, or as a result of legal restrictions or limitations (such as tax
diversification requirements) that apply to the Fund but not the Underlying
Index. The Adviser expects that, over time, the correlation between the Fund’s
performance and that of the Underlying Index, before fees and expenses, will
exceed 95%. A correlation percentage of 100% would indicate perfect correlation.
If the Fund uses a replication strategy, it can be expected to have greater
correlation to the Underlying Index than if it uses a representative sampling
strategy. The Fund concentrates its investments (i.e., holds 25% or more of its
total assets) in a particular industry or group of industries to approximately
the same extent that the Underlying Index is concentrated. SUMMARY OF PRINCIPAL
RISKS As with any investment, you could lose all or part of your investment in
the Fund, and the Fund's performance could trail that of other investments.
There is no guarantee that the Fund will achieve its investment objective. The
Fund is subject to the principal risks noted below, any of which may adversely
affect the Fund's net asset value ("NAV"), trading price, yield, total return
and ability to meet its investment objective, as well as other risks that are
described in greater detail in the Additional Information About the Funds’
Strategies and Risks section of the Prospectus and in the Statement of
Additional Information ("SAI"). ADR/GDR Risk: To the extent the Fund seeks
exposure to foreign companies, the Fund’s investments may be in the form of
depositary receipts or other securities convertible into securities of foreign
issuers, including ADRs and GDRs. While the use of ADRs and GDRs, which are
traded on exchanges and represent an ownership in a foreign security, provide an
alternative to directly purchasing the underlying foreign securities in their
respective national markets and currencies, investments in ADRs and GDRs
continue to be subject to certain of the risks associated with investing
directly in foreign securities. Asian Economic Risk: Decreasing Asian imports,
new trade regulations, changes in exchange rates, a recession in Asia or a
slowing of economic growth in this region could have an adverse impact on the
Chinese economy. Asset Class Risk: Securities in the Underlying Index or the
Fund's portfolio may underperform in comparison to the general securities
markets or other asset classes. Concentration Risk: Because the Fund's
investments are concentrated in Chinese securities and in the mid-cap size
category, the Fund will be susceptible to losses due to adverse occurrences
affecting this country. To the extent that the Underlying Index concentrates in
the securities of issuers in a particular country, industry, market, asset
class, or sector, the Fund will also concentrate its investments to
approximately the same extent. By concentrating its investments in a country,
industry, market, asset class, or sector, the Fund faces more risks than if it
were diversified broadly over numerous countries, industries, markets, asset
classes, or sectors. Such risks, any of which may adversely affect the companies
in which the Fund invests, may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources, adverse labor relations,
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular country, industry, market, asset class,
or sector. In addition, at times, such country, industry, market, asset class,
or sector may be out of favor and underperform other similar categories or the
market as a whole. For additional details on these risks, please see Risks
Related to Investing in China. Currency Risk: Because the Fund's NAV is
determined in U.S. dollars, the Fund's NAV could decline if China's currency
depreciates against the U.S. dollar.
34 Custody Risk: Less
developed markets are more likely to experience problems with the clearing and
settling of trades and the holding of securities by local banks, agents and
depositories. Emerging Market Risk: China is an emerging market country, which
may be subject to a greater risk of loss than investments in developed markets.
Securities markets of emerging market countries are less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries. Equity Securities Risk: Equity securities
are subject to changes in value and their values may be more volatile than other
asset classes, as a result of such factors as a company’s business performance,
investor perceptions, stock market trends and general economic conditions.
Foreign Security Risk: Investments in the securities of foreign issuers
(including investments in ADRs and GDRs) are subject to the risks associated
with investing in those foreign markets, such as heightened risks of inflation
or nationalization. In addition, securities of foreign issuers may lose value
due to political, economic and geographic events affecting a foreign issuer or
market. During periods of social, political or economic instability in a country
or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Geographic Risk: A natural disaster could occur in China,
which could affect the economy or particular business operations of companies
economically tied to China. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Management Risk: The Fund is subject to the risk that the
Adviser’s investment management strategy may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. Market Risk: The Fund's NAV could decline over
short periods due to short-term market movements and over longer periods during
market downturns. Market Trading Risk: The Fund faces numerous market trading
risks, including the potential lack of an active market for Shares, losses from
trading in secondary markets, and disruption in the creation/redemption process
of the Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Mid-Capitalization Companies Risk: Mid cap companies may have
greater volatility in price than the stocks of large companies due to limited
product lines or resources or a dependency upon a particular market niche.
Non-Correlation Risk: The Fund’s return may not match the return of the
Underlying Index for a number of reasons. For example, the Fund incurs operating
expenses not applicable to the Underlying Index, and incurs costs in buying and
selling securities, especially when rebalancing the Fund’s securities holdings
to reflect changes in the composition of the Underlying Index. In addition, the
performance of the Fund and the Underlying Index may vary due to asset valuation
differences and differences between the Fund’s portfolio and the Underlying
Index resulting from legal restrictions, costs or liquidity constraints.
Non-Diversification Risk: The Fund is classified as a “non-diversified”
investment company under the 1940 Act. As a result, the Fund is subject to the
risk that it will be more volatile than a diversified fund because the Fund may
invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds. Passive Investment Risk: The
Fund is not actively managed and the Adviser does not attempt to take defensive
positions in declining markets. Unlike many investment companies, the Fund does
not utilize an investing strategy that seeks returns in excess of its Underlying
Index. Therefore, it would not necessarily buy or sell a security unless that
security is added or removed, respectively, from the Underlying Index, even if
that security generally is underperforming.
35 Privatization Risk:
China has privatized certain entities and industries. Privatized entities may
lose money or be re-nationalized. Reliance on Trading Partners Risk: The Fund
invests in the Chinese economy, which is heavily dependent upon trading with key
partners. Any reduction in this trading, including as a result of adverse
economic conditions in a trading partner’s economy, may cause an adverse impact
on the economy in which the Fund invests. Risks Related to Investing in China:
Investment exposure to China subjects the Fund to risks specific to China. China
may be subject to considerable degrees of economic, political and social
instability. China is a developing market and demonstrates significantly higher
volatility from time to time in comparison to developed markets. Over the past
25 years, the Chinese government has undertaken reform of economic and market
practices and expansion of the sphere for private ownership of property in
China. However, Chinese markets generally continue to experience inefficiency,
volatility and pricing anomalies resulting from governmental influence, a lack
of publicly available information and/or political and social instability.
Internal social unrest or confrontations with other neighboring countries,
including military conflicts in response to such events, may also disrupt
economic development in China and result in a greater risk of currency
fluctuations, currency convertibility, interest rate fluctuations and higher
rates of inflation. Export growth continues to be a major driver of China’s
rapid economic growth. Reduction in spending on Chinese products and services,
institution of tariffs or other trade barriers, or a downturn in any of the
economies of China’s key trading partners may have an adverse impact on the
Chinese economy. Securities Market Risk: Because certain securities markets in
China are small in size, underdeveloped, and are less regulated and less
correlated to global economic cycles than those markets located in more
developed countries, the securities markets in China are subject to greater
risks associated with market volatility, lower market capitalization, lower
trading volume, illiquidity, inflation, greater price fluctuations and
uncertainty regarding the existence of trading markets. Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying Index. Trading
Halt Risk: An exchange or market may close or issue trading halts on specific
securities, or the ability to buy or sell certain securities or financial
instruments may be restricted, which may result in the Fund being unable to buy
or sell certain securities or financial instruments. In such circumstances, the
Fund may be unable to rebalance its portfolio, may be unable to accurately price
its investments and/or may incur substantial trading losses. U.S. Economic Risk:
A decrease in U.S. imports, new trade regulations, changes in the U.S. dollar
exchange rates or an economic slowdown in the United States may have an adverse
impact on China's economy and, as a result, securities to which the Fund has
exposure. Valuation Risk: The sales price the Fund could receive for a security
may differ from the Fund’s valuation of the security and may differ from the
value used by the Underlying Index, particularly for securities that trade in
low value or volatile markets or that are valued using a fair value methodology.
The value of the securities in the Fund's portfolio may change on days when
shareholders will not be able to purchase or sell the Fund's Shares. PERFORMANCE
INFORMATION The Fund has not commenced operations as of the date of this
Prospectus. Thus, no bar chart or Average Annual Total Returns table is included
for the Fund. FUND MANAGEMENT Investment Adviser: Global X Management Company
LLC. Portfolio Managers: The professionals primarily responsible for the
day-to-day management of the Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis
Berruga and Chang Kim, CFA (“Portfolio Managers”). Messrs. del Ama, Gonzalez,
Berruga, and Kim have been Portfolio Managers of the Fund since inception. OTHER
IMPORTANT INFORMATION REGARDING FUND SHARES For important information about
purchase and sale of Fund Shares, tax information and financial intermediary
compensation, please turn to the sections of this Prospectus entitled “Purchase
and Sale of Fund Shares,” “Tax Information,” and “Payments to Broker-Dealers and
Other Financial Intermediaries” on page 157 of the Prospectus
36 Global X NASDAQ China
Technology ETF Ticker: QQQC Exchange: NASDAQ INVESTMENT OBJECTIVE The Global X
NASDAQ China Technology ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the NASDAQ OMX China Technology Index (“Underlying Index”). FEES
AND EXPENSES This table describes the fees and expenses that you may pay if you
buy and hold shares (“Shares”) of the Fund. You will also incur usual and
customary brokerage commissions when buying and selling Shares. Annual Fund
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment): Management Fees: 0.65% Distribution and Service (12b-1)
Fees: None Other Expenses: 0.00% Total Annual Fund Operating Expenses: 0.65%
Example: The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be: One Year Three Years
Five Years Ten Years $66 $208 $362 $810 Portfolio Turnover: The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or
"turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. During the most
recent fiscal year, the Fund’s portfolio turnover rate was 64.79% of the average
value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES The Fund invests at
least 80% of its total assets in the securities of the Underlying Index and in
American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs")
based on the securities in the Underlying Index. The Fund will invest at least
80% of its total assets in securities of technology companies that are domiciled
in, principally traded in or whose revenues are primarily from China. For
purposes of this policy, technology companies include those engaged in
production of technology- related hardware and software, telecommunications,
internet, information technology and social media. The Fund’s 80% investment
policies are non-fundamental and require 60 days’ prior written notice to
shareholders before they can be changed. The Underlying Index is designed to
track the performance of the technology sector in China as defined by The NASDAQ
OMX Group, Inc. ("NASDAQ"), the provider of the Underling Index ("Index
Provider"). It is made up of securities of companies which have their main
business operations in the technology sector and generally includes companies
whose businesses involve: computer services; internet; software; computer
hardware; electronic office equipment; semiconductors; and telecommunications
equipment. The Fund’s investment objective and Underlying Index may be changed
without shareholder approval. The Underlying Index is sponsored by the Index
Provider, which is an organization that is independent of the Fund and Global X
Management Company LLC, the investment adviser for the Fund (“Adviser”). The
Index Provider determines the relative weightings of the securities in the
Underlying Index and publishes information regarding the market value of the
Underlying Index.
37 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Technology Sector. SUMMARY OF PRINCIPAL RISKS As with any investment, you
could lose all or part of your investment in the Fund, and the Fund's
performance could trail that of other investments. There is no guarantee that
the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
Asian Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the Chinese economy. Asset Class Risk:
Securities in the Underlying Index or the Fund's portfolio may underperform in
comparison to the general securities markets or other asset classes.
Concentration Risk: Because the Fund's investments are concentrated in Chinese
securities and in the technology sector, the Fund will be susceptible to loss
due to adverse occurrences affecting this country and sector. To the extent that
the Underlying Index concentrates in the securities of issuers in a particular
country, industry, market, asset class, or sector, the Fund will also
concentrate its investments to approximately the same extent. By concentrating
its investments in a country, industry, market, asset class, or sector, the Fund
faces more risks than if it were diversified broadly over numerous countries,
industries, markets, asset classes, or sectors. Such risks, any of which may
adversely affect the companies in which the Fund invests, may include, but are
not limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a particular country,
industry, market, asset class, or sector. In addition, at times, such country,
industry, market, asset class, or sector may be out of favor and underperform
other similar categories or the market as a whole. For additional details on
these risks, please see Risks Related to Investing in China and Risks Related to
Investing in the Technology Sector. Currency Risk: Because the Fund's NAV is
determined in U.S. dollars, the Fund's NAV could decline if China's currency
depreciates against the U.S. dollar. Custody Risk: Less developed markets are
more likely to experience problems with the clearing and settling of trades and
the holding of securities by local banks, agents and depositories.
38 Emerging Market Risk:
China is an emerging market country, which may be subject to a greater risk of
loss than investments in developed markets. Securities markets of emerging
market countries are less liquid, subject to greater price volatility, have
smaller market capitalizations, have less government regulation, and are not
subject to as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries. Equity
Securities Risk: Equity securities are subject to changes in value and their
values may be more volatile than other asset classes, as a result of such
factors as a company’s business performance, investor perceptions, stock market
trends and general economic conditions. Foreign Security Risk: Investments in
the securities of foreign issuers (including investments in ADRs and GDRs) are
subject to the risks associated with investing in those foreign markets, such as
heightened risks of inflation or nationalization. In addition, securities of
foreign issuers may lose value due to political, economic and geographic events
affecting a foreign issuer or market. During periods of social, political or
economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges, nonetheless, could be affected by, among other things,
increasing price volatility, illiquidity, or the closure of the primary market
on which the security (or the security underlying the ADR or GDR) is traded. You
may lose money due to political, economic and geographic events affecting a
foreign issuer or market. Geographic Risk: A natural disaster could occur in
China, which could affect the economy or particular business operations of
companies economically tied to China. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Management Risk: The Fund is subject to the risk that the
Adviser’s investment management strategy may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. Market Risk: The Fund's NAV could decline over
short periods due to short-term market movements and over longer periods during
market downturns. Market Trading Risk: The Fund faces numerous market trading
risks, including the potential lack of an active market for Shares, losses from
trading in secondary markets, and disruption in the creation/redemption process
of the Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller number of issuers or may
invest a larger proportion of its assets in a single issuer. As a result, the
gains and losses on a single investment may have a greater impact on the Fund’s
NAV and may make the Fund more volatile than more diversified funds. Passive
Investment Risk: The Fund is not actively managed and the Adviser does not
attempt to take defensive positions in declining markets. Unlike many investment
companies, the Fund does not utilize an investing strategy that seeks returns in
excess of its Underlying Index. Therefore, it would not necessarily buy or sell
a security unless that security is added or removed, respectively, from the
Underlying Index, even if that security generally is underperforming.
Privatization Risk: China has privatized certain entities and industries.
Privatized entities may lose money or be re-nationalized. Reliance on Trading
Partners Risk: The Fund invests in the Chinese economy, which is heavily
dependent upon trading with key partners. Any reduction in this trading,
including as a result of adverse economic conditions in a trading partner’s
economy, may cause an adverse impact on the economy in which the Fund invests.
39 Risks Related to
Investing in China: Investment exposure to China subjects the Fund to risks
specific to China. China may be subject to considerable degrees of economic,
political and social instability. China is a developing market and demonstrates
significantly higher volatility from time to time in comparison to developed
markets. Over the past 25 years, the Chinese government has undertaken reform of
economic and market practices and expansion of the sphere for private ownership
of property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Internal social unrest or confrontations with other neighboring
countries, including military conflicts in response to such events, may also
disrupt economic development in China and result in a greater risk of currency
fluctuations, currency convertibility, interest rate fluctuations and higher
rates of inflation. Export growth continues to be a major driver of China’s
rapid economic growth. Reduction in spending on Chinese products and services,
institution of tariffs or other trade barriers, or a downturn in any of the
economies of China’s key trading partners may have an adverse impact on the
Chinese economy. Risks Related to Investing in the Technology Sector:
Investments in securities in the technology sector are subject to rapid changes
in technology product cycles; rapid product obsolescence; government regulation;
and increased competition, both domestically and internationally, including
competition from foreign competitors with lower production costs. Technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market, and are also are heavily dependent on patent and
intellectual property rights. Securities Market Risk: Because certain securities
markets in China are small in size, underdeveloped, and are less regulated and
less correlated to global economic cycles than those markets located in more
developed countries, the securities markets in China are subject to greater
risks associated with market volatility, lower market capitalization, lower
trading volume, illiquidity, inflation, greater price fluctuations and
uncertainty regarding the existence of trading markets. Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying Index. Trading
Halt Risk: An exchange or market may close or issue trading halts on specific
securities, or the ability to buy or sell certain securities or financial
instruments may be restricted, which may result in the Fund being unable to buy
or sell certain securities or financial instruments. In such circumstances, the
Fund may be unable to rebalance its portfolio, may be unable to accurately price
its investments and/or may incur substantial trading losses. U.S. Economic Risk:
A decrease in U.S. imports, new trade regulations, changes in the U.S. dollar
exchange rates or an economic slowdown in the United States may have an adverse
impact on China's economy and, as a result, securities to which the Fund has
exposure. Valuation Risk: The sales price the Fund could receive for a security
may differ from the Fund’s valuation of the security and may differ from the
value used by the Underlying Index, particularly for securities that trade in
low value or volatile markets or that are valued using a fair value methodology.
The value of the securities in the Fund's portfolio may change on days when
shareholders will not be able to purchase or sell the Fund's Shares. PERFORMANCE
INFORMATION The bar chart and table that follow show how the Fund performed on a
calendar year basis and provide an indication of the risks of investing in the
Fund by showing changes in the Fund’s performance from year to year and by
showing how the Fund’s average annual returns for the indicated periods compare
with the Fund’s benchmark index and a broad measure of market performance. The
Fund’s past performance (before and after taxes) is not necessarily indicative
of how the Fund will perform in the future. Updated performance information is
available online at www.globalxfunds.com.
40 Annual Total Returns
(Years Ended December 31,) Best Quarter: 09/30/13 26.64% Worst Quarter: 09/30/11
-20.77% Average Annual Total Returns (for the Periods Ended December 31, 2014)
One Year Ended December 31, 2014 Five Years Ended December 31, 2014 Since
Inception (12/08/2009) Global X NASDAQ China Technology ETF: ·Return before
taxes ·Return after taxes on distributions1 ·Return after taxes on distributions
and sale of Fund Shares1 -1.29% -1.34% -0.64% 7.56% 7.46% 5.98% 7.99% 7.89%
6.32% Hybrid NASDAQ OMX China Technology Index (net)2 (Index returns do not
reflect deductions for fees, expenses, or taxes) -0.16% 8.47% 8.77% S&P 500
Index (Index returns do not reflect deductions for fees, expenses, or taxes)
13.69% 15.45% 15.74% 1 After-tax returns are calculated using the historical
highest individual U.S. federal marginal income tax rates and do not reflect the
impact of state and local taxes. Your actual after-tax returns will depend on
your specific tax situation and may differ from those shown above. After-tax
returns are not relevant to investors who hold Shares of the Fund through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts (IRAs). 2 Index performance reflects the performance of the Solactive
China Technology Index through December 12, 2011 and the NASDAQ OMX China
Technology Index thereafter. FUND MANAGEMENT Investment Adviser: Global X
Management Company LLC.
41 Portfolio Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang Kim, CFA
(“Portfolio Managers”). Messrs. del Ama and Gonzalez have been Portfolio
Managers of the Fund since December 8, 2009. Messrs. Berruga and Kim have been
Portfolio Managers of the Fund since February 15, 2014. OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and financial intermediary compensation,
please turn to the sections of this Prospectus entitled “Purchase and Sale of
Fund Shares,” “Tax Information,” and “Payments to Broker-Dealers and Other
Financial Intermediaries” on page 157 of the Prospectus.
42 Global X Brazil
Consumer ETF Ticker: BRAQ Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The
Global X Brazil Consumer ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Solactive Brazil Consumer Index (“Underlying Index”). FEES AND
EXPENSES This table describes the fees and expenses that you may pay if you buy
and hold shares (“Shares”) of the Fund. You will also incur usual and customary
brokerage commissions when buying and selling Shares. Annual Fund Operating
Expenses (expenses that you pay each year as a percentage of the value of your
investment): Management Fees: 0.77% Distribution and Service (12b-1) Fees: None
Other Expenses (Income Tax): 0.01% Total Annual Fund Operating Expenses: 0.78%
Example: The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be: One Year Three Years
Five Years Ten Years $80 $249 $433 $966 Portfolio Turnover: The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or
"turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. During the most
recent fiscal year, the Fund’s portfolio turnover rate was 18.59% of the average
value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES The Fund invests at
least 80% of its total assets in the securities of the Underlying Index and in
American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs")
based on the securities in the Underlying Index. The Fund also invests at least
80% of its total assets in securities of consumer companies that are domiciled
in, principally traded in or whose revenues are primarily from Brazil. For
purposes of this policy, consumer companies include producers of food,
beverages, apparel, household and leisure goods, cars and related items, media
content, operators of retail stores, and companies offering services to private
consumers. The Fund’s 80% investment policies are non-fundamental and require 60
days’ prior written notice to shareholders before they can be changed. The
Underlying Index is designed to measure the equity performance of the consumer
sector of the Brazilian economy, as defined by Solactive AG, the provider of the
Underlying Index ("Index Provider"). The Fund’s investment objective and
Underlying Index may be changed without shareholder approval. The Underlying
Index is sponsored by the Index Provider, which is an organization that is
independent of the Fund and Global X Management Company LLC, the investment
adviser for the Fund (“Adviser”). The Index Provider determines the relative
weightings of the securities in the Underlying Index and publishes information
regarding the market value of the Underlying Index.
43 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Consumer Discretionary and Consumer Staples Sectors. SUMMARY OF PRINCIPAL
RISKS As with any investment, you could lose all or part of your investment in
the Fund, and the Fund's performance could trail that of other investments.
There is no guarantee that the Fund will achieve its investment objective. The
Fund is subject to the principal risks noted below, any of which may adversely
affect the Fund's net asset value ("NAV"), trading price, yield, total return
and ability to meet its investment objective, as well as other risks that are
described in greater detail in the Additional Information About the Funds’
Strategies and Risks section of the Prospectus and in the Statement of
Additional Information ("SAI"). ADR/GDR Risk: To the extent the Fund seeks
exposure to foreign companies, the Fund’s investments may be in the form of
depositary receipts or other securities convertible into securities of foreign
issuers, including ADRs and GDRs. While the use of ADRs and GDRs, which are
traded on exchanges and represent an ownership in a foreign security, provide an
alternative to directly purchasing the underlying foreign securities in their
respective national markets and currencies, investments in ADRs and GDRs
continue to be subject to certain of the risks associated with investing
directly in foreign securities. Asian Economic Risk: Decreasing Asian imports,
new trade regulations, changes in exchange rates, a recession in Asia or a
slowing of economic growth in this region could have an adverse impact on the
economy of Brazil. Asset Class Risk: Securities in the Underlying Index or the
Fund's portfolio may underperform in comparison to the general securities
markets or other asset classes. Cash Transaction Risk: Unlike most ETFs, the
Fund intends to effect all creations and redemptions principally for cash,
rather than in-kind securities. As a result, an investment in the Fund may be
less tax-efficient than an investment in a more conventional ETF. Commodity
Exposure Risk: The Fund invests in Brazilian securities, which are susceptible
to fluctuations in certain commodity markets. Any negative changes in commodity
markets could have a great impact on the Brazilian economy. Concentration Risk:
Because the Fund's investments are concentrated in Brazilian securities and in
the consumer sector, the Fund will be susceptible to loss due to adverse
occurrences affecting this country and sector. To the extent that the Underlying
Index concentrates in the securities of issuers in a particular country,
industry, market, asset class, or sector, the Fund will also concentrate its
investments to approximately the same extent. By concentrating its investments
in a country, industry, market, asset class, or sector, the Fund faces more
risks than if it were diversified broadly over numerous countries, industries,
markets, asset classes, or sectors. Such risks, any of which may adversely
affect the companies in which the Fund invests, may include, but are not limited
to, the following: general economic conditions or cyclical market patterns that
could negatively affect supply and demand; competition for resources, adverse
labor relations, political or world events; obsolescence of technologies; and
increased competition or new product introductions that may affect the
profitability or viability of companies in a particular country, industry,
market, asset class, or sector. In addition, at times, such country, industry,
market, asset class, or sector may be out of favor and underperform other
similar categories or the market as a whole. For additional details on these
risks, please see Risks Related
44 to Investing in
Brazil, Risks Related to Investing in the Consumer Discretionary Sector, and
Risks Related to Investing in the Consumer Staples Sector. . Currency Risk:
Because the Fund's NAV is determined in U.S. dollars, the Fund's NAV could
decline if Brazil's currency depreciates against the U.S. dollar. Custody Risk:
Less developed markets are more likely to experience problems with the clearing
and settling of trades and the holding of securities by local banks, agents and
depositories. Emerging Market Risk: Brazil is an emerging market country, which
may be subject to a greater risk of loss than investments in developed markets.
Securities markets of emerging market countries are less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries. Equity Securities Risk: Equity securities
are subject to changes in value and their values may be more volatile than other
asset classes, as a result of such factors as a company’s business performance,
investor perceptions, stock market trends and general economic conditions.
Foreign Security Risk: Investments in the securities of foreign issuers
(including investments in ADRs and GDRs) are subject to the risks associated
with investing in those foreign markets, such as heightened risks of inflation
or nationalization. In addition, securities of foreign issuers may lose value
due to political, economic and geographic events affecting a foreign issuer or
market. During periods of social, political or economic instability in a country
or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Geographic Risk: A natural disaster could occur in Brazil,
which could affect the economy or particular business operations of companies
economically tied to Brazil. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Latin American Economic Risk: The economy of Brazil is
affected by the economies of Latin American countries, some of which have
experienced high interest rates, economic volatility, inflation, currency
devaluations and high unemployment rates. Any adverse economic event in one
country can have a significant effect on other countries of this region.
Management Risk: The Fund is subject to the risk that the Adviser’s investment
management strategy may cause the Fund to underperform the market or its
relevant benchmark or adversely affect the ability of the Fund to achieve its
investment objective. Market Risk: The Fund's NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns. Market Trading Risk: The Fund faces numerous market trading risks,
including the potential lack of an active market for Shares, losses from trading
in secondary markets, and disruption in the creation/redemption process of the
Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller
45 number of issuers or
may invest a larger proportion of its assets in a single issuer. As a result,
the gains and losses on a single investment may have a greater impact on the
Fund’s NAV and may make the Fund more volatile than more diversified funds.
Passive Investment Risk: The Fund is not actively managed and the Adviser does
not attempt to take defensive positions in declining markets. Unlike many
investment companies, the Fund does not utilize an investing strategy that seeks
returns in excess of its Underlying Index. Therefore, it would not necessarily
buy or sell a security unless that security is added or removed, respectively,
from the Underlying Index, even if that security generally is underperforming.
Premium/Discount Risk: Disruptions to creations and redemptions, the existence
of extreme market volatility or potential lack of an active trading market for
Shares may result in Shares trading at a significant premium or discount to NAV.
If a shareholder purchases Shares at a time when the market price is at a
premium to the NAV or sells Shares at a time when the market price is at a
discount to the NAV, the shareholder may sustain losses. Privatization Risk:
Brazil has privatized certain entities and industries. Privatized entities may
lose money or be re-nationalized. Reliance on Trading Partners Risk: The Fund
invests in the Brazilian economy, which is heavily dependent upon trading with
key partners. Any reduction in this trading, including as a result of adverse
economic conditions in a trading partner’s economy, may cause an adverse impact
on the economy in which the Fund invests. Risks Related to Investing in Brazil:
Investments in securities of Brazilian companies are subject to regulatory and
economic interventions that the Brazilian government has frequently exercised in
the past, including the setting of wage and price controls, blocking access to
bank accounts, imposing exchange controls and limiting imports. Investments are
also subject to certain restrictions on foreign investment as provided by
Brazilian law. The Brazilian economy has historically been subject to high rates
of inflation and a high level of debt, all of which may stifle economic growth.
Despite rapid development in recent years, Brazil still suffers from high levels
of corruption, crime and income disparity. There is the possibility that such
conditions may lead to social unrest and political upheaval in the future, which
may have adverse effects on the Fund's investments. Risks Related to Investing
in the Consumer Discretionary Sector: The consumer discretionary sector may be
affected by changes in domestic and international economies, exchange and
interest rates, competition, consumers’ disposable income and consumer
preferences, social trends and marketing campaigns. Risks Related to Investing
in the Consumer Staples Sector: The consumer staples sector may be affected by
marketing campaigns, changes in consumer demands, government regulations and
changes in commodity prices. Securities Market Risk: Because the securities
markets in Brazil are small in size, underdeveloped, and are less regulated and
less correlated to global economic cycles than those markets located in more
developed countries, the securities markets in Brazil are subject to greater
risks associated with market volatility, lower market capitalization, lower
trading volume, illiquidity, inflation, greater price fluctuations and
uncertainty regarding the existence of trading markets. Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying Index. Trading
Halt Risk: An exchange or market may close or issue trading halts on specific
securities, or the ability to buy or sell certain securities or financial
instruments may be restricted, which may result in the Fund being unable to buy
or sell certain securities or financial instruments. In such circumstances, the
Fund may be unable to rebalance its portfolio, may be unable to accurately price
its investments and/or may incur substantial trading losses. U.S. Economic Risk:
A decrease in U.S. imports, new trade regulations, changes in the U.S. dollar
exchange rates or an economic slowdown in the United States may have an adverse
impact on Brazil's economy and, as a result, securities to which the Fund has
exposure. Valuation Risk: The sales price the Fund could receive for a security
may differ from the Fund’s valuation of the security and may differ from the
value used by the Underlying Index, particularly for securities that trade in
low value or volatile markets or that are valued using a fair value methodology.
The value of the securities in the Fund's portfolio may change on days when
shareholders will not be able to purchase or sell the Fund's Shares. PERFORMANCE
INFORMATION The bar chart and table that follow show how the Fund performed on a
calendar year basis and provide an indication of the risks of investing in the
Fund by showing changes in the Fund’s performance from year to year and by
showing the Fund’s average
46 annual returns for the
indicated periods compared with the Fund’s benchmark index and a broad measure
of market performance. The Fund’s past performance (before and after taxes) is
not necessarily indicative of how the Fund will perform in the future. Updated
performance information is available online at www.globalxfunds.com.
47 Annual Total Returns
(Years Ended December 31,) Best Quarter: 03/31/12 25.60% Worst Quarter: 09/30/11
-29.52% Average Annual Total Returns (for the Periods Ended December 31, 2014)
Year Ended December 31, 2014 Since Inception (07/07/2010) Global X Brazil
Consumer ETF: ·Return before taxes ·Return after taxes on distributions1 ·Return
after taxes on distributions and sale of Fund Shares1 -10.32% -11.27% -5.71%
-0.68% -1.17% -0.62% Solactive Brazil Consumer Index (net) (Index returns do not
reflect deductions for fees, expenses, or taxes) -8.94% 0.41% S&P 500 Index
(Index returns do not reflect deductions for fees, expenses, or taxes) 13.69%
18.42% 1 After-tax returns are calculated using the historical highest
individual U.S. federal marginal income tax rates and do not reflect the impact
of state and local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown above. After-tax returns
are not relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts (IRAs).
FUND MANAGEMENT Investment Adviser: Global X Management Company LLC. Portfolio
Managers: The professionals primarily responsible for the day-to-day management
of the Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang
Kim, CFA (“Portfolio Managers”). Messrs. del Ama and Gonzalez have been
Portfolio Managers of the Fund since July 7, 2010. Messrs. Berruga and Kim have
been Portfolio Managers of the Fund since February 15, 2014.
48 OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and information about financial
intermediary compensation, please turn to the sections of this Prospectus
entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and “Payments to
Broker-Dealers and Other Financial Intermediaries” on page 157 of the
Prospectus.
49 Global X Brazil
Financials ETF Ticker: BRAF Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The
Global X Brazil Financials ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Solactive Brazil Financials Index (“Underlying Index”). FEES
AND EXPENSES This table describes the fees and expenses that you may pay if you
buy and hold shares (“Shares”) of the Fund. You will also incur usual and
customary brokerage commissions when buying and selling Shares. Annual Fund
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment): Management Fees: 0.77% Distribution and Service (12b-1)
Fees: None Other Expenses: 0.00% Total Annual Fund Operating Expenses: 0.77%
Example: The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be: One Year Three Years
Five Years Ten Years $79 $246 $428 $954 Portfolio Turnover: The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or
"turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. During the most
recent fiscal year, the Fund’s portfolio turnover rate was 17.31% of the average
value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES The Fund invests at
least 80% of its total assets in the securities of the Underlying Index and in
American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs")
based on the securities in the Underlying Index. The Fund also invests at least
80% of its total assets in securities of financials companies that are domiciled
in, principally traded in or whose revenues are primarily from Brazil. For
purposes of this policy, financials companies include those engaged in banking,
lending, insurance, investments and/or financing. The Fund’s 80% investment
policies are non-fundamental and require 60 days’ prior written notice to
shareholders before they can be changed. The Underlying Index is designed to
measure the equity performance of the financials sector of the Brazilian
economy, as defined by Solactive AG, the provider of the Underlying Index
("Index Provider"). The Fund’s investment objective and Underlying Index may be
changed without shareholder approval. The Underlying Index is sponsored by the
Index Provider, which is an organization that is independent of the Fund and
Global X Management Company LLC, the investment adviser for the Fund
(“Adviser”). The Index Provider determines the relative weightings of the
securities in the Underlying Index and publishes information regarding the
market value of the Underlying Index.
50 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Financials Sector. SUMMARY OF PRINCIPAL RISKS As with any investment, you
could lose all or part of your investment in the Fund, and the Fund's
performance could trail that of other investments. There is no guarantee that
the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
Asian Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the economy of Brazil. Asset Class Risk:
Securities in the Underlying Index or the Fund's portfolio may underperform in
comparison to the general securities markets or other asset classes. Cash
Transaction Risk: Unlike most ETFs, the Fund intends to effect all creations and
redemptions principally for cash, rather than in-kind securities. As a result,
an investment in the Fund may be less tax-efficient than an investment in a more
conventional ETF. Commodity Exposure Risk: The Fund invests in Brazilian
securities, which are susceptible to fluctuations in certain commodity markets.
Any negative changes in commodity markets could have a great impact on the
Brazilian economy. Concentration Risk: Because the Fund's investments are
concentrated in Brazilian securities and the financials sector, the Fund will be
susceptible to loss due to adverse occurrences affecting this country and
sector. To the extent that the Underlying Index concentrates in the securities
of issuers in a particular country, industry, market, asset class, or sector,
the Fund will also concentrate its investments to approximately the same extent.
By concentrating its investments in a country, industry, market, asset class, or
sector, the Fund faces more risks than if it were diversified broadly over
numerous countries, industries, markets, asset classes, or sectors. Such risks,
any of which may adversely affect the companies in which the Fund invests, may
include, but are not limited to, the following: general economic conditions or
cyclical market patterns that could negatively affect supply and demand;
competition for resources, adverse labor relations, political or world events;
obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular country, industry, market, asset class, or sector. In addition, at
times, such country, industry, market, asset class, or sector may be out of
favor and underperform other similar categories or the market as a whole. For
additional details on these risks, please see Risks Related to Investing in
Brazil and Risks Related to Investing in the Financials Sector.
51 Currency Risk: Because
the Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Brazil's currency depreciates against the U.S. dollar. Custody Risk: Less
developed markets are more likely to experience problems with the clearing and
settling of trades and the holding of securities by local banks, agents and
depositories. Emerging Market Risk: Brazil is an emerging market country, which
may be subject to a greater risk of loss than investments in developed markets.
Securities markets of emerging market countries are less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries. Equity Securities Risk: Equity securities
are subject to changes in value and their values may be more volatile than other
asset classes, as a result of such factors as a company’s business performance,
investor perceptions, stock market trends and general economic conditions.
Foreign Security Risk: Investments in the securities of foreign issuers
(including investments in ADRs and GDRs) are subject to the risks associated
with investing in those foreign markets, such as heightened risks of inflation
or nationalization. In addition, securities of foreign issuers may lose value
due to political, economic and geographic events affecting a foreign issuer or
market. During periods of social, political or economic instability in a country
or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Geographic Risk: A natural disaster could occur in Brazil,
which could affect the economy or particular business operations of companies
economically tied to Brazil. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Latin American Economic Risk: The economy of Brazil is
affected by the economies of Latin American countries, some of which have
experienced high interest rates, economic volatility, inflation, currency
devaluations and high unemployment rates. Any adverse economic event in one
country can have a significant effect on other countries of this region.
Management Risk: The Fund is subject to the risk that the Adviser’s investment
management strategy may cause the Fund to underperform the market or its
relevant benchmark or adversely affect the ability of the Fund to achieve its
investment objective. Market Risk: The Fund's NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns. Market Trading Risk: The Fund faces numerous market trading risks,
including the potential lack of an active market for Shares, losses from trading
in secondary markets, and disruption in the creation/redemption process of the
Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller number of issuers or may
invest a larger proportion of its assets in a single issuer. As a result, the
gains and losses on a single investment may have a greater impact on the Fund’s
NAV and may make the Fund more volatile than more diversified funds.
52 Passive Investment
Risk: The Fund is not actively managed and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not utilize an investing strategy that seeks returns in excess of its
Underlying Index. Therefore, it would not necessarily buy or sell a security
unless that security is added or removed, respectively, from the Underlying
Index, even if that security generally is underperforming. Privatization Risk:
Brazil has privatized certain entities and industries. Privatized entities may
lose money or be re-nationalized. Reliance on Trading Partners Risk: The Fund
invests in the Brazilian economy, which is heavily dependent upon trading with
key partners. Any reduction in this trading, including as a result of adverse
economic conditions in a trading partner’s economy, may cause an adverse impact
on the economy in which the Fund invests. Risks Related to Investing in Brazil:
Investments in securities of Brazilian companies are subject to regulatory and
economic interventions that the Brazilian government has frequently exercised in
the past, including the setting of wage and price controls, blocking access to
bank accounts, imposing exchange controls and limiting imports. Investments are
also subject to certain restrictions on foreign investment as provided by
Brazilian law. The Brazilian economy has historically been subject to high rates
of inflation and a high level of debt, all of which may stifle economic growth.
Despite rapid development in recent years, Brazil still suffers from high levels
of corruption, crime and income disparity. There is the possibility that such
conditions may lead to social unrest and political upheaval in the future, which
may have adverse effects on the Fund's investments. Risks Related to Investing
in the Financials Sector: Performance of companies in the financials sector may
be adversely impacted by many factors, including, among others, government
regulations, economic conditions, credit rating downgrades, changes in interest
rates, and decreased liquidity in credit markets. This sector has experienced
significant losses in the recent past, and the impact of more stringent capital
requirements and of recent or future regulation on any individual financial
company or on the sector as a whole cannot be predicted. Securities Market Risk:
Because the securities markets in Brazil are small in size, underdeveloped, and
are less regulated and less correlated to global economic cycles than those
markets located in more developed countries, the securities markets in Brazil
are subject to greater risks associated with market volatility, lower market
capitalization, lower trading volume, illiquidity, inflation, greater price
fluctuations and uncertainty regarding the existence of trading markets.
Tracking Error Risk: The performance of the Fund may diverge from that of the
Underlying Index. Trading Halt Risk: An exchange or market may close or issue
trading halts on specific securities, or the ability to buy or sell certain
securities or financial instruments may be restricted, which may result in the
Fund being unable to buy or sell certain securities or financial instruments. In
such circumstances, the Fund may be unable to rebalance its portfolio, may be
unable to accurately price its investments and/or may incur substantial trading
losses. U.S. Economic Risk: A decrease in U.S. imports, new trade regulations,
changes in the U.S. dollar exchange rates or an economic slowdown in the United
States may have an adverse impact on Brazil's economy and, as a result,
securities to which the Fund has exposure. Valuation Risk: The sales price the
Fund could receive for a security may differ from the Fund’s valuation of the
security and may differ from the value used by the Underlying Index,
particularly for securities that trade in low value or volatile markets or that
are valued using a fair value methodology. The value of the securities in the
Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares. PERFORMANCE INFORMATION The bar chart and
table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund’s performance from year to year and by showing the Fund’s average
annual returns for the indicated periods compared with the Fund’s benchmark
index and a broad measure of market performance. The Fund’s past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is available online at
www.globalxfunds.com.
53 Annual Total Returns
(Years Ended December 31,) Best Quarter: 03/31/12 14.89% Worst Quarter: 09/30/11
-28.35% Average Annual Total Returns (for the Periods Ended December 31, 2014)
Year Ended December 31, 2014 Since Inception (07/28/2010) Global X Brazil
Financials ETF: ·Return before taxes ·Return after taxes on distributions1
·Return after taxes on distributions and sale of Fund Shares1 -8.31% -11.09%
-4.15% -7.86% -9.08% -5.95% Solactive Brazil Financials Index (net) (Index
returns do not reflect deductions for fees, expenses, or taxes) -8.13% -7.37%
S&P 500 Index (Index returns do not reflect deductions for fees, expenses,
or taxes) 13.69% 17.53% 1 After-tax returns are calculated using the historical
highest individual U.S. federal marginal income tax rates and do not reflect the
impact of state and local taxes. Your actual after-tax returns will depend on
your specific tax situation and may differ from those shown above. After-tax
returns are not relevant to investors who hold Shares of the Fund through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts (IRAs). FUND MANAGEMENT Investment Adviser: Global X Management Company
LLC. Portfolio Managers: The professionals primarily responsible for the
day-to-day management of the Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis
Berruga and Chang Kim, CFA (“Portfolio Managers”). Messrs. del Ama and Gonzalez
have been Portfolio Managers of the Fund since July 28, 2010. Messrs. Berruga
and Kim have been Portfolio Managers of the Fund since February 15, 2014.
54 OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and information about financial
intermediary compensation, please turn to the sections of this Prospectus
entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and “Payments to
Broker-Dealers and Other Financial Intermediaries” on page 157 of the
Prospectus.
55 Global X Brazil
Industrials ETF Ticker: [ ] Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The
Global X Brazil Industrials ETF (“Fund”) seeks to provide investment results
that correspond generally to the price and yield performance, before fees and
expenses, of the Solactive Brazil Industrials Index (“Underlying Index”). FEES
AND EXPENSES This table describes the fees and expenses that you may pay if you
buy and hold shares (“Shares”) of the Fund. You will also incur usual and
customary brokerage commissions when buying and selling Shares. Annual Fund
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment): Management Fees: 0.77% Distribution and Service (12b-1)
Fees: None Other Expenses:1 0.00% Total Annual Fund Operating Expenses: 0.77% 1
“Other Expenses” reflect estimated expenses for the Fund’s first fiscal year of
operations. Example: The following example is intended to help you compare the
cost of investing in the Fund with the cost of investing in other funds. This
example does not take into account customary brokerage commissions that you pay
when purchasing or selling Shares of the Fund in the secondary market. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your Shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be: One Year Three
Years $79 $246 Portfolio Turnover: The Fund pays transaction costs, such as
commissions, when it buys and sells securities (or "turns over" its portfolio).
A higher portfolio turnover rate may indicate higher transaction costs and may
result in higher taxes when Shares are held in a taxable account. These costs,
which are not reflected in annual fund operating expenses or in the example,
affect the Fund’s performance. The Fund had not yet commenced investment
operations as of the most recent fiscal year end. Thus, no portfolio turnover
rate is provided for the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund will
invest at least 80% of its total assets in the securities of the Underlying
Index and in American Depositary Receipts ("ADRs") and Global Depositary
Receipts ("GDRs") based on the securities in the Underlying Index. The Fund also
will invest at least 80% of its total assets in securities of industrials
companies that are domiciled in, principally traded in or whose revenues are
primarily from Brazil. For purposes of this policy, industrials companies
include those engaged in heavy construction, production of construction
materials, waste and water management, freight transportation or production and
manufacturing of industrial goods, vessels, vehicles, containers, electrical
equipment and machinery. The Fund’s 80% investment policies are non-fundamental
and require 60 days’ prior written notice to shareholders before they can be
changed. The Underlying Index is designed to measure the equity performance of
the industrials sector of the Brazilian economy, as defined by Solactive AG, the
provider of the Underlying Index ("Index Provider"). The Fund’s investment
objective and Underlying Index may be changed without shareholder approval. The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of the Fund and Global X Management Company LLC, the
investment adviser for the Fund (“Adviser”). The Index Provider determines the
relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
56 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. SUMMARY OF PRINCIPAL RISKS As with any investment, you could lose
all or part of your investment in the Fund, and the Fund's performance could
trail that of other investments. There is no guarantee that the Fund will
achieve its investment objective. The Fund is subject to the principal risks
noted below, any of which may adversely affect the Fund's net asset value
("NAV"), trading price, yield, total return and ability to meet its investment
objective, as well as other risks that are described in greater detail in the
Additional Information About the Funds’ Strategies and Risks section of the
Prospectus and in the Statement of Additional Information ("SAI"). ADR/GDR Risk:
To the extent the Fund seeks exposure to foreign companies, the Fund’s
investments may be in the form of depositary receipts or other securities
convertible into securities of foreign issuers, including ADRs and GDRs. While
the use of ADRs and GDRs, which are traded on exchanges and represent an
ownership in a foreign security, provide an alternative to directly purchasing
the underlying foreign securities in their respective national markets and
currencies, investments in ADRs and GDRs continue to be subject to certain of
the risks associated with investing directly in foreign securities. Asian
Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the economy of Brazil. Asset Class Risk:
Securities in the Underlying Index or the Fund's portfolio may underperform in
comparison to the general securities markets or other asset classes. Cash
Transaction Risk: Unlike most ETFs, the Fund intends to effect all creations and
redemptions principally for cash, rather than in-kind securities. As a result,
an investment in the Fund may be less tax-efficient than an investment in a more
conventional ETF. Commodity Exposure Risk: The Fund invests in Brazilian
securities, which are susceptible to fluctuations in certain commodity markets.
Any negative changes in commodity markets could have a great impact on the
Brazilian economy. Concentration Risk: Because the Fund's investments are
concentrated in Brazilian securities and in the industrial sector, the Fund will
be susceptible to losses due to adverse occurrences affecting this country. To
the extent that the Underlying Index concentrates in the securities of issuers
in a particular country, industry, market, asset class, or sector, the Fund will
also concentrate its investments to approximately the same extent. By
concentrating its investments in a country, industry, market, asset class, or
sector, the Fund faces more risks than if it were diversified broadly over
numerous countries, industries, markets, asset classes, or sectors. Such risks,
any of which may adversely affect the companies in which the Fund invests, may
include, but are not limited to, the following: general economic conditions or
cyclical market patterns that could negatively affect supply and demand;
competition for resources, adverse labor relations, political or world events;
obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular country, industry, market, asset class, or sector. In addition, at
times, such country, industry, market, asset class, or sector may be out of
favor and underperform other similar categories or the market as a whole. For
additional details on these risks, please see Risks Related to Investing in
Brazil.
57 Currency Risk: Because
the Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Brazil's currency depreciates against the U.S. dollar. Custody Risk: Less
developed markets are more likely to experience problems with the clearing and
settling of trades and the holding of securities by local banks, agents and
depositories. Emerging Market Risk: Brazil is an emerging market country, which
may be subject to a greater risk of loss than investments in developed markets.
Securities markets of emerging market countries are less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries. Equity Securities Risk: Equity securities
are subject to changes in value and their values may be more volatile than other
asset classes, as a result of such factors as a company’s business performance,
investor perceptions, stock market trends and general economic conditions.
Foreign Security Risk: Investments in the securities of foreign issuers
(including investments in ADRs and GDRs) are subject to the risks associated
with investing in those foreign markets, such as heightened risks of inflation
or nationalization. In addition, securities of foreign issuers may lose value
due to political, economic and geographic events affecting a foreign issuer or
market. During periods of social, political or economic instability in a country
or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Geographic Risk: A natural disaster could occur in Brazil,
which could affect the economy or particular business operations of companies
economically tied to Brazil. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Latin American Economic Risk: The economy of Brazil is
affected by the economies of Latin American countries, some of which have
experienced high interest rates, economic volatility, inflation, currency
devaluations and high unemployment rates. Any adverse economic event in one
country can have a significant effect on other countries of this region.
Management Risk: The Fund is subject to the risk that the Adviser’s investment
management strategy may cause the Fund to underperform the market or its
relevant benchmark or adversely affect the ability of the Fund to achieve its
investment objective. Market Risk: The Fund's NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns. Market Trading Risk: The Fund faces numerous market trading risks,
including the potential lack of an active market for Shares, losses from trading
in secondary markets, and disruption in the creation/redemption process of the
Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller number of issuers or may
invest a larger proportion of its assets in a single issuer. As a result, the
gains and losses on a single investment may have a greater impact on the Fund’s
NAV and may make the Fund more volatile than more diversified funds.
58 Passive Investment
Risk: The Fund is not actively managed and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not utilize an investing strategy that seeks returns in excess of its
Underlying Index. Therefore, it would not necessarily buy or sell a security
unless that security is added or removed, respectively, from the Underlying
Index, even if that security generally is underperforming. Privatization Risk:
Brazil has privatized certain entities and industries. Privatized entities may
lose money or be re-nationalized. Reliance on Trading Partners Risk: The Fund
invests in the Brazilian economy, which is heavily dependent upon trading with
key partners. Any reduction in this trading, including as a result of adverse
economic conditions in a trading partner’s economy, may cause an adverse impact
on the economy in which the Fund invests. Risks Related to Investing in Brazil:
Investments in securities of Brazilian companies are subject to regulatory and
economic interventions that the Brazilian government has frequently exercised in
the past, including the setting of wage and price controls, blocking access to
bank accounts, imposing exchange controls and limiting imports. Investments are
also subject to certain restrictions on foreign investment as provided by
Brazilian law. The Brazilian economy has historically been subject to high rates
of inflation and a high level of debt, all of which may stifle economic growth.
Despite rapid development in recent years, Brazil still suffers from high levels
of corruption, crime and income disparity. There is the possibility that such
conditions may lead to social unrest and political upheaval in the future, which
may have adverse effects on the Fund's investments. Risks Related to Investing
in the Industrials Sector: Companies in the industrials sector are affected by
supply and demand both for their specific product or service. The products of
manufacturing companies may face product obsolescence due to rapid technological
developments. Government regulation, world events and economic conditions affect
the performance of companies in the industrial sector. Companies may also be
adversely affected by environmental damage and product liability claims.
Securities Market Risk: Because the securities markets in Brazil are small in
size, underdeveloped, and are less regulated and less correlated to global
economic cycles than those markets located in more developed countries, the
securities markets in Brazil are subject to greater risks associated with market
volatility, lower market capitalization, lower trading volume, illiquidity,
inflation, greater price fluctuations and uncertainty regarding the existence of
trading markets. Tracking Error Risk: The performance of the Fund may diverge
from that of the Underlying Index. Trading Halt Risk: An exchange or market may
close or issue trading halts on specific securities, or the ability to buy or
sell certain securities or financial instruments may be restricted, which may
result in the Fund being unable to buy or sell certain securities or financial
instruments. In such circumstances, the Fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses. U.S. Economic Risk: A decrease in U.S. imports, new
trade regulations, changes in the U.S. dollar exchange rates or an economic
slowdown in the United States may have an adverse impact on Brazil's economy
and, as a result, securities to which the Fund has exposure. Valuation Risk: The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology. The value of the securities
in the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares. PERFORMANCE INFORMATION The Fund has not
commenced operations as of the date of this Prospectus. Thus, no bar chart or
Average Annual Total Returns table is included for the Fund. FUND MANAGEMENT
Investment Adviser: Global X Management Company LLC. Portfolio Managers: The
professionals primarily responsible for the day-to-day management of the Fund
are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang Kim, CFA
(“Portfolio Managers”). Messrs. del Ama, Gonzalez, Berruga, and Kim have been
Portfolio Managers of the Fund since inception.
59 OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and information about financial
intermediary compensation, please turn to the sections of this Prospectus
entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and “Payments to
Broker-Dealers and Other Financial Intermediaries” on page 157 of the
Prospectus.
60 Global X Brazil
Materials ETF Ticker: [ ] Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The
Global X Brazil Materials ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Solactive Brazil Materials Index (“Underlying Index”). FEES AND
EXPENSES This table describes the fees and expenses that you may pay if you buy
and hold Shares (“Shares”) of the Fund. You will also incur usual and customary
brokerage commissions when buying and selling Shares. Annual Fund Operating
Expenses (expenses that you pay each year as a percentage of the value of your
investment): Management Fees: 0.77% Distribution and Service (12b-1) Fees: None
Other Expenses:1 0.00% Total Annual Fund Operating Expenses: 0.77% 1 “Other
Expenses” reflect estimated expenses for the Fund’s first fiscal year of
operations. Example: The following example is intended to help you compare the
cost of investing in the Fund with the cost of investing in other funds. This
example does not take into account customary brokerage commissions that you pay
when purchasing or selling Shares of the Fund in the secondary market. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your Shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be: One Year Three
Years $79 $246 Portfolio Turnover: The Fund pays transaction costs, such as
commissions, when it buys and sells securities (or "turns over" its portfolio).
A higher portfolio turnover rate may indicate higher transaction costs and may
result in higher taxes when Shares are held in a taxable account. These costs,
which are not reflected in annual fund operating expenses or in the example,
affect the Fund’s performance. The Fund had not yet commenced investment
operations as of the most recent fiscal year end. Thus, no portfolio turnover
rate is provided for the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund will
invest at least 80% of its total assets in the securities of the Underlying
Index and in American Depositary Receipts ("ADRs") and Global Depositary
Receipts ("GDRs") based on the securities in the Underlying Index. The Fund also
will invest at least 80% of its total assets in securities of materials
companies that are domiciled in, principally traded in or whose revenues are
primarily from Brazil. For purposes of this policy, materials companies include
those engaged in developing, producing or selling physical substances and raw
materials. The Fund’s 80% investment policies are non-fundamental and require 60
days’ prior written notice to shareholders before they can be changed. The
Underlying Index is designed to measure the equity performance of the materials
sector of the Brazilian economy, as defined by Solactive AG, the provider of the
Underlying Index ("Index Provider"). The Fund’s investment objective and
Underlying Index may be changed without shareholder approval. The Underlying
Index is sponsored by the Index Provider, which is an organization that is
independent of the Fund and Global X Management Company LLC, the investment
adviser for the Fund (“Adviser”). The Index Provider determines the relative
weightings of the securities in the Underlying Index and publishes information
regarding the market value of the Underlying Index.
61 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. SUMMARY OF PRINCIPAL RISKS As with any investment, you could lose
all or part of your investment in the Fund, and the Fund's performance could
trail that of other investments. There is no guarantee that the Fund will
achieve its investment objective. The Fund is subject to the principal risks
noted below, any of which may adversely affect the Fund's net asset value
("NAV"), trading price, yield, total return and ability to meet its investment
objective, as well as other risks that are described in greater detail in the
Additional Information About the Funds’ Strategies and Risks section of the
Prospectus and in the Statement of Additional Information ("SAI"). ADR/GDR Risk:
To the extent the Fund seeks exposure to foreign companies, the Fund’s
investments may be in the form of depositary receipts or other securities
convertible into securities of foreign issuers, including ADRs and GDRs. While
the use of ADRs and GDRs, which are traded on exchanges and represent an
ownership in a foreign security, provide an alternative to directly purchasing
the underlying foreign securities in their respective national markets and
currencies, investments in ADRs and GDRs continue to be subject to certain of
the risks associated with investing directly in foreign securities. Asian
Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the economy of Brazil. Asset Class Risk:
Securities in the Underlying Index or the Fund's portfolio may underperform in
comparison to the general securities markets or other asset classes. Cash
Transaction Risk: Unlike most ETFs, the Fund intends to effect all creations and
redemptions principally for cash, rather than in-kind securities. As a result,
an investment in the Fund may be less tax-efficient than an investment in a more
conventional ETF. Commodity Exposure Risk: The Fund invests in Brazilian
securities, which are susceptible to fluctuations in certain commodity markets.
Any negative changes in commodity markets could have a great impact on the
Brazilian economy. Concentration Risk: Because the Fund's investments are
concentrated in the Brazilian securities and in the materials sector, the Fund
will be susceptible to loss due to adverse occurrences affecting this country.
To the extent that the Underlying Index concentrates in the securities of
issuers in a particular country, industry, market, asset class, or sector, the
Fund will also concentrate its investments to approximately the same extent. By
concentrating its investments in a country, industry, market, asset class, or
sector, the Fund faces more risks than if it were diversified broadly over
numerous countries, industries, markets, asset classes, or sectors. Such risks,
any of which may adversely affect the companies in which the Fund invests, may
include, but are not limited to, the following: general economic conditions or
cyclical market patterns that could negatively affect supply and demand;
competition for resources, adverse labor relations, political or world events;
obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular country, industry, market, asset class, or sector. In addition, at
times, such country, industry, market, asset class, or sector may be out of
favor and underperform other similar categories or the market as a whole.
62 Currency Risk: Because
the Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Brazil's currency depreciates against the U.S. dollar. Custody Risk: Less
developed markets are more likely to experience problems with the clearing and
settling of trades and the holding of securities by local banks, agents and
depositories. Emerging Market Risk: Brazil is an emerging market country, which
may be subject to a greater risk of loss than investments in developed markets.
Securities markets of emerging market countries are less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries. Equity Securities Risk: Equity securities
are subject to changes in value and their values may be more volatile than other
asset classes, as a result of such factors as a company’s business performance,
investor perceptions, stock market trends and general economic conditions.
Foreign Security Risk: Investments in the securities of foreign issuers
(including investments in ADRs and GDRs) are subject to the risks associated
with investing in those foreign markets, such as heightened risks of inflation
or nationalization. In addition, securities of foreign issuers may lose value
due to political, economic and geographic events affecting a foreign issuer or
market. During periods of social, political or economic instability in a country
or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Geographic Risk: A natural disaster could occur in Brazil,
which could affect the economy or particular business operations of companies
economically tied to Brazil. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Latin American Economic Risk: The economy of Brazil is
affected by the economies of Latin American countries, some of which have
experienced high interest rates, economic volatility, inflation, currency
devaluations and high unemployment rates. Any adverse economic event in one
country can have a significant effect on other countries of this region.
Management Risk: The Fund is subject to the risk that the Adviser’s investment
management strategy may cause the Fund to underperform the market or its
relevant benchmark or adversely affect the ability of the Fund to achieve its
investment objective. Market Risk: The Fund's NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns. Market Trading Risk: The Fund faces numerous market trading risks,
including the potential lack of an active market for Shares, losses from trading
in secondary markets, and disruption in the creation/redemption process of the
Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller number of issuers or may
invest a larger proportion of its assets in a single issuer. As a result, the
gains and losses on a single investment may have a greater impact on the Fund’s
NAV and may make the Fund more volatile than more diversified funds.
63 Passive Investment
Risk: The Fund is not actively managed and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not utilize an investing strategy that seeks returns in excess of its
Underlying Index. Therefore, it would not necessarily buy or sell a security
unless that security is added or removed, respectively, from the Underlying
Index, even if that security generally is underperforming. Privatization Risk:
Brazil has privatized certain entities and industries. Privatized entities may
lose money or be re-nationalized. Reliance on Trading Partners Risk: The Fund
invests in the Brazilian economy, which is heavily dependent upon trading with
key partners. Any reduction in this trading, including as a result of adverse
economic conditions in a trading partner’s economy, may cause an adverse impact
on the economy in which the Fund invests. Risks Related to Investing in Brazil:
Investments in securities of Brazilian companies are subject to regulatory and
economic interventions that the Brazilian government has frequently exercised in
the past, including the setting of wage and price controls, blocking access to
bank accounts, imposing exchange controls and limiting imports. Investments are
also subject to certain restrictions on foreign investment as provided by
Brazilian law. The Brazilian economy has historically been subject to high rates
of inflation and a high level of debt, all of which may stifle economic growth.
Despite rapid development in recent years, Brazil still suffers from high levels
of corruption, crime and income disparity. There is the possibility that such
conditions may lead to social unrest and political upheaval in the future, which
may have adverse effects on the Fund's investments. Risks Related to Investing
in the Materials Sector: Companies in the materials sector are affected by
commodity price volatility, exchange rates, import controls and worldwide
competition. At times, worldwide production of industrial materials has exceeded
demand, leading to poor investment returns or outright losses. Issuers in the
materials sector are at risk of depletion of resources, technical progress,
labor relations, governmental regulations and environmental damage and product
liability claims. Securities Market Risk: Because the securities markets in
Brazil are small in size, underdeveloped, and are less regulated and less
correlated to global economic cycles than those markets located in more
developed countries, the securities markets in Brazil are subject to greater
risks associated with market volatility, lower market capitalization, lower
trading volume, illiquidity, inflation, greater price fluctuations and
uncertainty regarding the existence of trading markets. Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying Index. Trading
Halt Risk: An exchange or market may close or issue trading halts on specific
securities, or the ability to buy or sell certain securities or financial
instruments may be restricted, which may result in the Fund being unable to buy
or sell certain securities or financial instruments. In such circumstances, the
Fund may be unable to rebalance its portfolio, may be unable to accurately price
its investments and/or may incur substantial trading losses. U.S. Economic Risk:
A decrease in U.S. imports, new trade regulations, changes in the U.S. dollar
exchange rates or an economic slowdown in the United States may have an adverse
impact on Brazil's economy and, as a result, securities to which the Fund has
exposure. Valuation Risk: The sales price the Fund could receive for a security
may differ from the Fund’s valuation of the security and may differ from the
value used by the Underlying Index, particularly for securities that trade in
low value or volatile markets or that are valued using a fair value methodology.
The value of the securities in the Fund's portfolio may change on days when
shareholders will not be able to purchase or sell the Fund's Shares. PERFORMANCE
INFORMATION The Fund has not commenced operations as of the date of this
Prospectus. Thus, no bar chart or Average Annual Total Returns table is included
for the Fund. FUND MANAGEMENT Investment Adviser: Global X Management Company
LLC. Portfolio Managers: The professionals primarily responsible for the
day-to-day management of the Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis
Berruga and Chang Kim, CFA (“Portfolio Managers”). Messrs. del Ama, Gonzalez,
Berruga, and Kim have been Portfolio Managers of the Fund since inception.
64 OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and information about financial
intermediary compensation, please turn to the sections of this Prospectus
entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and “Payments to
Broker-Dealers and Other Financial Intermediaries” on page 157 of the
Prospectus.
65 Global X Brazil Mid
Cap ETF Ticker: BRAZ Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The Global X
Brazil Mid Cap ETF (“Fund”) seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
Solactive Brazil Mid Cap Index (“Underlying Index”). FEES AND EXPENSES This
table describes the fees and expenses that you may pay if you buy and hold
shares (“Shares”) of the Fund. You will also incur usual and customary brokerage
commissions when buying and selling Shares. Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment): Management Fees: 0.69% Distribution and Service (12b-1) Fees: None
Other Expenses: 0.00% Total Annual Fund Operating Expenses: 0.69% Example: The
following example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other funds. This example does not take into
account customary brokerage commissions that you pay when purchasing or selling
Shares of the Fund in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be: One Year Three Years Five Years Ten
Years $70 $221 $384 $859 Portfolio Turnover: The Fund pays transaction costs,
such as commissions, when it buys and sells securities (or "turns over" its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund’s performance. During the most recent fiscal year, the
Fund’s portfolio turnover rate was 17.72% of the average value of its portfolio.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests at least 80% of its total
assets in the securities of the Underlying Index and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund also invests at least 80% of its
total assets in securities of companies that are domiciled in, principally
traded in or whose revenues are primarily from Brazil. For purposes of this
policy, the Fund considers mid-market capitalization ("mid-cap") companies to be
those companies included in, or similar in size to those included in, the
Solactive Brazil Mid Cap Index, as of the latest reconstitution date, at the
time of purchase. As of January 1, 2015, the market capitalization of the
Solactive Brazil Mid Cap Index was between $1 billion and $13 billion. The
Fund’s capitalization range will change over time. The Fund’s 80% investment
policies are non-fundamental and require 60 days’ prior written notice to
shareholders before they can be changed. The Underlying Index is designed to
measure the equity performance of the Brazilian mid-market capitalization
companies, as defined by Solactive AG, the provider of the Underlying Index
("Index Provider"). The Fund’s investment objective and Underlying Index may be
changed without shareholder approval. The Underlying Index is sponsored by the
Index Provider, which is an organization that is independent of the Fund and
Global X Management Company LLC, the investment adviser for the Fund
(“Adviser”). The Index Provider determines the relative weightings of the
securities in the Underlying Index and publishes information regarding the
market value of the Underlying Index.
66 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was not concentrated
in any industry. SUMMARY OF PRINCIPAL RISKS As with any investment, you could
lose all or part of your investment in the Fund, and the Fund's performance
could trail that of other investments. There is no guarantee that the Fund will
achieve its investment objective. The Fund is subject to the principal risks
noted below, any of which may adversely affect the Fund's net asset value
("NAV"), trading price, yield, total return and ability to meet its investment
objective, as well as other risks that are described in greater detail in the
Additional Information About the Funds’ Strategies and Risks section of the
Prospectus and in the Statement of Additional Information ("SAI"). ADR/GDR Risk:
To the extent the Fund seeks exposure to foreign companies, the Fund’s
investments may be in the form of depositary receipts or other securities
convertible into securities of foreign issuers, including ADRs and GDRs. While
the use of ADRs and GDRs, which are traded on exchanges and represent an
ownership in a foreign security, provide an alternative to directly purchasing
the underlying foreign securities in their respective national markets and
currencies, investments in ADRs and GDRs continue to be subject to certain of
the risks associated with investing directly in foreign securities. Asian
Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the economy of Brazil. Asset Class Risk:
Securities in the Underlying Index or the Fund's portfolio may underperform in
comparison to the general securities markets or other asset classes. Cash
Transaction Risk: Unlike most ETFs, the Fund intends to effect all creations and
redemptions principally for cash, rather than in-kind securities. As a result,
an investment in the Fund may be less tax-efficient than an investment in a more
conventional ETF. Commodity Exposure Risk: The Fund invests in Brazilian
securities, which are susceptible to fluctuations in certain commodity markets.
Any negative changes in commodity markets could have a great impact on the
Brazilian economy. Concentration Risk: Because the Fund's investments are
concentrated in Brazilian securities and in the mid-cap size category, the Fund
will be susceptible to losses due to adverse occurrences affecting this country
and asset class. To the extent that the Underlying Index concentrates in the
securities of issuers in a particular country, industry, market, asset class, or
sector, the Fund will also concentrate its investments to approximately the same
extent. By concentrating its investments in a country, industry, market, asset
class, or sector, the Fund faces more risks than if it were diversified broadly
over numerous countries, industries, markets, asset classes, or sectors. Such
risks, any of which may adversely affect the companies in which the Fund
invests, may include, but are not limited to, the following: general economic
conditions or cyclical market patterns that could negatively affect supply and
demand; competition for resources, adverse labor relations, political or world
events; obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular country, industry, market, asset class, or sector. In addition, at
times, such country, industry, market, asset class, or sector may be out of
favor and underperform other similar categories or the market as a whole. For
additional details on these risks, please see Risks Related to Investing in
Brazil.
67 Currency Risk: Because
the Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Brazil's currency depreciates against the U.S. dollar. Custody Risk: Less
developed markets are more likely to experience problems with the clearing and
settling of trades and the holding of securities by local banks, agents and
depositories. Emerging Market Risk: Brazil is an emerging market country, which
may be subject to a greater risk of loss than investments in developed markets.
Securities markets of emerging market countries are less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries. Equity Securities Risk: Equity securities
are subject to changes in value and their values may be more volatile than other
asset classes, as a result of such factors as a company’s business performance,
investor perceptions, stock market trends and general economic conditions.
Foreign Security Risk: Investments in the securities of foreign issuers
(including investments in ADRs and GDRs) are subject to the risks associated
with investing in those foreign markets, such as heightened risks of inflation
or nationalization. In addition, securities of foreign issuers may lose value
due to political, economic and geographic events affecting a foreign issuer or
market. During periods of social, political or economic instability in a country
or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Geographic Risk: A natural disaster could occur in Brazil,
which could affect the economy or particular business operations of companies
economically tied to Brazil. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Latin American Economic Risk: The economy of Brazil is
affected by the economies of Latin American countries, some of which have
experienced high interest rates, economic volatility, inflation, currency
devaluations and high unemployment rates. Any adverse economic event in one
country can have a significant effect on other countries of this region.
Management Risk: The Fund is subject to the risk that the Adviser’s investment
management strategy may cause the Fund to underperform the market or its
relevant benchmark or adversely affect the ability of the Fund to achieve its
investment objective. Market Risk: The Fund's NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns. Market Trading Risk: The Fund faces numerous market trading risks,
including the potential lack of an active market for Shares, losses from trading
in secondary markets, and disruption in the creation/redemption process of the
Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Mid-Capitalization Companies Risk: Mid cap companies may have
greater volatility in price than the stocks of large companies due to limited
product lines or resources or a dependency upon a particular market niche.
Non-Correlation Risk: The Fund’s return may not match the return of the
Underlying Index for a number of reasons. For example, the Fund incurs operating
expenses not applicable to the Underlying Index, and incurs costs in buying and
selling securities, especially when rebalancing the Fund’s securities holdings
to reflect changes in the composition of the Underlying Index. In addition, the
performance of the Fund and the Underlying Index may vary due to asset valuation
differences and differences between the Fund’s portfolio and the Underlying
Index resulting from legal restrictions, costs or liquidity constraints.
Non-Diversification Risk: The Fund is classified as a “non-diversified”
investment company under the 1940 Act. As a result, the Fund is subject to the
risk that it will be more volatile than a diversified fund because the Fund may
invest its assets in a smaller
68 number of issuers or
may invest a larger proportion of its assets in a single issuer. As a result,
the gains and losses on a single investment may have a greater impact on the
Fund’s NAV and may make the Fund more volatile than more diversified funds.
Passive Investment Risk: The Fund is not actively managed and the Adviser does
not attempt to take defensive positions in declining markets. Unlike many
investment companies, the Fund does not utilize an investing strategy that seeks
returns in excess of its Underlying Index. Therefore, it would not necessarily
buy or sell a security unless that security is added or removed, respectively,
from the Underlying Index, even if that security generally is underperforming.
Premium/Discount Risk: Disruptions to creations and redemptions, the existence
of extreme market volatility or potential lack of an active trading market for
Shares may result in Shares trading at a significant premium or discount to NAV.
If a shareholder purchases Shares at a time when the market price is at a
premium to the NAV or sells Shares at a time when the market price is at a
discount to the NAV, the shareholder may sustain losses. Privatization Risk:
Brazil has privatized certain entities and industries. Privatized entities may
lose money or be re-nationalized. Reliance on Trading Partners Risk: The Fund
invests in the Brazilian economy, which is heavily dependent upon trading with
key partners. Any reduction in this trading, including as a result of adverse
economic conditions in a trading partner’s economy, may cause an adverse impact
on the economy in which the Fund invests. Risks Related to Investing in Brazil:
Investments in securities of Brazilian companies are subject to regulatory and
economic interventions that the Brazilian government has frequently exercised in
the past, including the setting of wage and price controls, blocking access to
bank accounts, imposing exchange controls and limiting imports. Investments are
also subject to certain restrictions on foreign investment as provided by
Brazilian law. The Brazilian economy has historically been subject to high rates
of inflation and a high level of debt, all of which may stifle economic growth.
Despite rapid development in recent years, Brazil still suffers from high levels
of corruption, crime and income disparity. There is the possibility that such
conditions may lead to social unrest and political upheaval in the future, which
may have adverse effects on the Fund's investments. Securities Market Risk:
Because the securities markets in Brazil are small in size, underdeveloped, and
are less regulated and less correlated to global economic cycles than those
markets located in more developed countries, the securities markets in Brazil
are subject to greater risks associated with market volatility, lower market
capitalization, lower trading volume, illiquidity, inflation, greater price
fluctuations and uncertainty regarding the existence of trading markets.
Tracking Error Risk: The performance of the Fund may diverge from that of the
Underlying Index. Trading Halt Risk: An exchange or market may close or issue
trading halts on specific securities, or the ability to buy or sell certain
securities or financial instruments may be restricted, which may result in the
Fund being unable to buy or sell certain securities or financial instruments. In
such circumstances, the Fund may be unable to rebalance its portfolio, may be
unable to accurately price its investments and/or may incur substantial trading
losses. U.S. Economic Risk: A decrease in U.S. imports, new trade regulations,
changes in the U.S. dollar exchange rates or an economic slowdown in the United
States may have an adverse impact on Brazil's economy and, as a result,
securities to which the Fund has exposure. Valuation Risk: The sales price the
Fund could receive for a security may differ from the Fund’s valuation of the
security and may differ from the value used by the Underlying Index,
particularly for securities that trade in low value or volatile markets or that
are valued using a fair value methodology. The value of the securities in the
Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares. PERFORMANCE INFORMATION The bar chart and
table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund’s performance from year to year and by showing how the Fund’s
average annual returns for the indicated periods compare with the Fund’s
benchmark index and a broad measure of market performance. The Fund’s past
performance (before and after taxes) is not necessarily indicative of how the
Fund will perform in the future. Updated performance information is available
online at www.globalxfunds.com.
69 Annual Total Returns
(Years Ended December 31,) Best Quarter: 03/31/12 21.22% Worst Quarter: 09/30/11
-28.04% Average Annual Total Returns (for the Periods Ended December 31, 2014)
Year Ended December 31, 2014 Since Inception (06/21/2010) Global X Brazil Mid
Cap ETF ·Return before taxes ·Return after taxes on distributions1 ·Return after
taxes on distributions and sale of Fund Shares1 -17.34% -18.24% -9.46% -5.06%
-5.92% -3.74% Solactive Brazil Mid Cap Index (net) (Index returns do not reflect
deductions for fees, expenses, or taxes) -17.12% -4.39% S&P 500 Index (Index
returns do not reflect deductions for fees, expenses, or taxes) 13.69% 16.99% 1
After-tax returns are calculated using the historical highest individual U.S.
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your specific tax
situation and may differ from those shown above. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts (IRAs).
FUND MANAGEMENT Investment Adviser: Global X Management Company LLC. Portfolio
Managers: The professionals primarily responsible for the day-to-day management
of the Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang
Kim, CFA (“Portfolio Managers”). Messrs. del Ama and Gonzalez have been
Portfolio Managers of the Fund since June 21, 2010. Messrs. Berruga and Kim have
been Portfolio Managers of the Fund since February 15, 2014.
70 OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and information about financial
intermediary compensation, please turn to the sections of this Prospectus
entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and “Payments to
Broker-Dealers and Other Financial Intermediaries” on page 157 of the
Prospectus.
71 Global X Brazil
Utilities ETF Ticker: BRAU Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The
Global X Brazil Utilities ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Solactive Brazil Utilities Index (“Underlying Index”). FEES AND
EXPENSES This table describes the fees and expenses that you may pay if you buy
and hold Shares (“Shares”) of the Fund. You will also incur usual and customary
brokerage commissions when buying and selling Shares. Annual Fund Operating
Expenses (expenses that you pay each year as a percentage of the value of your
investment): Management Fees: 0.77% Distribution and Service (12b-1) Fees: None
Other Expenses:1 0.00% Total Annual Fund Operating Expenses: 0.77% 1 "Other
Expenses” reflect estimated expenses for the Fund’s first fiscal year of
operations. Example: The following example is intended to help you compare the
cost of investing in the Fund with the cost of investing in other funds. This
example does not take into account customary brokerage commissions that you pay
when purchasing or selling Shares of the Fund in the secondary market. The
example assumes that you invest $10,000 in the Fund for the time periods
indicated and then sell all of your Shares at the end of those periods. The
example also assumes that your investment has a 5% return each year and that the
Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be: One Year Three
Years $79 $246 Portfolio Turnover: The Fund pays transaction costs, such as
commissions, when it buys and sells securities (or "turns over" its portfolio).
A higher portfolio turnover rate may indicate higher transaction costs and may
result in higher taxes when Shares are held in a taxable account. These costs,
which are not reflected in annual fund operating expenses or in the example,
affect the Fund’s performance. The Fund had not yet commenced investment
operations as of the most recent fiscal year end. Thus, no portfolio turnover
rate is provided for the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund will
invest at least 80% of its total assets in the securities of the Underlying
Index and in American Depositary Receipts ("ADRs") and Global Depositary
Receipts ("GDRs") based on the securities in the Underlying Index. The Fund also
will invest at least 80% of its total assets in securities of utilities
companies that are domiciled in, principally traded in or whose revenues are
primarily from Brazil. For purposes of this policy, utilities companies include
those engaged in the operation of facilities that distribute utilities such as
electricity, natural gas, telecommunications, water, sewage and engage in
related services. The Fund’s 80% investment policies are non-fundamental and
require 60 days’ prior written notice to shareholders before they can be
changed. The Underlying Index is designed to measure the equity performance of
the utilities sector of the Brazilian, as defined by Solactive AG, the provider
of the Underlying Index ("Index Provider"). The Fund’s investment objective and
Underlying Index may be changed without shareholder approval. The Underlying
Index is sponsored by the Index Provider, which is an organization that is
independent of the Fund and Global X Management Company LLC, the investment
adviser for the Fund (“Adviser”). The Index Provider determines the relative
weightings of the securities in the Underlying Index and publishes information
regarding the market value of the Underlying Index.
72 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. SUMMARY OF PRINCIPAL RISKS As with any investment, you could lose
all or part of your investment in the Fund, and the Fund's performance could
trail that of other investments. There is no guarantee that the Fund will
achieve its investment objective. The Fund is subject to the principal risks
noted below, any of which may adversely affect the Fund's net asset value
("NAV"), trading price, yield, total return and ability to meet its investment
objective, as well as other risks that are described in greater detail in the
Additional Information About the Funds’ Strategies and Risks section of the
Prospectus and in the Statement of Additional Information ("SAI"). ADR/GDR Risk:
To the extent the Fund seeks exposure to foreign companies, the Fund’s
investments may be in the form of depositary receipts or other securities
convertible into securities of foreign issuers, including ADRs and GDRs. While
the use of ADRs and GDRs, which are traded on exchanges and represent an
ownership in a foreign security, provide an alternative to directly purchasing
the underlying foreign securities in their respective national markets and
currencies, investments in ADRs and GDRs continue to be subject to certain of
the risks associated with investing directly in foreign securities. Asian
Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the economy of Brazil. Asset Class Risk:
Securities in the Underlying Index or the Fund's portfolio may underperform in
comparison to the general securities markets or other asset classes. Cash
Transaction Risk: Unlike most ETFs, the Fund intends to effect all creations and
redemptions principally for cash, rather than in-kind securities. As a result,
an investment in the Fund may be less tax-efficient than an investment in a more
conventional ETF. Commodity Exposure Risk: The Fund invests in Brazilian
securities, which are susceptible to fluctuations in certain commodity markets.
Any negative changes in commodity markets could have a great impact on the
Brazilian economy. Concentration Risk: Because the Fund's investments are
concentrated in the Brazilian securities and in the utilities sector, the Fund
will be susceptible to loss due to adverse occurrences affecting this country.
To the extent that the Underlying Index concentrates in the securities of
issuers in a particular country, industry, market, asset class, or sector, the
Fund will also concentrate its investments to approximately the same extent. By
concentrating its investments in a country, industry, market, asset class, or
sector, the Fund faces more risks than if it were diversified broadly over
numerous countries, industries, markets, asset classes, or sectors. Such risks,
any of which may adversely affect the companies in which the Fund invests, may
include, but are not limited to, the following: general economic conditions or
cyclical market patterns that could negatively affect supply and demand;
competition for resources, adverse labor relations, political or world events;
obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular country, industry, market, asset class, or sector. In addition, at
times, such country, industry, market, asset class, or sector may be out of
favor and underperform other similar categories or the market as a whole.
73 Currency Risk: Because
the Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Brazil's currency depreciates against the U.S. dollar. Custody Risk: Less
developed markets are more likely to experience problems with the clearing and
settling of trades and the holding of securities by local banks, agents and
depositories. Emerging Market Risk: Brazil is an emerging market country, which
may be subject to a greater risk of loss than investments in developed markets.
Securities markets of emerging market countries are less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries. Equity Securities Risk: Equity securities
are subject to changes in value and their values may be more volatile than other
asset classes, as a result of such factors as a company’s business performance,
investor perceptions, stock market trends and general economic conditions.
Foreign Security Risk: Investments in the securities of foreign issuers
(including investments in ADRs and GDRs) are subject to the risks associated
with investing in those foreign markets, such as heightened risks of inflation
or nationalization. In addition, securities of foreign issuers may lose value
due to political, economic and geographic events affecting a foreign issuer or
market. During periods of social, political or economic instability in a country
or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Geographic Risk: A natural disaster could occur in Brazil,
which could affect the economy or particular business operations of companies
economically tied to Brazil. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Latin American Economic Risk: The economy of Brazil is
affected by the economies of Latin American countries, some of which have
experienced high interest rates, economic volatility, inflation, currency
devaluations and high unemployment rates. Any adverse economic event in one
country can have a significant effect on other countries of this region.
Management Risk: The Fund is subject to the risk that the Adviser’s investment
management strategy may cause the Fund to underperform the market or its
relevant benchmark or adversely affect the ability of the Fund to achieve its
investment objective. Market Risk: The Fund's NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns. Market Trading Risk: The Fund faces numerous market trading risks,
including the potential lack of an active market for Shares, losses from trading
in secondary markets, and disruption in the creation/redemption process of the
Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller number of issuers or may
invest a larger proportion of its assets in a single issuer. As a result, the
gains and losses on a single investment may have a greater impact on the Fund’s
NAV and may make the Fund more volatile than more diversified funds.
74 Passive Investment
Risk: The Fund is not actively managed and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not utilize an investing strategy that seeks returns in excess of its
Underlying Index. Therefore, it would not necessarily buy or sell a security
unless that security is added or removed, respectively, from the Underlying
Index, even if that security generally is underperforming. Privatization Risk:
Brazil has privatized certain entities and industries. Privatized entities may
lose money or be re-nationalized. Reliance on Trading Partners Risk: The Fund
invests in the Brazilian economy, which is heavily dependent upon trading with
key partners. Any reduction in this trading, including as a result of adverse
economic conditions in a trading partner’s economy, may cause an adverse impact
on the economy in which the Fund invests. Risks Related to Investing in Brazil:
Investments in securities of Brazilian companies are subject to regulatory and
economic interventions that the Brazilian government has frequently exercised in
the past, including the setting of wage and price controls, blocking access to
bank accounts, imposing exchange controls and limiting imports. Investments are
also subject to certain restrictions on foreign investment as provided by
Brazilian law. The Brazilian economy has historically been subject to high rates
of inflation and a high level of debt, all of which may stifle economic growth.
Despite rapid development in recent years, Brazil still suffers from high levels
of corruption, crime and income disparity. There is the possibility that such
conditions may lead to social unrest and political upheaval in the future, which
may have adverse effects on the Fund's investments. Risks Related to Investing
in the Utilities Sector: Companies in the utilities sector may be adversely
affected by changes in exchange rates, domestic and international competition
and governmental regulations on rates charged to customers. Privatization in the
utilities sector may subject companies to greater competition and losses in
profitability. Companies in the utilities industry may have difficulty obtaining
an adequate return on invested capital, raising capital, or financing large
construction programs during periods of inflation or unsettled capital markets.
Securities Market Risk: Because the securities markets in Brazil are small in
size, underdeveloped, and are less regulated and less correlated to global
economic cycles than those markets located in more developed countries, the
securities markets in Brazil are subject to greater risks associated with market
volatility, lower market capitalization, lower trading volume, illiquidity,
inflation, greater price fluctuations and uncertainty regarding the existence of
trading markets. Tracking Error Risk: The performance of the Fund may diverge
from that of the Underlying Index. Trading Halt Risk: An exchange or market may
close or issue trading halts on specific securities, or the ability to buy or
sell certain securities or financial instruments may be restricted, which may
result in the Fund being unable to buy or sell certain securities or financial
instruments. In such circumstances, the Fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses. U.S. Economic Risk: A decrease in U.S. imports, new
trade regulations, changes in the U.S. dollar exchange rates or an economic
slowdown in the United States may have an adverse impact on Brazil's economy
and, as a result, securities to which the Fund has exposure. Valuation Risk: The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology. The value of the securities
in the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares. PERFORMANCE INFORMATION The Fund has not
commenced operations as of the date of this Prospectus. Thus, no bar chart or
Average Annual Total Returns table is included for the Fund. FUND MANAGEMENT
Investment Adviser: Global X Management Company LLC. Portfolio Managers: The
professionals primarily responsible for the day-to-day management of the Fund
are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang Kim, CFA
(“Portfolio Managers”). Messrs. del Ama, Gonzalez, Berruga, and Kim have been
Portfolio Managers of the Fund since inception.
75 OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and financial intermediary compensation,
please turn to the sections of this Prospectus entitled “Purchase and Sale of
Fund Shares,” “Tax Information,” and “Payments to Broker-Dealers and Other
Financial Intermediaries” on page 157 of the Prospectus.
76 Global X FTSE Andean
40 ETF Ticker: AND Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The Global X
FTSE Andean 40 ETF (“Fund”) seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
FTSE Andean 40 Index (“Underlying Index”). FEES AND EXPENSES This table
describes the fees and expenses that you may pay if you buy and hold shares
(“Shares”) of the Fund. You will also incur usual and customary brokerage
commissions when buying and selling Shares. Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment): Management Fees: 0.72% Distribution and Service (12b-1) Fees: None
Other Expenses: 0.00% Total Annual Fund Operating Expenses: 0.72% Example: The
following example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other funds. This example does not take into
account customary brokerage commissions that you pay when purchasing or selling
Shares of the Fund in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be: One Year Three Years Five Years Ten
Years $74 $230 $401 $894 Portfolio Turnover: The Fund pays transaction costs,
such as commissions, when it buys and sells securities (or "turns over" its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund’s performance. During the most recent fiscal year, the
Fund’s portfolio turnover rate was 19.94% of the average value of its portfolio.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests at least 80% of its total
assets in the securities of the Underlying Index and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund also invests at least 80% of its
total assets in securities of companies that are domiciled in, principally
traded in or whose revenues are primarily from Chile, Colombia and Peru. The
Fund’s 80% investment policies are non-fundamental and require 60 days’ prior
written notice to shareholders before they can be changed. The Underlying Index
is a free-float adjusted, modified capitalization-weighted index designed to
measure performance of the 40 largest and most liquid companies in the Chile,
Colombia, and Peru markets as defined by FTSE International Limited ("FTSE"),
the provider of the Underlying Index ("Index Provider"). The Fund’s investment
objective and Underlying Index may be changed without shareholder approval. The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of the Fund and Global X Management Company LLC, the
investment adviser for the Fund (“Adviser”). The Index Provider determines the
relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
77 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Financials Sector. SUMMARY OF PRINCIPAL RISKS As with any investment, you
could lose all or part of your investment in the Fund, and the Fund's
performance could trail that of other investments. There is no guarantee that
the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
Asian Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the economies of Chile, Colombia and
Peru. Asset Class Risk: Securities in the Underlying Index or the Fund's
portfolio may underperform in comparison to the general securities markets or
other asset classes. Cash Transaction Risk: Unlike most ETFs, the Fund intends
to effect all creations and redemptions principally for cash, rather than
in-kind securities. As a result, an investment in the Fund may be less
tax-efficient than an investment in a more conventional ETF. Commodity Exposure
Risk: The Fund invests in the Chile, Colombia and Peru markets, which are
susceptible to fluctuations in certain commodity markets. Any negative changes
in commodity markets could have a great impact on these economies. Concentration
Risk: Because the Fund's investments are concentrated in Chilean, Colombian and
Peruvian securities and the financials sector, the Fund will be susceptible to
losses due to adverse occurrences affecting these countries and sector. To the
extent that the Underlying Index concentrates in the securities of issuers in a
particular country, industry, market, asset class, or sector, the Fund will also
concentrate its investments to approximately the same extent. By concentrating
its investments in a country, industry, market, asset class, or sector, the Fund
faces more risks than if it were diversified broadly over numerous countries,
industries, markets, asset classes, or sectors. Such risks, any of which may
adversely affect the companies in which the Fund invests, may include, but are
not limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a particular country,
industry, market, asset class, or sector. In addition, at times, such country,
industry, market, asset class, or sector may be out of favor and underperform
other similar categories or the market as a whole. For additional details on
these risks, please see Risks Related to Investing in the Andean Region and
Risks Related to Investing in the Financials Sector.
78 Currency Risk: The
Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Andean currencies depreciate against the U.S. dollar. Custody Risk: Less
developed markets are more likely to experience problems with the clearing and
settling of trades and the holding of securities by local banks, agents and
depositories. Emerging Market Risk: The Fund is expected to invest in securities
in the following emerging market countries: Chile, Colombia and Peru. The Fund’s
investment in an emerging market country may be subject to a greater risk of
loss than investments in developed markets. Securities markets of emerging
market countries are less liquid, subject to greater price volatility, have
smaller market capitalizations, have less government regulation, and are not
subject to as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries. Equity
Securities Risk: Equity securities are subject to changes in value and their
values may be more volatile than other asset classes, as a result of such
factors as a company’s business performance, investor perceptions, stock market
trends and general economic conditions. European Economic Risk: Several
countries in Europe are major trade and investment partners of Chile, Colombia
and Peru. Decreasing imports or exports, changes in governmental or Economic and
Monetary Union of the European Union (the “EMU”) regulations on trade, changes
in the exchange rate of the euro, the default or threat of default by an EMU
member country or its sovereign debt, and recessions in an EMU member country
may have a significant adverse effect on the economies of EMU member countries
and their trading partners. Foreign Security Risk: Investments in the securities
of foreign issuers (including investments in ADRs and GDRs) are subject to the
risks associated with investing in those foreign markets, such as heightened
risks of inflation or nationalization. In addition, securities of foreign
issuers may lose value due to political, economic and geographic events
affecting a foreign issuer or market. During periods of social, political or
economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges, nonetheless, could be affected by, among other things,
increasing price volatility, illiquidity, or the closure of the primary market
on which the security (or the security underlying the ADR or GDR) is traded. You
may lose money due to political, economic and geographic events affecting a
foreign issuer or market. Geographic Risk: A natural disaster could occur in
South America, which could affect the economy or particular business operations
of companies economically tied to South America. Investable Universe of
Companies Risk: The investable universe of companies in which a Fund may invest
may be limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s underlying
portfolio holdings and on Fund performance. Issuer Risk: Fund performance
depends on the performance of individual companies in which the Fund invests.
Changes to the financial condition of any of those companies may cause the value
of their securities to decline. Latin American Economic Risk: High interest
rates, economic volatility, inflation, currency devaluations, fluctuations in
commodity prices, government defaults and high unemployment rates in Central or
South America may have an adverse impact on the economies of Chile, Colombia and
Peru. Management Risk: The Fund is subject to the risk that the Adviser’s
investment management strategy may cause the Fund to underperform the market or
its relevant benchmark or adversely affect the ability of the Fund to achieve
its investment objective. Market Risk: The Fund's NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns. Market Trading Risk: The Fund faces numerous market trading risks,
including the potential lack of an active market for Shares, losses from trading
in secondary markets, and disruption in the creation/redemption process of the
Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Mid-Capitlization Companies Risk: Mid cap companies may have
greater volatility in price than the stocks of large companies due to limited
product lines or resources or a dependency upon a particular market niche.
79 Non-Correlation Risk:
The Fund’s return may not match the return of the Underlying Index for a number
of reasons. For example, the Fund incurs operating expenses not applicable to
the Underlying Index, and incurs costs in buying and selling securities,
especially when rebalancing the Fund’s securities holdings to reflect changes in
the composition of the Underlying Index. In addition, the performance of the
Fund and the Underlying Index may vary due to asset valuation differences and
differences between the Fund’s portfolio and the Underlying Index resulting from
legal restrictions, costs or liquidity constraints. Non-Diversification Risk:
The Fund is classified as a “non-diversified” investment company under the 1940
Act. As a result, the Fund is subject to the risk that it will be more volatile
than a diversified fund because the Fund may invest its assets in a smaller
number of issuers or may invest a larger proportion of its assets in a single
issuer. As a result, the gains and losses on a single investment may have a
greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds. Passive Investment Risk: The Fund is not actively managed and
the Adviser does not attempt to take defensive positions in declining markets.
Unlike many investment companies, the Fund does not utilize an investing
strategy that seeks returns in excess of its Underlying Index. Therefore, it
would not necessarily buy or sell a security unless that security is added or
removed, respectively, from the Underlying Index, even if that security
generally is underperforming. Premium/Discount Risk: Disruptions to creations
and redemptions, the existence of extreme market volatility or potential lack of
an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. Reliance on Trading Partners Risk: Economies in emerging market
countries generally are dependent heavily upon commodity prices and
international trade and, accordingly, may be affected adversely by the economies
of their trading partners, trade barriers, exchange controls, managed
adjustments in relative currency values, and may suffer from extreme and
volatile debt burdens or inflation rates. Risks Related to Investing in the
Andean Region: The Fund currently invests in the Andean countries of Chile,
Colombia and Peru. The economies of these countries have experienced periods of
high interest rates, economic volatility, inflation, currency devaluations and
high unemployment rates. Any adverse economic event in one country can have a
significant effect on other countries of this region. In addition, commodities
(such as oil, gas and minerals) represent a significant percentage of the
regions' exports, and many economies in this region are particularly sensitive
to fluctuations in commodity prices. Risks Related to Investing in the
Financials Sector: Performance of companies in the financials sector may be
adversely impacted by many factors, including, among others, government
regulations, economic conditions, credit rating downgrades, changes in interest
rates, and decreased liquidity in credit markets. This sector has experienced
significant losses in the recent past, and the impact of more stringent capital
requirements and of recent or future regulation on any individual financial
company or on the sector as a whole cannot be predicted. Securities Lending
Risk: Securities lending involves a risk of loss because the borrower may fail
to return the securities in a timely manner or at all. If the Fund is not able
to recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters. Securities Market Risk: Because certain securities markets in the
countries in which the Fund may invest are small in size, underdeveloped, and
are less regulated and less correlated to global economic cycles than those
markets located in more developed countries, the securities markets in such
countries are subject to greater risks associated with market volatility, lower
market capitalization, lower trading volume, illiquidity, inflation, greater
price fluctuations and uncertainty regarding the existence of trading markets.
Security Risk: Countries in which the Fund invests have experienced security
concerns. Incidents involving a country's or region's security may cause
uncertainty in the country's markets and may adversely affect its economies and
the Fund's investments. Structural Risk: The countries in which the Fund invests
may be subject to considerable degrees of economic, political and social
instability. Tracking Error Risk: The performance of the Fund may diverge from
that of the Underlying Index.
80 Trading Halt Risk: An
exchange or market may close or issue trading halts on specific securities, or
the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses. U.S. Economic Risk:
Decreasing U.S. imports, new trade regulations, changes in the U.S. dollar
exchange rates, a recession in the United States or continued increases in
foreclosures rates may have an adverse impact on the economies of Chile,
Colombia and Peru. Valuation Risk: The sales price the Fund could receive for a
security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology. The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's Shares.
PERFORMANCE INFORMATION The bar chart and table that follow show how the Fund
performed on a calendar year basis and provide an indication of the risks of
investing in the Fund by showing changes in the Fund’s performance from year to
year and by showing how the Fund’s average annual returns for the indicated
periods compare with the Fund’s benchmark index and a broad measure of market
performance. The Fund’s past performance (before and after taxes) is not
necessarily indicative of how the Fund will perform in the future. Updated
performance information is available online at www.globalxfunds.com. Annual
Total Returns (Years Ended December 31,) Best Quarter: 03/31/12 18.93% Worst
Quarter: 06/30/13 -16.97%
81 Average Annual Total
Returns (for the Periods Ended December 31, 2014) Year Ended December 31, 2014
Since Inception (02/02/2011) Global X FTSE Andean 40 ETF: ·Return before taxes
·Return after taxes on distributions1 ·Return after taxes on distributions and
sale of Fund Shares1 -14.74% -14.85% -7.67% -9.92% -9.98% -6.88% FTSE Andean 40
Index (net) (Index returns do not reflect deductions for fees, expenses, or
taxes) -13.72% -9.37% S&P 500 Index (Index returns do not reflect deductions
for fees, expenses, or taxes) 13.69% 14.82% 1 After-tax returns are calculated
using the historical highest individual U.S. federal marginal income tax rates
and do not reflect the impact of state and local taxes. Your actual after-tax
returns will depend on your specific tax situation and may differ from those
shown above. After- tax returns are not relevant to investors who hold Shares of
the Fund through tax-deferred arrangements, such as 401(k) plans or individual
retirement accounts (IRAs). FUND MANAGEMENT Investment Adviser: Global X
Management Company LLC. Portfolio Managers: The professionals primarily
responsible for the day-to-day management of the Fund are Bruno del Ama, CFA,
Jose C. Gonzalez, Luis Berruga and Chang Kim, CFA (“Portfolio Managers”).
Messrs. del Ama and Gonzalez have been Portfolio Managers of the Fund since
February 2, 2011. Messrs. Berruga and Kim have been Portfolio Managers of the
Fund since February 15, 2014. OTHER IMPORTANT INFORMATION REGARDING FUND SHARES
For important information about purchase and sale of Fund Shares, tax
information and financial intermediary compensation, please turn to the sections
of this Prospectus entitled “Purchase and Sale of Fund Shares,” “Tax
Information,” and “Payments to Broker-Dealers and Other Financial
Intermediaries” on page 157 of the Prospectus.
82 Global X MSCI
Argentina ETF Ticker: ARGT Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The
Global X MSCI Argentina ETF (formerly, Global X FTSE Argentina 20 ETF) (“Fund”)
seeks to provide investment results that correspond generally to the price and
yield performance, before fees and expenses, of the MSCI All Argentina 25/50
Index (“Underlying Index”). FEES AND EXPENSES This table describes the fees and
expenses that you may pay if you buy and hold shares (“Shares”) of the Fund. You
will also incur usual and customary brokerage commissions when buying and
selling Shares. Annual Fund Operating Expenses (expenses that you pay each year
as a percentage of the value of your investment): Management Fees: 0.74%
Distribution and Service (12b-1) Fees: None Other Expenses (Custody Fees): 0.01%
Total Annual Fund Operating Expenses: 0.75% Example: The following example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest $10,000 in the Fund
for the time periods indicated and then sell all of your Shares at the end of
those periods. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be: One Year Three Years Five Years Ten Years $77 $240 $417 $930 Portfolio
Turnover: The Fund pays transaction costs, such as commissions, when it buys and
sells securities (or "turns over" its portfolio). A higher portfolio turnover
rate may indicate higher transaction costs and may result in higher taxes when
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund’s portfolio turnover rate was
95.29% of the average value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES
The Fund invests at least 80% of its total assets in the securities of the
Underlying Index and in American Depositary Receipts ("ADRs") and Global
Depositary Receipts ("GDRs") based on the securities in the Underlying Index.
Moreover, the Fund invests at least 80% of its total assets in securities that
are economically tied to Argentina. The Fund’s 80% investment policies are non-
fundamental and require 60 days’ prior written notice to shareholders before
they can be changed. The Underlying Index is designed to represent the
performance of the broad Argentina equity universe, while including a minimum
number of constituents, as defined by MSCI, Inc. ("MSCI"), the provider of the
Underlying Index ("Index Provider"). The broad Argentina equity universe
includes securities that are classified in Argentina according to the MSCI
Global Investable Market Index Methodology, together with companies that are
headquartered or listed in Argentina and carry out the majority of their
operations in Argentina. The Underlying Index targets a minimum of 25 securities
and 20 issuers at construction. The Fund’s investment objective and Underlying
Index may be changed without shareholder approval. The Underlying Index is
sponsored by the Index Provider, which is an organization that is independent of
the Fund and Global X Management Company LLC, the investment adviser for the
Fund (“Adviser”). The Index Provider determines the relative weightings of the
securities in the Underlying Index and publishes information regarding the
market value of the Underlying Index.
83 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Energy Sector. SUMMARY OF PRINCIPAL RISKS As with any investment, you could
lose all or part of your investment in the Fund, and the Fund's performance
could trail that of other investments. There is no guarantee that the Fund will
achieve its investment objective. The Fund is subject to the principal risks
noted below, any of which may adversely affect the Fund's net asset value
("NAV"), trading price, yield, total return and ability to meet its investment
objective, as well as other risks that are described in greater detail in the
Additional Information About the Funds’ Strategies and Risks section of the
Prospectus and in the Statement of Additional Information ("SAI"). ADR/GDR Risk:
To the extent the Fund seeks exposure to foreign companies, the Fund’s
investments may be in the form of depositary receipts or other securities
convertible into securities of foreign issuers, including ADRs and GDRs. While
the use of ADRs and GDRs, which are traded on exchanges and represent an
ownership in a foreign security, provide an alternative to directly purchasing
the underlying foreign securities in their respective national markets and
currencies, investments in ADRs and GDRs continue to be subject to certain of
the risks associated with investing directly in foreign securities. Asian
Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the economy of Argentina. Asset Class
Risk: Securities in the Underlying Index or the Fund's portfolio may
underperform in comparison to the general securities markets or other asset
classes. Concentration Risk: Because the Fund's investments are concentrated in
Argentinian securities and in the energy sector, the Fund will be susceptible to
loss due to adverse occurrences affecting this country or market. To the extent
that the Underlying Index concentrates in the securities of issuers in a
particular country, industry, market, asset class, or sector, the Fund will also
concentrate its investments to approximately the same extent. By concentrating
its investments in a country, industry, market, asset class, or sector, the Fund
faces more risks than if it were diversified broadly over numerous countries,
industries, markets, asset classes, or sectors. Such risks, any of which may
adversely affect the companies in which the Fund invests, may include, but are
not limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a particular country,
industry, market, asset class, or sector. In addition, at times, such country,
industry, market, asset class, or sector may be out of favor and underperform
other similar categories or the market as a whole. For additional details on
these risks, please see Risks Related to Investing in Argentina and Risks
Related to Investing in the Energy Sector. Currency Risk: Because the Fund's NAV
is determined in U.S. dollars, the Fund's NAV could decline if Argentina's
currency depreciates against the U.S. dollar. Custody Risk: Less developed
markets are more likely to experience problems with the clearing and settling of
trades and the holding of securities by local banks, agents and depositories.
84 Emerging Market Risk:
Argentina is an emerging market country, which may be subject to a greater risk
of loss than investments in developed markets. Securities markets of emerging
market countries are less liquid, subject to greater price volatility, have
smaller market capitalizations, have less government regulation, and are not
subject to as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries. Equity
Securities Risk: Equity securities are subject to changes in value and their
values may be more volatile than other asset classes, as a result of such
factors as a company’s business performance, investor perceptions, stock market
trends and general economic conditions. Foreign Security Risk: Investments in
the securities of foreign issuers (including investments in ADRs and GDRs) are
subject to the risks associated with investing in those foreign markets, such as
heightened risks of inflation or nationalization. In addition, securities of
foreign issuers may lose value due to political, economic and geographic events
affecting a foreign issuer or market. During periods of social, political or
economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges, nonetheless, could be affected by, among other things,
increasing price volatility, illiquidity, or the closure of the primary market
on which the security (or the security underlying the ADR or GDR) is traded. You
may lose money due to political, economic and geographic events affecting a
foreign issuer or market. Frontier Market Risks: Frontier market countries
generally have smaller economies or less developed capital markets than
traditional emerging markets, and, as a result, the risks of investing in
emerging market countries are magnified in frontier market countries. The
economies of frontier market countries are less correlated to global economic
cycles than those of their more developed counterparts and their markets have
low trading volumes and the potential for extreme price volatility and
illiquidity. These factors make investing in frontier market countries
significantly riskier than in other countries and any one of them could cause
the price of the Fund’s Shares to decline. Geographic Risk: A natural disaster
could occur in Argentina, which could affect the economy or particular business
operations of companies economically tied to Argentina. Investable Universe of
Companies Risk: The investable universe of companies in which a Fund may invest
may be limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s underlying
portfolio holdings and on Fund performance. Issuer Risk: Fund performance
depends on the performance of individual companies in which the Fund invests.
Changes to the financial condition of any of those companies may cause the value
of their securities to decline. Latin American Economic Risk: The economy of
Argentina is affected by the economies of Latin American countries, some of
which have experienced high interest rates, economic volatility, inflation,
currency devaluations and high unemployment rates. Any adverse economic event in
one country can have a significant effect on other countries of this region.
Management Risk: The Fund is subject to the risk that the Adviser’s investment
management strategy may cause the Fund to underperform the market or its
relevant benchmark or adversely affect the ability of the Fund to achieve its
investment objective. Market Risk: The Fund's NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns. Market Trading Risk: The Fund faces numerous market trading risks,
including the potential lack of an active market for Shares, losses from trading
in secondary markets, and disruption in the creation/redemption process of the
Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller number of issuers or may
invest a larger proportion of its assets in a single issuer. As a result, the
gains and losses on a single investment may have a greater impact on the Fund’s
NAV and may make the Fund more volatile than more diversified funds.
85 Passive Investment
Risk: The Fund is not actively managed and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not utilize an investing strategy that seeks returns in excess of its
Underlying Index. Therefore, it would not necessarily buy or sell a security
unless that security is added or removed, respectively, from the Underlying
Index, even if that security generally is underperforming. Privatization Risk:
Argentina has privatized certain entities and industries. Privatized entities
may lose money or be re- nationalized. Reliance on Trading Partners Risk: The
Fund invests in the Argentinean economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner’s economy, may cause an adverse
impact on the economies in which the Fund invests. Risks Related to Investing in
Argentina: Argentina has experienced high interest rates, economic volatility,
inflation, currency devaluations and high unemployment rates. The economy is
heavily dependent on exports and commodities. Argentina’s default on its debt in
2001, and its recent nationalization of private pensions, continues to impact
the confidence of investors in Argentina, which might adversely impact returns
in the Fund. In 2014, minority bondholders of Argentina’s previously defaulted
debt sought, and won, an injunction that prohibited Argentina from repaying
bonds that had been renegotiated, unless they simultaneously paid the holdout
minority bondholders their full amount due as well. Argentina’s willingness and
ability to repay its sovereign debt is currently in question, and the
possibility of default is not unlikely, which could limit its ability to borrow
in the future. Risks Related to Investing in the Energy Sector: The value of
securities issued by companies in the energy sector may decline for many
reasons, including, without limitation, changes in energy prices; international
politics; energy conservation; the success of exploration projects; natural
disasters or other catastrophes; changes in exchange rates, interest rates, or
economic conditions; changes in demand for energy products and services; and tax
and other government regulatory policies. Securities Market Risk: Because the
securities markets in Argentina are small in size, underdeveloped, and are less
regulated and less correlated to global economic cycles than those markets
located in more developed countries, the securities markets in Argentina are
subject to greater risks associated with market volatility, lower market
capitalization, lower trading volume, illiquidity, inflation, greater price
fluctuations and uncertainty regarding the existence of trading markets.
Tracking Error Risk: The performance of the Fund may diverge from that of the
Underlying Index. Trading Halt Risk: An exchange or market may close or issue
trading halts on specific securities, or the ability to buy or sell certain
securities or financial instruments may be restricted, which may result in the
Fund being unable to buy or sell certain securities or financial instruments. In
such circumstances, the Fund may be unable to rebalance its portfolio, may be
unable to accurately price its investments and/or may incur substantial trading
losses. U.S. Economic Risk: Decreasing U.S. imports, new trade regulations,
changes in the U.S. dollar exchange rates, a recession in the United States or
continued increases in foreclosures rates may have an adverse impact on the
economy of Argentina. Valuation Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology. The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's Shares.
PERFORMANCE INFORMATION The bar chart and table that follow show how the Fund
performed on a calendar year basis and provide an indication of the risks of
investing in the Fund by showing changes in the Fund’s performance from year to
year and by showing how the Fund’s average annual returns for the indicated
periods compare with the Fund’s benchmark index and a broad measure of market
performance. On August 15, 2014, the name of the Fund changed from the Global X
FTSE Argentina 20 ETF to the Global X MSCI Argentina ETF to reflect a change to
the Fund's Index Provider from FTSE International Limited to MSCI, Inc. and a
change in the Fund's Underlying Index from FTSE Argentina 20 Index to MSCI All
Argentina 25/50 Index. The Fund’s past performance (before and after taxes) is
not necessarily indicative of how the Fund will perform in the future. Updated
performance information is available online at www.globalxfunds.com.
86 Annual Total Returns
(Years Ended December 31,) Best Quarter: 09/30/13 23.14% Worst Quarter: 06/30/12
-24.37% Average Annual Total Returns (for the Periods Ended December 31, 2014)
Year Ended December 31, 2014 Since Inception (03/02/2011) Global X MSCI
Argentina ETF: ·Return before taxes ·Return after taxes on distributions1
·Return after taxes on distributions and sale of Fund Shares1 -2.89% -2.86%
-1.41% -10.18% -10.33% -7.34% Hybrid MSCI All Argentina 25/50 Index/FTSE
Argentina 20 Index (net)2 (Index returns do not reflect deductions for fees,
expenses, or taxes) -1.76% -9.30% FTSE Argentina 20 Index (net) (Index returns
do not reflect deductions for fees, expenses, or taxes) -4.05% -9.86% S&P
500 Index (Index returns do not reflect deductions for fees, expenses, or taxes)
13.69% 14.97% 1 After-tax returns are calculated using the historical highest
individual U.S. federal marginal income tax rates and do not reflect the impact
of state and local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown above. After-tax returns
are not relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts (IRAs). 2
Index performance reflects the performance of the FTSE Argentina 20 Index
through August 14, 2014 and the MSCI All Argentina 25/50 Index thereafter.
Effective August 15, 2014, the Fund changed its index from the FTSE Argentina 20
Index to the MSCI All Argentina 25/50 Index ("New Index"). This change was
effected due to the planned migration to the New Index, potentially allowing for
broader access to the local market.
87 FUND MANAGEMENT
Investment Adviser: Global X Management Company LLC. Portfolio Managers: The
professionals primarily responsible for the day-to-day management of the Fund
are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang Kim, CFA
(“Portfolio Managers”). Messrs. del Ama and Gonzalez have been Portfolio
Managers of the Fund since March 2, 2011. Messrs. Berruga and Kim have been
Portfolio Managers of the Fund since February 15, 2014. OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and information about financial
intermediary compensation, please turn to the sections of this Prospectus
entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and “Payments to
Broker-Dealers and Other Financial Intermediaries” on page 157 of the
Prospectus.
88 Global X Southeast
Asia ETF Ticker: ASEA Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The Global
X Southeast Asia ETF (formerly, Global X FTSE ASEAN 40 ETF) (“Fund”) seeks to
provide investment results that correspond generally to the price and yield
performance, before fees and expenses, of the FTSE/ASEAN 40 Index (“Underlying
Index”). FEES AND EXPENSES This table describes the fees and expenses that you
may pay if you buy and hold shares (“Shares”) of the Fund. You will also incur
usual and customary brokerage commissions when buying and selling Shares. Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment): Management Fees: 0.65% Distribution and Service
(12b-1) Fees: None Other Expenses: 0.00% Total Annual Fund Operating Expenses:
0.65% Example: The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be: One Year Three Years
Five Years Ten Years $66 $208 $362 $810 Portfolio Turnover: The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or
"turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. During the most
recent fiscal year, the Fund’s portfolio turnover rate was 8.36% of the average
value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES The Fund invests at
least 80% of its total assets in the securities of the Underlying Index and in
American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs")
based on the securities in the Underlying Index. The Fund also invests at least
80% of its total assets in securities of companies that are domiciled in,
principally traded in or whose revenues are primarily from Singapore, Malaysia,
Indonesia, Thailand and the Philippines. The Fund’s 80% investment policies are
non-fundamental and require 60 days’ prior written notice to shareholders before
they can be changed. The Fund may lend securities representing up to one-third
of the value of the Fund’s total assets (including the value of the collateral
received). The Underlying Index tracks the equity performance of the 40 largest
and most liquid companies in the five Association of Southeast Asian Nations
("ASEAN") regions: Singapore, Malaysia, Indonesia, Thailand and the Philippines,
as defined by FTSE International Limited ("FTSE"), the provider of the
Underlying Index ("Index Provider"). The Fund’s investment objective and
Underlying Index may be changed without shareholder approval. The Underlying
Index is sponsored by the Index Provider, which is an organization that is
independent of the Fund and Global X Management Company LLC, the investment
adviser for the Fund (“Adviser”). The Index Provider determines the relative
weightings of the securities in the Underlying Index and publishes information
regarding the market value of the Underlying Index.
89 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Financials Sector. SUMMARY OF PRINCIPAL RISKS As with any investment, you
could lose all or part of your investment in the Fund, and the Fund's
performance could trail that of other investments. There is no guarantee that
the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
Asian Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the economy of Singapore, Malaysia,
Indonesia, Thailand and the Philippines. Asset Class Risk: Securities in the
Underlying Index or the Fund's portfolio may underperform in comparison to the
general securities markets or other asset classes. Cash Transaction Risk: Unlike
most ETFs, the Fund intends to effect all creations and redemptions partially
for cash, rather than in-kind securities. As a result, an investment in the Fund
may be less tax-efficient than an investment in a more conventional ETF.
Commodity Exposure Risk: The Fund invests in securities and markets that are
susceptible to fluctuations in certain commodity markets. Any negative changes
in commodity markets could have a great impact on these economies. Concentration
Risk: Because the Fund's investments are concentrated in ASEAN related
securities and in the financials sector, the Fund will be susceptible to losses
due to adverse occurrences affecting these countries or sector. To the extent
that the Underlying Index concentrates in the securities of issuers in a
particular country, industry, market, asset class, or sector, the Fund will also
concentrate its investments to approximately the same extent. By concentrating
its investments in a country, industry, market, asset class, or sector, the Fund
faces more risks than if it were diversified broadly over numerous countries,
industries, markets, asset classes, or sectors. Such risks, any of which may
adversely affect the companies in which the Fund invests, may include, but are
not limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a particular country,
industry, market, asset class, or sector. In addition, at times, such country,
industry, market, asset class, or sector may be out of favor and underperform
other similar categories or the market as a whole. For additional details on
these risks, please see Risks Related to Investing in the ASEAN Region and Risks
Related to Investing in the Financials Sector.
90 Currency Risk: The
Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
ASEAN currencies depreciate against the U.S. dollar. Custody Risk: Less
developed markets are more likely to experience problems with the clearing and
settling of trades and the holding of securities by local banks, agents and
depositories. Emerging Market Risk: The Fund is expected to invest in securities
in the following emerging market countries: Malaysia, Indonesia, Thailand and
the Philippines. The Fund’s investment in an emerging market country may be
subject to a greater risk of loss than investments in developed markets.
Securities markets of emerging market countries are less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries. Equity Securities Risk: Equity securities
are subject to changes in value and their values may be more volatile than other
asset classes, as a result of such factors as a company’s business performance,
investor perceptions, stock market trends and general economic conditions.
Foreign Security Risk: Investments in the securities of foreign issuers
(including investments in ADRs and GDRs) are subject to the risks associated
with investing in those foreign markets, such as heightened risks of inflation
or nationalization. In addition, securities of foreign issuers may lose value
due to political, economic and geographic events affecting a foreign issuer or
market. During periods of social, political or economic instability in a country
or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Geographic Risk: A natural disaster could occur in Southeast
Asia, which could affect the economy or particular business operations of
companies economically tied to Southeast Asia. Investable Universe of Companies
Risk: The investable universe of companies in which a Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s underlying
portfolio holdings and on Fund performance. Issuer Risk: Fund performance
depends on the performance of individual companies in which the Fund invests.
Changes to the financial condition of any of those companies may cause the value
of their securities to decline. Management Risk: The Fund is subject to the risk
that the Adviser’s investment management strategy may cause the Fund to
underperform the market or its relevant benchmark or adversely affect the
ability of the Fund to achieve its investment objective. Market Risk: The Fund's
NAV could decline over short periods due to short-term market movements and over
longer periods during market downturns. Market Trading Risk: The Fund faces
numerous market trading risks, including the potential lack of an active market
for Shares, losses from trading in secondary markets, and disruption in the
creation/redemption process of the Fund. Any of these factors may lead to the
Shares trading at a premium or discount to NAV. Non-Correlation Risk: The Fund’s
return may not match the return of the Underlying Index for a number of reasons.
For example, the Fund incurs operating expenses not applicable to the Underlying
Index, and incurs costs in buying and selling securities, especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Underlying Index. In addition, the performance of the Fund and the
Underlying Index may vary due to asset valuation differences and differences
between the Fund’s portfolio and the Underlying Index resulting from legal
restrictions, costs or liquidity constraints. Non-Diversification Risk: The Fund
is classified as a “non-diversified” investment company under the 1940 Act. As a
result, the Fund is subject to the risk that it will be more volatile than a
diversified fund because the Fund may invest its assets in a smaller number of
issuers or may invest a larger proportion of its assets in a single issuer. As a
result, the gains and losses on a single investment may have a greater impact on
the Fund’s NAV and may make the Fund more volatile than more diversified funds.
Passive Investment Risk: The Fund is not actively managed and the Adviser does
not attempt to take defensive positions in declining markets. Unlike many
investment companies, the Fund does not utilize an investing strategy that seeks
returns in excess
91 of its Underlying
Index. Therefore, it would not necessarily buy or sell a security unless that
security is added or removed, respectively, from the Underlying Index, even if
that security generally is underperforming. Premium/Discount Risk: Disruptions
to creations and redemptions, the existence of extreme market volatility or
potential lack of an active trading market for Shares may result in Shares
trading at a significant premium or discount to NAV. If a shareholder purchases
Shares at a time when the market price is at a premium to the NAV or sells
Shares at a time when the market price is at a discount to the NAV, the
shareholder may sustain losses. Reliance on Trading Partners Risk: Economies in
emerging market countries generally are dependent heavily upon commodity prices
and international trade and, accordingly, may be affected adversely by the
economies of their trading partners, trade barriers, exchange controls, managed
adjustments in relative currency values, and may suffer from extreme and
volatile debt burdens or inflation rates. Risks Related to Investing in the
ASEAN Region: Investments in the ASEAN region involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. Singapore,
Malaysia, Thailand, Indonesia and the Philippines present different economic and
political conditions from those in Western markets, and less social, political
and economic stability. In the past, some of these economies have experienced
high interest rates, economic volatility, inflation, currency devaluations and
high unemployment rates. Political instability could have an adverse effect on
economic or social conditions in these economies and may result in outbreaks of
civil unrest, terrorist attacks or threats or acts of war in the affected areas,
any of which could materially and adversely affect the companies in which the
Fund may invest. Risks Related to Investing in the Financials Sector:
Performance of companies in the financials sector may be adversely impacted by
many factors, including, among others, government regulations, economic
conditions, credit rating downgrades, changes in interest rates, and decreased
liquidity in credit markets. This sector has experienced significant losses in
the recent past, and the impact of more stringent capital requirements and of
recent or future regulation on any individual financial company or on the sector
as a whole cannot be predicted. Securities Lending Risk: Securities lending
involves a risk of loss because the borrower may fail to return the securities
in a timely manner or at all. If the Fund is not able to recover the securities
loaned, it may sell the collateral and purchase a replacement security in the
market. Lending securities entails a risk of loss to the Fund if and to the
extent that the market value of the loaned securities increases and the
collateral is not increased accordingly. Additionally, the Fund will bear any
loss on the investment of cash collateral it receives. These events could also
trigger adverse tax consequences for the Fund. As securities on loan may not be
voted by the Fund, there is a risk that the Fund may not be able to recall the
securities in sufficient time to vote on material proxy matters. Securities
Market Risk: Because certain securities markets in the countries in which the
Fund may invest are small in size, underdeveloped, and are less regulated and
less correlated to global economic cycles than those markets located in more
developed countries, the securities markets in such countries are subject to
greater risks associated with market volatility, lower market capitalization,
lower trading volume, illiquidity, inflation, greater price fluctuations and
uncertainty regarding the existence of trading markets. Tracking Error Risk: The
performance of the Fund may diverge from that of the Underlying Index. Trading
Halt Risk: An exchange or market may close or issue trading halts on specific
securities, or the ability to buy or sell certain securities or financial
instruments may be restricted, which may result in the Fund being unable to buy
or sell certain securities or financial instruments. In such circumstances, the
Fund may be unable to rebalance its portfolio, may be unable to accurately price
its investments and/or may incur substantial trading losses. U.S. Economic Risk:
Decreasing U.S. imports, new trade regulations, changes in the U.S. dollar
exchange rates, a recession in the United States or continued increases in
foreclosures rates may have an adverse impact on the economies of Singapore,
Malaysia, Indonesia, Thailand and the Philippines. Valuation Risk: The sales
price the Fund could receive for a security may differ from the Fund’s valuation
of the security and may differ from the value used by the Underlying Index,
particularly for securities that trade in low value or volatile markets or that
are valued using a fair value methodology. The value of the securities in the
Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
92 PERFORMANCE
INFORMATION The bar chart and table that follow show how the Fund performed on a
calendar year basis and provide an indication of the risks of investing in the
Fund by showing changes in the Fund’s performance from year to year and by
showing how the Fund’s average annual returns for the indicated periods compare
with the Fund’s benchmark index and a broad measure of market performance. The
Fund’s past performance (before and after taxes) is not necessarily indicative
of how the Fund will perform in the future. Updated performance information is
available online at www.globalxfunds.com. Annual Total Returns (Years Ended
December 31,) Best Quarter: 03/31/12 11.77% Worst Quarter: 06/30/12 -4.34%
Average Annual Total Returns (for the Periods Ended December 31, 2014) Year
Ended December 31, 2014 Since Inception (02/16/2011) Global X Southeast Asia
ETF: ·Return before taxes ·Return after taxes on distributions1 ·Return after
taxes on distributions and sale of Fund Shares1 5.34% 4.57% 3.43% 4.34% 3.59%
3.28% FTSE/ASEAN 40 Index (net) (Index returns do not reflect deductions for
fees, expenses, or taxes) 6.37% 4.97% S&P 500 Index (Index returns do not
reflect deductions for fees, expenses, or taxes) 13.69% 14.22% 1 After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns will depend on your specific tax situation
and may differ from those shown above. After-tax returns are not relevant to
investors who hold Shares of the Fund through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts (IRAs).
93 FUND MANAGEMENT
Investment Adviser: Global X Management Company LLC. Portfolio Managers: The
professionals primarily responsible for the day-to-day management of the Fund
are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang Kim, CFA
(“Portfolio Managers”). Messrs. del Ama and Gonzalez have been Portfolio
Managers of the Fund since February 16, 2011. Messrs. Berruga and Kim have been
Portfolio Managers of the Fund since February 15, 2014. OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and financial intermediary compensation,
please turn to the sections of this Prospectus entitled “Purchase and Sale of
Fund Shares,” “Tax Information,” and “Payments to Broker-Dealers and Other
Financial Intermediaries” on page 157 of the Prospectus.
94 Global X FTSE
Bangladesh Index ETF Ticker: [ ] Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE
The Global X FTSE Bangladesh Index ETF (“Fund”) seeks to provide investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the FTSE Bangladesh Index (“Underlying Index”). FEES AND
EXPENSES This table describes the fees and expenses that you may pay if you buy
and hold shares (“Shares”) of the Fund. You will also incur usual and customary
brokerage commissions when buying and selling Shares. Annual Fund Operating
Expenses (expenses that you pay each year as a percentage of the value of your
investment): Management Fees: 0.68% Distribution and Service (12b-1) Fees: None
Other Expenses (Custody Fees):1 0.40% Total Annual Fund Operating Expenses:
1.08% 1 “Other Expenses” reflect estimated expenses for the Fund’s first fiscal
year of operations. Example: The following example is intended to help you
compare the cost of investing in the Fund with the cost of investing in other
funds. This example does not take into account customary brokerage commissions
that you pay when purchasing or selling Shares of the Fund in the secondary
market. The example assumes that you invest $10,000 in the Fund for the time
periods indicated and then sell all of your Shares at the end of those periods.
The example also assumes that your investment has a 5% return each year and that
the Fund's operating expenses remain the same. Although your actual costs may be
higher or lower, based on these assumptions, your costs would be: One Year Three
Years $110 $343 Portfolio Turnover: The Fund pays transaction costs, such as
commissions, when it buys and sells securities (or "turns over" its portfolio).
A higher portfolio turnover rate may indicate higher transaction costs and may
result in higher taxes when Shares are held in a taxable account. These costs,
which are not reflected in annual fund operating expenses or in the example,
affect the Fund’s performance. The Fund had not yet commenced investment
operations as of the most recent fiscal year end. Thus, no portfolio turnover
rate is provided for the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund will
invest at least 80% of its total assets in the securities of the Underlying
Index and in American Depositary Receipts ("ADRs") and Global Depositary
Receipts ("GDRs") based on the securities in the Underlying Index. The Fund’s
80% investment policy is non-fundamental and requires 60 days’ prior written
notice to shareholders before it can be changed. The Underlying Index is
designed to reflect broad-based equity market performance in Bangladesh, as
defined by FTSE International Limited ("FTSE"), the provider of the Underlying
Index ("Index Provider"). As of January 1, 2015, the Underlying Index had 20
constituents. The Fund’s investment objective and Underlying Index may be
changed without shareholder approval. The Underlying Index is sponsored by the
Index Provider, which is an organization that is independent of the Fund and
Global X Management Company LLC, the investment adviser for the Fund
(“Adviser”). The Index Provider determines the relative weightings of the
securities in the Underlying Index and publishes information regarding the
market value of the Underlying Index. The Adviser uses a “passive” or indexing
approach to try to achieve the Fund’s investment objective. Unlike many
investment companies, the Fund does not try to outperform the Underlying Index
and does not seek temporary defensive positions when markets decline or appear
overvalued.
95 The Fund generally
will use a replication strategy. A replication strategy is an indexing strategy
that involves investing in the securities of the Underlying Index in
approximately the same proportions as in the Underlying Index. However, the Fund
may utilize a representative sampling strategy with respect to the Underlying
Index when a replication strategy might be detrimental or disadvantageous to
shareholders, such as when there are practical difficulties or substantial costs
involved in compiling a portfolio of equity securities to replicate the
Underlying Index, in instances in which a security in the Underlying Index
becomes temporarily illiquid, unavailable or less liquid, or as a result of
legal restrictions or limitations (such as tax diversification requirements)
that apply to the Fund but not the Underlying Index. The Adviser expects that,
over time, the correlation between the Fund’s performance and that of the
Underlying Index, before fees and expenses, will exceed 95%. A correlation
percentage of 100% would indicate perfect correlation. If the Fund uses a
replication strategy, it can be expected to have greater correlation to the
Underlying Index than if it uses a representative sampling strategy. The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. SUMMARY OF PRINCIPAL RISKS As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund's performance could trail that of other investments. There is no guarantee
that the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
Asian Economic Risk: Decreasing Asian imports, new trade regulations, changes in
exchange rates, a recession in Asia or a slowing of economic growth in this
region could have an adverse impact on the economy of Bangladesh. Asset Class
Risk: Securities in the Underlying Index or the Fund's portfolio may
underperform in comparison to the general securities markets or other asset
classes. Cash Transactions Risk: Unlike most ETFs, the Fund intends to effect
all creations and redemptions principally for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Concentration Risk: Because the
Fund's investments are concentrated in Bangladeshi securities, the Fund will be
susceptible to losses due to adverse occurrences affecting that country. To the
extent that the Underlying Index concentrates in the securities of issuers in a
particular country, industry, market, asset class, or sector, the Fund will also
concentrate its investments to approximately the same extent. By concentrating
its investments in a country, industry, market, asset class, or sector, the Fund
faces more risks than if it were diversified broadly over numerous countries,
industries, markets, asset classes, or sectors. Such risks, any of which may
adversely affect the companies in which the Fund invests, may include, but are
not limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a particular country,
industry, market, asset class, or sector. In addition, at times, such country,
industry, market, asset class, or sector may be out of favor and underperform
other similar categories or the market as a whole. For additional details on
these risks, please see Risks Related to Investing in Bangladesh. Currency Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Bangladesh's currency depreciates against the U.S. dollar. Custody Risk: Less
developed markets are more likely to experience problems with the clearing and
settling of trades and the holding of securities by local banks, agents and
depositories.
96 Emerging Market Risk:
Bangladesh is an emerging market country which, may be subject to a greater risk
of loss than investments in developed markets. Securities markets of emerging
market countries are less liquid, subject to greater price volatility, have
smaller market capitalizations, have less government regulation, and are not
subject to as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries. Equity
Securities Risk: Equity securities are subject to changes in value and their
values may be more volatile than other asset classes, as a result of such
factors as a company’s business performance, investor perceptions, stock market
trends and general economic conditions. Foreign Security Risk: Investments in
the securities of foreign issuers (including investments in ADRs and GDRs) are
subject to the risks associated with investing in those foreign markets, such as
heightened risks of inflation or nationalization. In addition, securities of
foreign issuers may lose value due to political, economic and geographic events
affecting a foreign issuer or market. During periods of social, political or
economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges, nonetheless, could be affected by, among other things,
increasing price volatility, illiquidity, or the closure of the primary market
on which the security (or the security underlying the ADR or GDR) is traded. You
may lose money due to political, economic and geographic events affecting a
foreign issuer or market. Frontier Market Risks: Frontier market countries
generally have smaller economies or less developed capital markets than
traditional emerging markets, and, as a result, the risks of investing in
emerging market countries are magnified in frontier market countries. The
economies of frontier market countries are less correlated to global economic
cycles than those of their more developed counterparts and their markets have
low trading volumes and the potential for extreme price volatility and
illiquidity. These factors make investing in frontier market countries
significantly riskier than in other countries and any one of them could cause
the price of the Fund’s Shares to decline. Geographic Risk: A natural disaster
could occur in Bangladesh, which could affect the economy or particular business
operations of companies economically tied to Bangladesh. Investable Universe of
Companies Risk: The investable universe of companies in which a Fund may invest
may be limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s underlying
portfolio holdings and on Fund performance. Issuer Risk: Fund performance
depends on the performance of individual companies in which the Fund invests.
Changes to the financial condition of any of those companies may cause the value
of their securities to decline. Management Risk: The Fund is subject to the risk
that the Adviser’s investment management strategy may cause the Fund to
underperform the market or its relevant benchmark or adversely affect the
ability of the Fund to achieve its investment objective. Market Risk: The Fund's
NAV could decline over short periods due to short-term market movements and over
longer periods during market downturns. Market Trading Risk: The Fund faces
numerous market trading risks, including the potential lack of an active market
for Shares, losses from trading in secondary markets, and disruption in the
creation/redemption process of the Fund. Any of these factors may lead to the
Shares trading at a premium or discount to NAV. Non-Correlation Risk: The Fund’s
return may not match the return of the Underlying Index for a number of reasons.
For example, the Fund incurs operating expenses not applicable to the Underlying
Index, and incurs costs in buying and selling securities, especially when
rebalancing the Fund’s securities holdings to reflect changes in the composition
of the Underlying Index. In addition, the performance of the Fund and the
Underlying Index may vary due to asset valuation differences and differences
between the Fund’s portfolio and the Underlying Index resulting from legal
restrictions, costs or liquidity constraints. Non-Diversification Risk: The Fund
is classified as a “non-diversified” investment company under the 1940 Act. As a
result, the Fund is subject to the risk that it will be more volatile than a
diversified fund because the Fund may invest its assets in a smaller number of
issuers or may invest a larger proportion of its assets in a single issuer. As a
result, the gains and losses on a single investment may have a greater impact on
the Fund’s NAV and may make the Fund more volatile than more diversified funds.
Passive Investment Risk: The Fund is not actively managed and the Adviser does
not attempt to take defensive positions in declining markets. Unlike many
investment companies, the Fund does not utilize an investing strategy that seeks
returns in excess
97 of its Underlying
Index. Therefore, it would not necessarily buy or sell a security unless that
security is added or removed, respectively, from the Underlying Index, even if
that security generally is underperforming. Privatization Risk: Bangladesh has
privatized certain entities and industries. Privatized entities may lose money
or be renationalized. Risks Related to Investing in Bangladesh: Investments are
concentrated in companies in Bangladesh. Bangladesh faces many economic hurdles
including weak political institutions, government mismanagement of resources,
poor infrastructure, lack of privatization of industry and a labor force that
has outpaced job growth in the country. The privatization of industries in
Bangladesh has been slow, largely due to worker unrest at state-owned
enterprises. Opposition from government bureaucracy and public sector unions has
prevented much of the economic liberalization, and capital markets in Bangladesh
are still in need of reform with regard to the treatment of foreign investors
and foreign capital. Securities Market Risk: Because securities markets in
Bangladesh are small in size, underdeveloped and are less regulated and less
correlated to global economic cycles than those markets located in more
developed countries, the securities markets in Bangladesh are subject to greater
risks associated with market volatility, lower market capitalization, lower
trading volume, illiquidity, inflation, greater price fluctuations and
uncertainty regarding the existence of trading markets. Security Risk: The
country in which the Fund invests has experienced security concerns. Incidents
involving a country's or region's security may cause uncertainty in Colombian
markets and may adversely affect their economies and the Fund's investments.
Structural Risk: Colombia may be subject to considerable degrees of economic,
political and social instability. Small- and Mid-Capitalization Companies Risk:
Small- and mid-capitalization companies often have greater price volatility,
lower trading volume and less liquidity than larger more established companies.
In addition, these companies are often subject to less analyst coverage and may
be in early and less predictable periods of their corporate existences. These
companies tend to have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than larger companies.
Tracking Error Risk: The performance of the Fund may diverge from that of the
Underlying Index. Trading Halt Risk: An exchange or market may close or issue
trading halts on specific securities, or the ability to buy or sell certain
securities or financial instruments may be restricted, which may result in the
Fund being unable to buy or sell certain securities or financial instruments. In
such circumstances, the Fund may be unable to rebalance its portfolio, may be
unable to accurately price its investments and/or may incur substantial trading
losses. Valuation Risk: The sales price the Fund could receive for a security
may differ from the Fund’s valuation of the security and may differ from the
value used by the Underlying Index, particularly for securities that trade in
low value or volatile markets or that are valued using a fair value methodology.
The value of the securities in the Fund's portfolio may change on days when
shareholders will not be able to purchase or sell the Fund's Shares. PERFORMANCE
INFORMATION The Fund has not commenced operations as of the date of this
Prospectus. Thus, no bar chart or Average Annual Total Returns table is included
for the Fund. FUND MANAGEMENT Investment Adviser: Global X Management Company
LLC. Portfolio Managers: The professionals primarily responsible for the
day-to-day management of the Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis
Berruga and Chang Kim, CFA (“Portfolio Managers”). Messrs. del Ama, Gonzalez,
Berruga, and Kim have been Portfolio Managers of the Fund since inception. OTHER
IMPORTANT INFORMATION REGARDING FUND SHARES For important information about
purchase and sale of Fund Shares, tax information and financial intermediary
compensation, please turn to the sections of this Prospectus entitled “Purchase
and Sale of Fund Shares,” “Tax Information,” and “Payments to Broker-Dealers and
Other Financial Intermediaries” on page 157 of the Prospectus.
98 Global X MSCI Colombia
ETF Ticker: GXG Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The Global X MSCI
Colombia ETF (formerly, Global X FTSE Colombia 20 ETF) (“Fund”) seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the MSCI All Colombia Capped Index (the “Underlying
Index”). FEES AND EXPENSES This table describes the fees and expenses that you
may pay if you buy and hold shares (“Shares”) of the Fund. You will also incur
usual and customary brokerage commissions when buying and selling Shares. Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment): Management Fees: 0.68% Distribution and Service
(12b-1) Fees: None Other Expenses (Custody Fees):1 0.11% Total Annual Fund
Operating Expenses: 0.79% Expense Reimbursement and/or Fee Waiver:2 (0.18)%
Total Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement: 0.61% 1 Custody Fees have been restated to reflect current fees
and expenses. 2 Pursuant to an Expense Limitation Agreement, the Adviser has
contractually agreed to waive or reimburse fees and/or limit Fund expenses to
the extent necessary to assure that the operating expenses of the Fund
(exclusive of taxes, brokerage fees, commissions, and other transaction
expenses, interest and extraordinary expenses (such as litigation and
indemnification expenses)) will not exceed 0.61% of the Fund’s average daily net
assets per year until at least March 1, 2016. Pursuant to the Expense Limitation
Agreement, the Fund (at a later date) may reimburse the Adviser for the fees and
expenses it waived or reimbursed and/or limited pursuant to the Expense
Limitation Agreement during any of the prior three fiscal years, provided that,
among other things, any reimbursement made to the Adviser does not cause Total
Annual Fund Operating Expenses of the Fund to exceed 0.61% during the period in
which it is paid and the Board of Trustees has approved in advance such
reimbursement to the Adviser. Example: The following example is intended to help
you compare the cost of investing in the Fund with the cost of investing in
other funds. This example does not take into account customary brokerage
commissions that you pay when purchasing or selling Shares of the Fund in the
secondary market. The example assumes that you invest $10,000 in the Fund for
the time periods indicated and then sell all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would be:
One Year Three Years Five Years Ten Years $62 $234 $421 $961 Portfolio Turnover:
The Fund pays transaction costs, such as commissions, when it buys and sells
securities (or "turns over" its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, affect the Fund’s performance. During the
most recent fiscal year, the Fund’s portfolio turnover rate was 47.57% of the
average value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES The Fund invests
its total assets in securities of companies that are listed on the Colombian
Stock Exchange as well as cash and cash equivalents. The Fund also invests at
least 80% of its total assets in the securities of the Underlying Index and in
American
99 Depositary Receipts
("ADRs") and Global Depositary Receipts ("GDRs") based on the securities in the
Underlying Index. The investment policies described above are non-fundamental
and require 60 days’ prior written notice to shareholders before they can be
changed. The Fund may lend securities representing up to one-third of the value
of the Fund's total assets (including the value of the collateral received). The
Underlying Index is designed to measure broad-based equity market performance in
Colombia, as defined by MSCI, Inc. ("MSCI"), the provider of the Underlying
Index ("Index Provider"). The Fund’s investment objective and Underlying Index
may be changed without shareholder approval. The Underlying Index is sponsored
by the Index Provider, which is an organization that is independent of the Fund
and Global X Management Company LLC, the investment adviser for the Fund
(“Adviser”). The Index Provider determines the relative weightings of the
securities in the Underlying Index and publishes information regarding the
market value of the Underlying Index. The Adviser uses a “passive” or indexing
approach to try to achieve the Fund’s investment objective. Unlike many
investment companies, the Fund does not try to outperform the Underlying Index
and does not seek temporary defensive positions when markets decline or appear
overvalued. The Fund generally will use a replication strategy. A replication
strategy is an indexing strategy that involves investing in the securities of
the Underlying Index in approximately the same proportions as in the Underlying
Index. However, the Fund may utilize a representative sampling strategy with
respect to the Underlying Index when a replication strategy might be detrimental
or disadvantageous to shareholders, such as when there are practical
difficulties or substantial costs involved in compiling a portfolio of equity
securities to replicate the Underlying Index, in instances in which a security
in the Underlying Index becomes temporarily illiquid, unavailable or less
liquid, or as a result of legal restrictions or limitations (such as tax
diversification requirements) that apply to the Fund but not the Underlying
Index. The Adviser expects that, over time, the correlation between the Fund’s
performance and that of the Underlying Index, before fees and expenses, will
exceed 95%. A correlation percentage of 100% would indicate perfect correlation.
If the Fund uses a replication strategy, it can be expected to have greater
correlation to the Underlying Index than if it uses a representative sampling
strategy. The Fund concentrates its investments (i.e., holds 25% or more of its
total assets) in a particular industry or group of industries to approximately
the same extent that the Underlying Index is concentrated. As of December 31,
2014, the Underlying Index was concentrated in the Financials Sector. SUMMARY OF
PRINCIPAL RISKS As with any investment, you could lose all or part of your
investment in the Fund, and the Fund's performance could trail that of other
investments. There is no guarantee that the Fund will achieve its investment
objective. The Fund is subject to the principal risks noted below, any of which
may adversely affect the Fund's net asset value ("NAV"), trading price, yield,
total return and ability to meet its investment objective, as well as other
risks that are described in greater detail in the Additional Information About
the Funds’ Strategies and Risks section of the Prospectus and in the Statement
of Additional Information ("SAI"). ADR/GDR Risk: To the extent the Fund seeks
exposure to foreign companies, the Fund’s investments may be in the form of
depositary receipts or other securities convertible into securities of foreign
issuers, including ADRs and GDRs. While the use of ADRs and GDRs, which are
traded on exchanges and represent an ownership in a foreign security, provide an
alternative to directly purchasing the underlying foreign securities in their
respective national markets and currencies, investments in ADRs and GDRs
continue to be subject to certain of the risks associated with investing
directly in foreign securities. Asset Class Risk: Securities in the Underlying
Index or the Fund's portfolio may underperform in comparison to the general
securities markets or other asset classes. Cash Transaction Risk: Unlike most
ETFs, the Fund intends to effect all creations and redemptions principally for
cash, rather than in-kind securities. As a result, an investment in the Fund may
be less tax-efficient than an investment in a more conventional ETF. Commodity
Exposure Risk: The Fund invests in Colombian securities, which are susceptible
to fluctuations in certain commodity markets. Any negative changes in commodity
markets could have a great impact on the Colombian economy. Concentration Risk:
Because the Fund's investments are concentrated in Colombian securities and in
the financials sector, the Fund will be susceptible to loss due to adverse
occurrences affecting this country and sector. To the extent that the Underlying
100 Index concentrates in
the securities of issuers in a particular country, industry, market, asset
class, or sector, the Fund will also concentrate its investments to
approximately the same extent. By concentrating its investments in a country,
industry, market, asset class, or sector, the Fund faces more risks than if it
were diversified broadly over numerous countries, industries, markets, asset
classes, or sectors. Such risks, any of which may adversely affect the companies
in which the Fund invests, may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources, adverse labor relations,
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular country, industry, market, asset class,
or sector. In addition, at times, such country, industry, market, asset class,
or sector may be out of favor and underperform other similar categories or the
market as a whole. For additional details on these risks, please see Risks
Related to Investing in Colombia and Risks Related to Investing in the
Financials Sector. Currency Risk: Because the Fund's NAV is determined in U.S.
dollars, the Fund's NAV could decline if Colombia's currency depreciates against
the U.S. dollar. Custody Risk: Less developed markets are more likely to
experience problems with the clearing and settling of trades and the holding of
securities by local banks, agents and depositories. Emerging Market Risk:
Colombia is an emerging market country, which may be subject to a greater risk
of loss than investments in developed markets. Securities markets of emerging
market countries are less liquid, subject to greater price volatility, have
smaller market capitalizations, have less government regulation, and are not
subject to as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries. Equity
Securities Risk: Equity securities are subject to changes in value and their
values may be more volatile than other asset classes, as a result of such
factors as a company’s business performance, investor perceptions, stock market
trends and general economic conditions. Foreign Security Risk: Investments in
the securities of foreign issuers (including investments in ADRs and GDRs) are
subject to the risks associated with investing in those foreign markets, such as
heightened risks of inflation or nationalization. In addition, securities of
foreign issuers may lose value due to political, economic and geographic events
affecting a foreign issuer or market. During periods of social, political or
economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges, nonetheless, could be affected by, among other things,
increasing price volatility, illiquidity, or the closure of the primary market
on which the security (or the security underlying the ADR or GDR) is traded. You
may lose money due to political, economic and geographic events affecting a
foreign issuer or market. Geographic Risk: A natural disaster could occur in
Colombia, which could affect the economy or particular business operations of
companies economically tied to Colombia. Investable Universe of Companies Risk:
The investable universe of companies in which a Fund may invest may be limited.
If a company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Latin American Economic Risk: The economy of Colombia is
affected by the economies of Latin American countries, some of which have
experienced high interest rates, economic volatility, inflation, currency
devaluations and high unemployment rates. Any adverse economic event in one
country can have a significant effect on other countries of this region.
Management Risk: The Fund is subject to the risk that the Adviser’s investment
management strategy may cause the Fund to underperform the market or its
relevant benchmark or adversely affect the ability of the Fund to achieve its
investment objective. Market Risk: The Fund's NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns. Market Trading Risk: The Fund faces numerous market trading risks,
including the potential lack of an active market for Shares, losses from trading
in secondary markets, and disruption in the creation/redemption process of the
Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV.
101 Mid-Capitalization
Companies Risk: Mid-market capitalization companies may have greater volatility
in price than the stocks of large companies due to limited product lines or
resources or a dependency upon a particular market niche. Non-Correlation Risk:
The Fund’s return may not match the return of the Underlying Index for a number
of reasons. For example, the Fund incurs operating expenses not applicable to
the Underlying Index, and incurs costs in buying and selling securities,
especially when rebalancing the Fund’s securities holdings to reflect changes in
the composition of the Underlying Index. In addition, the performance of the
Fund and the Underlying Index may vary due to asset valuation differences and
differences between the Fund’s portfolio and the Underlying Index resulting from
legal restrictions, costs or liquidity constraints. Non-Diversification Risk:
The Fund is classified as a “non-diversified” investment company under the 1940
Act. As a result, the Fund is subject to the risk that it will be more volatile
than a diversified fund because the Fund may invest its assets in a smaller
number of issuers or may invest a larger proportion of its assets in a single
issuer. As a result, the gains and losses on a single investment may have a
greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds. Passive Investment Risk: The Fund is not actively managed and
the Adviser does not attempt to take defensive positions in declining markets.
Unlike many investment companies, the Fund does not utilize an investing
strategy that seeks returns in excess of its Underlying Index. Therefore, it
would not necessarily buy or sell a security unless that security is added or
removed, respectively, from the Underlying Index, even if that security
generally is underperforming. Premium/Discount Risk: Disruptions to creations
and redemptions, the existence of extreme market volatility or potential lack of
an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. Reliance on Trading Partners Risk: The Fund invests in the Colombian
economy, which is heavily dependent upon trading with key partners. Any
reduction in this trading, including as a result of adverse economic conditions
in a trading partner’s economy, may cause an adverse impact on the economy in
which the Fund invests. Risks Related to Investing in Colombia: Investment in
Colombian issuers and companies that have significant operations in Colombia
involves risks that are specific to Colombia, including legal, regulatory,
political and economic risks. The Colombian economy has grown steadily during
the past several years, but there can be no assurance that economic growth will
continue. The Colombian economy depends heavily on oil, coal and other commodity
exports, making it vulnerable to commodity prices. Risks Related to Investing in
the Financials Sector: Performance of companies in the financials sector may be
adversely impacted by many factors, including, among others, government
regulations, economic conditions, credit rating downgrades, changes in interest
rates, and decreased liquidity in credit markets. This sector has experienced
significant losses in the recent past, and the impact of more stringent capital
requirements and of recent or future regulation on any individual financial
company or on the sector as a whole cannot be predicted. Securities Lending
Risk: Securities lending involves a risk of loss because the borrower may fail
to return the securities in a timely manner or at all. If the Fund is not able
to recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters. Securities Market Risk: Because the securities markets in Colombia are
small in size, underdeveloped, and are less regulated and less correlated to
global economic cycles than those markets located in more developed countries,
the securities markets in Colombia are subject to greater risks associated with
market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations and uncertainty regarding the
existence of trading markets. Security Risk: The country in which the Fund
invests has experienced security concerns. Incidents involving a country's or
region's security may cause uncertainty in Colombian markets and may adversely
affect their economies and the Fund's investments. Structural Risk: Colombia may
be subject to considerable degrees of economic, political and social
instability. Tracking Error Risk: The performance of the Fund may diverge from
that of the Underlying Index.
102 Trading Halt Risk: An
exchange or market may close or issue trading halts on specific securities, or
the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses. U.S. Economic Risk:
Decreasing U.S. imports, new trade regulations, changes in the U.S. dollar
exchange rates, a recession in the United States or continued increases in
foreclosures rates may have an adverse impact on the economy of Colombia.
Valuation Risk: The sales price the Fund could receive for a security may differ
from the Fund’s valuation of the security and may differ from the value used by
the Underlying Index, particularly for securities that trade in low value or
volatile markets or that are valued using a fair value methodology. The value of
the securities in the Fund's portfolio may change on days when shareholders will
not be able to purchase or sell the Fund's Shares. PERFORMANCE INFORMATION The
bar chart and table that follow show how the Fund performed on a calendar year
basis and provide an indication of the risks of investing in the Fund by showing
changes in the Fund’s performance from year to year and by showing how the
Fund’s average annual returns for the indicated periods compare with the Fund’s
benchmark index and a broad measure of market performance. Absent any applicable
fee waivers and/or expense limitations, performance would have been lower. On
July 15, 2014, the name of the Fund changed from the Global X FTSE Colombia 20
ETF to the Global X MSCI Colombia ETF to reflect a change to the Fund's Index
Provider from FTSE International Limited to MSCI, Inc. and a change in the
Fund's Underlying Index from FTSE Colombia 20 Index to MSCI All Colombia Capped
Index. The Fund’s past performance (before and after taxes) is not necessarily
indicative of how the Fund will perform in the future. Updated performance
information is available online at www.globalxfunds.com. Annual Total Returns
(Years Ended December 31,) Best Quarter: 09/30/10 30.53% Worst Quarter: 12/31/14
-26.98%
103 Average Annual Total
Returns (for the Periods Ended December 31, 2014) One Year Ended December 31,
2014 Five Years Ended December 31, 2014 Since Inception (02/05/2009) Global X
MSCI Colombia ETF: ·Return before taxes ·Return after taxes on distributions1
·Return after taxes on distributions and sale of Fund Shares1 -26.46% -26.96%
-14.49% 0.18% -0.39% 0.16% 12.48% 11.75% 10.08% Hybrid MSCI All Colombia Capped
Index/FTSE Colombia 20 Index (net)2 (Index returns do not reflect deductions for
fees, expenses, or taxes) -24.28% 1.55% 13.87% FTSE Colombia 20 Index (net)
(Index returns do not reflect deductions for fees, expenses, or taxes) -21.15%
2.38% 14.66% S&P 500 Index (Index returns do not reflect deductions for
fees, expenses, or taxes) 13.69% 15.45% 18.79% 1 After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local taxes. Your actual
after-tax returns will depend on your specific tax situation and may differ from
those shown above. After-tax returns are not relevant to investors who hold
Shares of the Fund through tax-deferred arrangements, such as 401(k) plans or
individual retirement accounts (IRAs). 2 Index performance reflects the
performance of the FTSE Colombia 20 Index through July 14, 2014 and the MSCI All
Colombia Capped Index thereafter. Effective July 15, 2014, the Fund changed its
index from FTSE Colombia 20 Index to the MSCI All Colombia Capped Index ("New
Index"). This change was effected due to the planned migration to the New Index,
potentially allowing for broader access to the local market. FUND MANAGEMENT
Investment Adviser: Global X Management Company LLC. Portfolio Managers: The
professionals primarily responsible for the day-to-day management of the Fund
are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang Kim, CFA
(“Portfolio Managers”). Messrs. del Ama and Gonzalez have been Portfolio
Managers of the Fund since February 5, 2009. Messrs. Berruga and Kim have been
Portfolio Managers of the Fund since February 15, 2014. OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and information about financial
intermediary compensation, please turn to the sections of this Prospectus
entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and “Payments to
Broker-Dealers and Other Financial Intermediaries” on page 157 of the
Prospectus.
104 Global X Next
Emerging & Frontier ETF Ticker: EMFM Exchange: NYSE Arca, Inc. INVESTMENT
OBJECTIVE The Global X Next Emerging & Frontier ETF (“Fund”) seeks to
provide investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Solactive Next Emerging &
Frontier Index (“Underlying Index”). FEES AND EXPENSES This table describes the
fees and expenses that you may pay if you buy and hold shares (“Shares”) of the
Fund. You will also incur usual and customary brokerage commissions when buying
and selling Shares. Annual Fund Operating Expenses (expenses that you pay each
year as a percentage of the value of your investment): Management Fees: 0.49%
Distribution and Service (12b-1) Fees: None Other Expenses (Custody and Income
Tax): 0.09% Total Annual Fund Operating Expenses: 0.58% Example: The following
example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other funds. This example does not take into account
customary brokerage commissions that you pay when purchasing or selling Shares
of the Fund in the secondary market. The example assumes that you invest $10,000
in the Fund for the time periods indicated and then sell all of your Shares at
the end of those periods. The example also assumes that your investment has a 5%
return each year and that the Fund's operating expenses remain the same.
Although your actual costs may be higher or lower, based on these assumptions,
your costs would be: One Year Three Years Five Years Ten Years $59 $186 $324
$726 Portfolio Turnover: The Fund pays transaction costs, such as commissions,
when it buys and sells securities (or "turns over" its portfolio). A higher
portfolio turnover rate may indicate higher transaction costs and may result in
higher taxes when Shares are held in a taxable account. These costs, which are
not reflected in annual fund operating expenses or in the example, affect the
Fund’s performance. During the most recent fiscal year, the Fund's portfolio
turnover rate was 24.14% of the average value of its portfolio. PRINCIPAL
INVESTMENT STRATEGIES The Fund invests at least 80% of its total assets in the
securities of the Underlying Index and in American Depositary Receipts ("ADRs")
and Global Depositary Receipts ("GDRs") based on the securities in the
Underlying Index. The Fund also invests at least 80% of its total assets in
securities of companies that are domiciled in, principally traded in or whose
revenues are primarily from "Next Emerging and Frontier" markets, which are
defined generally as investable markets that have lower market capitalization
and less liquidity than more developed markets. The Fund’s 80% investment
policies are non-fundamental and require 60 days’ prior written notice to
shareholders before they can be changed. The Underlying Index is designed to
reflect equity performance of Next Emerging markets and Frontier markets
companies, as defined by the Solactive AG, the provider of the Underlying Index
("Index Provider"). Next Emerging markets are defined as emerging market
countries beyond the BRICs (Brazil, Russia, India and China are excluded) and
beyond the most developed tier of emerging markets (currently South Korea and
Taiwan are also excluded). Frontier markets are those emerging market countries
that generally have smaller economies or less developed capital markets. The
Underlying Index is comprised of common stocks, ADRs and GDRs of selected
companies globally that are domiciled, principally traded in or have their main
business operations in these markets or that generate at least 50% of their
revenues from these markets. The Underlying Index screens the largest stocks
according to free-float market capitalization, which may include small- or
mid-cap companies, and weights them by modified liquidity.
105 As of January 1,
2015, the Underlying Index had 201 constituents from the following countries:
Argentina, Bangladesh, Chile, Colombia, Czech Republic, Egypt, Gabon, Georgia,
Hungary, Indonesia, Kazakhstan, Kenya, Kuwait, Laos, Malaysia, Mauritius,
Mexico, Mongolia, Namibia, Nigeria, Oman, Pakistan, Panama, Papua New Guinea,
Peru, Philippines, Poland, Qatar, Slovakia, South Africa, Tanzania, Thailand,
Turkey, United Arab Emirates and Vietnam. The Fund’s investment objective and
Underlying Index may be changed without shareholder approval. The Underlying
Index is sponsored by the Index Provider, which is an organization that is
independent of the Fund and Global X Management Company LLC, the investment
adviser for the Fund (“Adviser”). The Index Provider determines the relative
weightings of the securities in the Underlying Index and publishes information
regarding the market value of the Underlying Index. The Adviser uses a “passive”
or indexing approach to try to achieve the Fund’s investment objective. Unlike
many investment companies, the Fund does not try to outperform the Underlying
Index and does not seek temporary defensive positions when markets decline or
appear overvalued. The Fund uses a representative sampling strategy with respect
to the Underlying Index. “Representative sampling” is an indexing strategy that
involves investing in a representative sample of securities that collectively
has an investment profile similar to the Underlying Index in terms of key risk
factors, performance attributes and other characteristics. The Fund may or may
not hold all of the securities in the Underlying Index. The Adviser expects
that, over time, the correlation between the Fund’s performance and that of the
Underlying Index, before fees and expenses, will exceed 95%. A correlation
percentage of 100% would indicate perfect correlation. If the Fund uses a
replication strategy, it can be expected to have greater correlation to the
Underlying Index than if it uses a representative sampling strategy. The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of December 31, 2014, the Underlying
Index was not concentrated in a sector. SUMMARY OF PRINCIPAL RISKS As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund's performance could trail that of other investments. There is no guarantee
that the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
African Economic Risk: Investment in African securities involves heightened
risks including, among others, expropriation and/ or nationalization of assets,
confiscatory taxation, political instability, including authoritarian and/or
military involvement in governmental decision-making, armed conflict, the impact
on the economy as a result of civil war, and social instability as a result of
religious, ethnic and/or socioeconomic unrest and, in certain countries,
genocidal warfare. Certain countries in Africa generally have less developed
capital markets than traditional emerging market countries, and, consequently,
the risks of investing in foreign securities are magnified in such countries.
Asian Economic Risk: Investments in Asian markets involve risks not typically
associated with investments in securities of issuers in more developed countries
that may negatively affect the value of your investment in the Fund. The
countries in Asia present different economic and political conditions from those
in Western markets, and less social, political and economic stability. Political
instability could have an adverse effect on economic or social conditions in
these economies and may result in outbreaks of civil unrest, terrorist attacks
or threats or acts of war in the affected areas, any of which could materially
and adversely affect the companies in which the Fund may invest. Asset Class
Risk: Securities in the Underlying Index or the Fund's portfolio may
underperform in comparison to the general securities markets or other asset
classes.
106 Cash Transaction
Risk: Unlike most ETFs, the Fund intends to effect all creations and redemptions
partially for cash, rather than in-kind securities. As a result, an investment
in the Fund may be less tax-efficient than an investment in a more conventional
ETF. Commodity Exposure Risk: The Fund invests in securities and markets that
are susceptible to fluctuations in certain commodity markets. Any negative
changes in commodity markets could have a great impact on these economies.
Concentration Risk: To the extent that the Underlying Index concentrates in the
securities of issuers in a particular country, industry, market, asset class, or
sector, the Fund will also concentrate its investments to approximately the same
extent. By concentrating its investments in a country, industry, market, asset
class, or sector, the Fund faces more risks than if it were diversified broadly
over numerous countries, industries, markets, asset classes, or sectors. Such
risks, any of which may adversely affect the companies in which the Fund
invests, may include, but are not limited to, the following: general economic
conditions or cyclical market patterns that could negatively affect supply and
demand; competition for resources, adverse labor relations, political or world
events; obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular country, industry, market, asset class, or sector. In addition, at
times, such country, industry, market, asset class, or sector may be out of
favor and underperform other similar categories or the market as a whole.
Currency Risk: The Fund may invest in securities denominated in foreign
currencies. Because the Fund's NAV is determined in U.S. dollars, the Fund's NAV
could decline if relevant foreign currencies depreciates. Custody Risk: Less
developed markets are more likely to experience problems with the clearing and
settling of trades and the holding of securities by local banks, agents and
depositories. Emerging Market Risk: The Fund’s investments in emerging market
countries may be subject to a greater risk of loss than investments in developed
markets. Securities markets of emerging market countries are less liquid,
subject to greater price volatility, have smaller market capitalizations, have
less government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries. Equity Securities Risk: Equity securities
are subject to changes in value and their values may be more volatile than other
asset classes, as a result of such factors as a company’s business performance,
investor perceptions, stock market trends and general economic conditions.
European Economic Risk: The economies of Europe are highly dependent on each
other, both as key trading partners and as in many cases as fellow members
maintaining the euro. Reduction in trading activity among European countries may
cause an adverse impact on each nation’s individual economies. The European
financial markets have recently experienced volatility and adverse trends due to
concerns about rising government debt levels, ability to service debt, and
potential for defaults of several European countries, including Greece, Spain,
Ireland, Italy and Portugal. Investments in Eastern European markets involve
risks not typically associated with investments in securities of issuers in more
developed countries that may negatively affect the value of your investment in
the Fund. An investment in Eastern European issuers may subject the Fund to
legal, regulatory, political, currency, security and economic risks specific to
Eastern Europe. The securities markets in Eastern European countries are
substantially smaller and inexperienced, with less government supervision and
regulation of stock exchanges and less liquid and more volatile than securities
markets in the United States or Western European countries. Foreign Security
Risk: Investments in the securities of foreign issuers (including investments in
ADRs and GDRs) are subject to the risks associated with investing in those
foreign markets, such as heightened risks of inflation or nationalization. In
addition, securities of foreign issuers may lose value due to political,
economic and geographic events affecting a foreign issuer or market. During
periods of social, political or economic instability in a country or region, the
value of a foreign security traded on U.S. exchanges, nonetheless, could be
affected by, among other things, increasing price volatility, illiquidity, or
the closure of the primary market on which the security (or the security
underlying the ADR or GDR) is traded. You may lose money due to political,
economic and geographic events affecting a foreign issuer or market. Frontier
Market Risks: Frontier market countries generally have smaller economies or less
developed capital markets than traditional emerging markets, and, as a result,
the risks of investing in emerging market countries are magnified in frontier
market countries. The economies of frontier market countries are less correlated
to global economic cycles than those of their more developed counterparts and
their markets have low trading volumes and the potential for extreme price
volatility and illiquidity. These factors make investing in frontier market
countries significantly riskier than in other countries and any one of them
could cause the price of the Fund’s Shares to decline. Geographic Risk: A
natural disaster could occur in a country in which the Fund invests.
107 Investable Universe
of Companies Risk: The investable universe of companies in which a Fund may
invest may be limited. If a company no longer meets the Index Provider’s
criteria for inclusion in the Underlying Index, the Fund may need to reduce or
eliminate its holdings in that company. The reduction or elimination of the
Fund’s holdings in the company may have an adverse impact on the liquidity of
the Fund’s underlying portfolio holdings and on Fund performance. Issuer Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of their securities to decline. Latin American Economic Risk:
Many economies in Latin America have experienced high interest rates, economic
volatility, inflation, currency devaluations and high unemployment rates. Any
adverse economic event in one country can have a significant effect on other
countries of this region. In addition, commodities (such as oil, gas and
minerals) represent a significant percentage of the region's exports and many
economies in this region, are particularly sensitive to fluctuations in
commodity prices. Management Risk: The Fund is subject to the risk that the
Adviser’s investment management strategy may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. Market Risk: The Fund's NAV could decline over
short periods due to short-term market movements and over longer periods during
market downturns. Market Trading Risk: The Fund faces numerous market trading
risks, including the potential lack of an active market for Shares, losses from
trading in secondary markets, and disruption in the creation/redemption process
of the Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Middle East Economic Risk: Certain economies in the Middle East
depend to a significant degree upon exports of primary commodities such as oil.
A sustained decrease in commodity prices could have a significant negative
impact on all aspects of the economy in the region. Middle Eastern governments
have exercised and continue to exercise substantial influence over many aspects
of the private sector. Countries in the Middle East may be affected by political
instability, war or the threat of war, regional instability, terrorist
activities and religious, ethnic and/or socioeconomic unrest. Recent unrest and
instability in the larger Middle East region has adversely impacted many
economies in the region. Recent political instability and protests in the Middle
East and North Africa (which has ethnic, religious and economic ties to the
Middle East) have caused significant disruptions to many industries.
Non-Correlation Risk: The Fund’s return may not match the return of the
Underlying Index for a number of reasons. For example, the Fund incurs operating
expenses not applicable to the Underlying Index, and incurs costs in buying and
selling securities, especially when rebalancing the Fund’s securities holdings
to reflect changes in the composition of the Underlying Index. In addition, the
performance of the Fund and the Underlying Index may vary due to asset valuation
differences and differences between the Fund’s portfolio and the Underlying
Index resulting from legal restrictions, costs or liquidity constraints.
Non-Diversification Risk: The Fund is classified as a “non-diversified”
investment company under the 1940 Act. As a result, the Fund is subject to the
risk that it will be more volatile than a diversified fund because the Fund may
invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds. Passive Investment Risk: The
Fund is not actively managed and the Adviser does not attempt to take defensive
positions in declining markets. Unlike many investment companies, the Fund does
not utilize an investing strategy that seeks returns in excess of its Underlying
Index. Therefore, it would not necessarily buy or sell a security unless that
security is added or removed, respectively, from the Underlying Index, even if
that security generally is underperforming. Premium/Discount Risk: Disruptions
to creations and redemptions, the existence of extreme market volatility or
potential lack of an active trading market for Shares may result in Shares
trading at a significant premium or discount to NAV. If a shareholder purchases
Shares at a time when the market price is at a premium to the NAV or sells
Shares at a time when the market price is at a discount to the NAV, the
shareholder may sustain losses. Privatization Risk: The countries in which the
Funds invest have privatized certain entities and industries. Privatized
entities may lose money or be re-nationalized. Securities Market Risk: Because
certain securities markets in the countries in which the Fund may invest are
small in size, underdeveloped, and are less regulated and less correlated to
global economic cycles than those markets located in more developed countries,
the securities markets in such countries are subject to greater risks associated
with market volatility, lower market
108 capitalization, lower
trading volume, illiquidity, inflation, greater price fluctuations and
uncertainty regarding the existence of trading markets. Small- and
Mid-Capitalization Companies Risk: Small- and mid-capitalization companies often
have greater price volatility, lower trading volume and less liquidity than
larger more established companies. In addition, these companies are often
subject to less analyst coverage and may be in early and less predictable
periods of their corporate existences. These companies tend to have smaller
revenues, narrower product lines, less management depth and experience, smaller
shares of their product or service markets, fewer financial resources and less
competitive strength than larger companies. Tracking Error Risk: The performance
of the Fund may diverge from that of the Underlying Index. Trading Halt Risk: An
exchange or market may close or issue trading halts on specific securities, or
the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses. Valuation Risk: The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology. The value of the securities
in the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares. PERFORMANCE INFORMATION The bar chart and
table that follow show how the Fund performed for the most recent calendar year
and provide an indication of the risks of investing in the Fund by showing the
Fund’s performance from year to year and by showing how the Fund’s average
annual returns for the indicated periods compare with the Fund’s benchmark index
and a broad measure of market performance. The Fund’s past performance (before
and after taxes) is not necessarily indicative of how the Fund will perform in
the future. Updated performance information is available online at
www.globalxfunds.com.
109 Annual Total Returns
(Years Ended December 31,) Best Quarter: 03/31/14 4.52% Worst Quarter: 12/31/14
-7.91% Average Annual Total Returns (for the Periods Ended December 31, 2014)
Year Ended December 31, 2014 Since Inception (11/06/2013) Global X Next Emerging
& Frontier ETF: ·Return before taxes ·Return after taxes on distributions1
·Return after taxes on distributions and sale of Fund Shares1 -2.65% -2.83%
-0.98% -4.76% -4.95% -3.45% Solactive Next Emerging & Frontier Index (net)
(Index returns do not reflect deductions for fees, expenses, or taxes) -1.90%
-3.94% S&P 500 Index (Index returns do not reflect deductions for fees,
expenses, or taxes) 13.69% 16.40% 1 After-tax returns are calculated using the
historical highest individual U.S. federal marginal income tax rates and do not
reflect the impact of state and local taxes. Your actual after-tax returns will
depend on your specific tax situation and may differ from those shown above.
After-tax returns are not relevant to investors who hold Shares of the Fund
through tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts (IRAs). FUND MANAGEMENT Investment Adviser: Global X Management Company
LLC. Portfolio Managers: The professionals primarily responsible for the
day-to-day management of the Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis
Berruga and Chang Kim, CFA (“Portfolio Managers”). Messrs. del Ama and Gonzalez
have been Portfolio Managers of the Fund since November 6, 2013. Messrs. Berruga
and Kim have been Portfolio Managers of the Fund since February 15, 2014.
110 OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and information about financial
intermediary compensation, please turn to the sections of this Prospectus
entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and “Payments to
Broker-Dealers and Other Financial Intermediaries” on page 157 of the
Prospectus.
111 Global X FTSE Greece
20 ETF Ticker: GREK Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The Global X
FTSE Greece 20 ETF (“Fund”) seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
FTSE/ATHEX Custom Capped Index (“Underlying Index”). FEES AND EXPENSES This
table describes the fees and expenses that you may pay if you buy and hold
shares (“Shares”) of the Fund. You will also incur usual and customary brokerage
commissions when buying and selling Shares. Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment): Management Fees: 0.55% Distribution and Service (12b-1) Fees: None
Other Expenses (Custody Fees): 1 0.06% Total Annual Fund Operating Expenses:
0.61% 1 Custody fees have been restated to reflect current fees and expenses.
Example: The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be: One Year Three Years
Five Years Ten Years $62 $195 $340 $762 Portfolio Turnover: The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or
"turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. During the most
recent fiscal year, the Fund’s portfolio turnover rate was 64.19% of the average
value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES The Fund invests at
least 80% of its total assets in the securities of the Underlying Index and in
American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs")
based on the securities in the Underlying Index. The Fund also invests at least
80% of its total assets in securities on companies that are domiciled in,
principally traded in or whose revenues are primarily from Greece. The Fund’s
80% investment policies are non-fundamental and require 60 days’ prior written
notice to shareholders before they can be changed. The Fund may lend securities
representing up to one-third of the value of the Fund's total assets (including
the value of the collateral received). The Underlying Index is designed to
reflect broad-based equity market performance in Greece, as defined by FTSE
International Limited ("FTSE"), the provider of the Underlying Index ("Index
Provider"). As of January 1, 2015, the Underlying Index had 20 constituents. The
Fund’s investment objective and Underlying Index may be changed without
shareholder approval. The Underlying Index is sponsored by the Index Provider,
which is an organization that is independent of the Fund and Global X Management
Company LLC, the investment adviser for the Fund (“Adviser”). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying Index.
112 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Financials Sector. SUMMARY OF PRINCIPAL RISKS As with any investment, you
could lose all or part of your investment in the Fund, and the Fund's
performance could trail that of other investments. There is no guarantee that
the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
Asset Class Risk: Securities in the Underlying Index or the Fund's portfolio may
underperform in comparison to the general securities markets or other asset
classes. Concentration Risk: Because the Fund's investments are concentrated in
Greek securities and in the financials sector, the Fund will be susceptible to
losses due to adverse occurrences affecting that country or sector. To the
extent that the Underlying Index concentrates in the securities of issuers in a
particular country, industry, market, asset class, or sector, the Fund will also
concentrate its investments to approximately the same extent. By concentrating
its investments in a country, industry, market, asset class, or sector, the Fund
faces more risks than if it were diversified broadly over numerous countries,
industries, markets, asset classes, or sectors. Such risks, any of which may
adversely affect the companies in which the Fund invests, may include, but are
not limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a particular country,
industry, market, asset class, or sector. In addition, at times, such country,
industry, market, asset class, or sector may be out of favor and underperform
other similar categories or the market as a whole. For additional details on
these risks, please see Risks Related to Investing in Greece and Risks Related
to Investing in the Financials Sector. Currency Risk: The Fund may invest in
securities denominated in foreign currencies. Because the Fund's NAV is
determined in U.S. dollars, the Fund's NAV could decline if the euro depreciates
against the U.S. dollar. Custody Risk: Less developed markets are more likely to
experience problems with the clearing and settling of trades and the holding of
securities by local banks, agents and depositories. Emerging Market Risk: Greece
is an emerging market country, which may be subject to a greater risk of loss
than investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have
113 smaller market
capitalizations, have less government regulation, and are not subject to as
extensive and frequent accounting, financial, and other reporting requirements
as the securities markets of more developed countries. Equity Securities Risk:
Equity securities are subject to changes in value and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions. European Economic Risk: The economies of Europe are highly
dependent on each other, both as key trading partners and as in many cases as
fellow members maintaining the euro. Reduction in trading activity among
European countries may cause an adverse impact on each nation’s individual
economies. The European financial markets have recently experienced volatility
and adverse trends due to concerns about rising government debt levels, ability
to service debt, and potential for defaults of several European countries,
including Greece, Spain, Ireland, Italy and Portugal. Investments in Eastern
European markets involve risks not typically associated with investments in
securities of issuers in more developed countries that may negatively affect the
value of your investment in the Fund. An investment in Eastern European issuers
may subject the Fund to legal, regulatory, political, currency, security and
economic risks specific to Eastern Europe. The securities markets in Eastern
European countries are substantially smaller and inexperienced, with less
government supervision and regulation of stock exchanges and less liquid and
more volatile than securities markets in the United States or Western European
countries. Foreign Security Risk: Investments in the securities of foreign
issuers (including investments in ADRs and GDRs) are subject to the risks
associated with investing in those foreign markets, such as heightened risks of
inflation or nationalization. In addition, securities of foreign issuers may
lose value due to political, economic and geographic events affecting a foreign
issuer or market. During periods of social, political or economic instability in
a country or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Geographic Risk: A natural disaster could occur in Greece,
which could affect the economy or particular business operations of companies
economically tied to Greece. Government Debt Risk: Greece currently has high
levels of debt and public spending, which may stifle economic growth, contribute
to prolonged periods of recession or lower Greece’s sovereign debt rating and
adversely impact investments in the Fund. Investable Universe of Companies Risk:
The investable universe of companies in which a Fund may invest may be limited.
If a company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Management Risk: The Fund is subject to the risk that the
Adviser’s investment management strategy may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. Market Risk: The Fund's NAV could decline over
short periods due to short-term market movements and over longer periods during
market downturns. Market Trading Risk: The Fund faces numerous market trading
risks, including the potential lack of an active market for Shares, losses from
trading in secondary markets, and disruption in the creation/redemption process
of the Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints.
114 Non-Diversification
Risk: The Fund is classified as a “non-diversified” investment company under the
1940 Act. As a result, the Fund is subject to the risk that it will be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds. Passive Investment Risk: The Fund is not actively managed and
the Adviser does not attempt to take defensive positions in declining markets.
Unlike many investment companies, the Fund does not utilize an investing
strategy that seeks returns in excess of its Underlying Index. Therefore, it
would not necessarily buy or sell a security unless that security is added or
removed, respectively, from the Underlying Index, even if that security
generally is underperforming. Risks Related to Investing in the Financials
Sector: Performance of companies in the financials sector may be adversely
impacted by many factors, including, among others, government regulations,
economic conditions, credit rating downgrades, changes in interest rates, and
decreased liquidity in credit markets. This sector has experienced significant
losses in the recent past, and the impact of more stringent capital requirements
and of recent or future regulation on any individual financial company or on the
sector as a whole cannot be predicted. Risks Related to Investing in Greece:
Investments are concentrated in companies in Greece. Greece’s economy is heavily
dependent on the services sector and has a large public sector. Key trading
partners are member states of the European Union ("EU"), most notably Germany,
Spain, Italy and the United Kingdom. Decreasing demand for Greek products and
services or changes in governmental regulations on trade may have a
significantly adverse effect on Greece’s economy. Greece’s ability to repay its
sovereign debt is in question, and the possibility of default is not unlikely,
which could limit its ability to borrow in the future. Greece has been required
to impose harsh austerity measures on its population in order to receive
financial aid from the IMF and EU member countries. The success of political
parties in Greece opposed to austerity measures may increase the possibility
that Greece would rescind these austerity measures and consequently fail to
receive further financial aid from these institutions. The persistence of these
factors may seriously reduce the economic performance of Greece and pose serious
risks for the country’s economy in the future. There is the possibility that
Greece may exit the European Monetary Union, which would result in immediate
devaluation of the Greek currency and potential for default. If this were to
occur, Greece would face significant risks related to the process of full
currency redenomination as well as the resulting instability of the Euro zone in
general, which would have a severe adverse effect on the value of the securities
held by the Fund. Increased volatility in the Greek market may result in the
increased use of fair value pricing. Securities Lending Risk: Securities lending
involves a risk of loss because the borrower may fail to return the securities
in a timely manner or at all. If the Fund is not able to recover the securities
loaned, it may sell the collateral and purchase a replacement security in the
market. Lending securities entails a risk of loss to the Fund if and to the
extent that the market value of the loaned securities increases and the
collateral is not increased accordingly. Additionally, the Fund will bear any
loss on the investment of cash collateral it receives. These events could also
trigger adverse tax consequences for the Fund. As securities on loan may not be
voted by the Fund, there is a risk that the Fund may not be able to recall the
securities in sufficient time to vote on material proxy matters. Securities
Market Risk: Because securities markets in Greece are small in size,
underdeveloped and are less regulated and less correlated to global economic
cycles than those markets located in more developed countries, the securities
markets in Greece are subject to greater risks associated with market
volatility, lower market capitalization, lower trading volume, illiquidity,
inflation, greater price fluctuations and uncertainty regarding the existence of
trading markets. Small- and Mid-Capitalization Companies Risk: Small- and
mid-capitalization companies often have greater price volatility, lower trading
volume and less liquidity than larger more established companies. In addition,
these companies are often subject to less analyst coverage and may be in early
and less predictable periods of their corporate existences. These companies tend
to have smaller revenues, narrower product lines, less management depth and
experience, smaller shares of their product or service markets, fewer financial
resources and less competitive strength than larger companies. Tracking Error
Risk: The performance of the Fund may diverge from that of the Underlying Index.
Trading Halt Risk: An exchange or market may close or issue trading halts on
specific securities, or the ability to buy or sell certain securities or
financial instruments may be restricted, which may result in the Fund being
unable to buy or sell certain securities or financial instruments. In such
circumstances, the Fund may be unable to rebalance its portfolio, may be unable
to accurately price its investments and/or may incur substantial trading losses.
Valuation Risk: The sales price the Fund could receive for a security may differ
from the Fund’s valuation of the security and may differ from the value used by
the Underlying Index, particularly for securities that trade in low value or
volatile markets or
115 that are valued using
a fair value methodology. The value of the securities in the Fund's portfolio
may change on days when shareholders will not be able to purchase or sell the
Fund's Shares. PERFORMANCE INFORMATION The bar chart and table that follow show
how the Fund performed on a calendar year basis and provide an indication of the
risks of investing in the Fund by showing changes in the Fund’s performance from
year to year and by showing how the Fund’s average annual returns for the
indicated periods compare with the Fund’s benchmark index and a broad measure of
market performance. The Fund’s past performance (before and after taxes) is not
necessarily indicative of how the Fund will perform in the future. Updated
performance information is available online at www.globalxfunds.com. Annual
Total Returns (Years Ended December 31,) Best Quarter: 09/30/13 27.03% Worst
Quarter: 12/31/14 -26.19%
116 Average Annual Total
Returns (for the Periods Ended December 31, 2014) Year Ended December 31, 2014
Since Inception (12/07/2011) Global X FTSE Greece 20 ETF: ·Return before taxes
·Return after taxes on distributions1 ·Return after taxes on distributions and
sale of Fund Shares1 -38.18% -38.24% -21.41% -3.12% -3.12% -2.23% FTSE/Athex
Custom Capped Index (net)2 (Index returns do not reflect deductions for fees,
expenses, or taxes) -37.35% -1.88% S&P 500 Index (Index returns do not
reflect deductions for fees, expenses, or taxes) 13.69% 19.86% 1 After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns will depend on your specific tax situation
and may differ from those shown above. After-tax returns are not relevant to
investors who hold Shares of the Fund through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts (IRAs). 2 Effective March 1,
2013, the name of the Underlying Index changed from the FTSE/Athex 20 Capped
Index to the FTSE/ATHEX Custom Capped Index. FUND MANAGEMENT Investment Adviser:
Global X Management Company LLC. Portfolio Managers: The professionals primarily
responsible for the day-to-day management of the Fund are Bruno del Ama, CFA,
Jose C. Gonzalez, Luis Berruga and Chang Kim, CFA (“Portfolio Managers”).
Messrs. del Ama and Gonzalez have been Portfolio Managers of the Fund since
December 7, 2011. Messrs. Berruga and Kim have been Portfolio Managers of the
Fund since February 15, 2014. OTHER IMPORTANT INFORMATION REGARDING FUND SHARES
For important information about purchase and sale of Fund Shares, tax
information and financial intermediary compensation, please turn to the sections
of this Prospectus entitled “Purchase and Sale of Fund Shares,” “Tax
Information,” and “Payments to Broker-Dealers and Other Financial
Intermediaries” on page 157 of the Prospectus.
117 Global X FTSE Nordic
Region ETF Ticker: GXF Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The Global
X FTSE Nordic Region ETF (“Fund”) seeks investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
FTSE Nordic 30 Index (“Underlying Index”). FEES AND EXPENSES This table
describes the fees and expenses that you may pay if you buy and hold shares
(“Shares”) of the Fund. You will also incur usual and customary brokerage
commissions when buying and selling Shares. Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment): Management Fees: 0.50% Distribution and Service (12b-1) Fees: None
Other Expenses: 0.00% Total Annual Fund Operating Expenses: 0.50% Example: The
following example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other funds. This example does not take into
account customary brokerage commissions that you pay when purchasing or selling
Shares of the Fund in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be: One Year Three Years Five Years Ten
Years $51 $160 $280 $628 Portfolio Turnover: The Fund pays transaction costs,
such as commissions, when it buys and sells securities (or "turns over" its
portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund’s performance. During the most recent fiscal year, the
Fund’s portfolio turnover rate was 6.05% of the average value of its portfolio.
PRINCIPAL INVESTMENT STRATEGIES The Fund invests at least 80% of its total
assets in the securities of the Underlying Index and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund also invests at least 80% of its
total assets in securities of companies that are domiciled in, principally
traded in or whose revenues are primarily from Sweden, Denmark, Norway and
Finland. The Fund’s 80% investment policies are non-fundamental and require 60
days’ prior written notice to shareholders before they can be changed. The Fund
may lend securities representing up to one-third of the value of the Fund’s
total assets (including the value of the collateral received). The Underlying
Index is designed to reflect broad-based equity market performance in Sweden,
Denmark, Norway and Finland, as defined by FTSE International Limited ("FTSE"),
the provider of the Underlying Index ("Index Provider"). The Index tracks the
equity performance of the 30 largest and most liquid companies in Sweden,
Denmark, Norway and Finland. The Fund’s investment objective and Underlying
Index may be changed without shareholder approval. The Underlying Index is
sponsored by the Index Provider, which is an organization that is independent of
the Fund and Global X Management Company LLC, the investment adviser for the
Fund (“Adviser”). The Index Provider determines the relative weightings of the
securities in the Underlying Index and publishes information regarding the
market value of the Underlying Index.
118 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Financials Sector. SUMMARY OF PRINCIPAL RISKS As with any investment, you
could lose all or part of your investment in the Fund, and the Fund's
performance could trail that of other investments. There is no guarantee that
the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
Asset Class Risk: Securities in the Underlying Index or the Fund's portfolio may
underperform in comparison to the general securities markets or other asset
classes. Commodity Exposure Risk: The Fund invests in Sweden, Norway, Finland
and Denmark, which are susceptible to fluctuations in certain commodity markets.
Any negative changes in commodity markets could have an adverse impact on the
economies of Sweden, Norway, Finland and Denmark. Concentration Risk: To the
extent that the Underlying Index concentrates in the securities of issuers in a
particular country, industry, market, asset class, or sector, the Fund will also
concentrate its investments to approximately the same extent. By concentrating
its investments in a country, industry, market, asset class, or sector, the Fund
faces more risks than if it were diversified broadly over numerous countries,
industries, markets, asset classes, or sectors. Such risks, any of which may
adversely affect the companies in which the Fund invests, may include, but are
not limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a particular country,
industry, market, asset class, or sector. In addition, at times, such country,
industry, market, asset class, or sector may be out of favor and underperform
other similar categories or the market as a whole. For additional details on
these risks, please see Risks Related to Investing in the Nordic Region and
Risks Related to Investing in the Financials Sector. Currency Risk: Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if Nordic
currencies depreciate against the U.S. dollar. Custody Risk: Less developed
markets are more likely to experience problems with the clearing and settling of
trades and the holding of securities by local banks, agents and depositories.
119 Equity Securities
Risk: Equity securities are subject to changes in value and their values may be
more volatile than other asset classes, as a result of such factors as a
company’s business performance, investor perceptions, stock market trends and
general economic conditions. European Economic Risk: The economies of Europe are
highly dependent on each other, both as key trading partners and as in many
cases as fellow members maintaining the euro. Reduction in trading activity
among European countries may cause an adverse impact on each nation’s individual
economies. The European financial markets have recently experienced volatility
and adverse trends due to concerns about rising government debt levels, ability
to service debt, and potential for defaults of several European countries,
including Greece, Spain, Ireland, Italy and Portugal. Investments in Eastern
European markets involve risks not typically associated with investments in
securities of issuers in more developed countries that may negatively affect the
value of your investment in the Fund. An investment in Eastern European issuers
may subject the Fund to legal, regulatory, political, currency, security and
economic risks specific to Eastern Europe. The securities markets in Eastern
European countries are substantially smaller and inexperienced, with less
government supervision and regulation of stock exchanges and less liquid and
more volatile than securities markets in the United States or Western European
countries. Foreign Security Risk: Investments in the securities of foreign
issuers (including investments in ADRs and GDRs) are subject to the risks
associated with investing in those foreign markets, such as heightened risks of
inflation or nationalization. In addition, securities of foreign issuers may
lose value due to political, economic and geographic events affecting a foreign
issuer or market. During periods of social, political or economic instability in
a country or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Geographic Risk: A natural disaster could occur in Sweden,
Denmark, Norway and Finland, which could affect the economies or particular
business operations of companies economically tied to Sweden, Denmark, Norway
and Finland. Investable Universe of Companies Risk: The investable universe of
companies in which a Fund may invest may be limited. If a company no longer
meets the Index Provider’s criteria for inclusion in the Underlying Index, the
Fund may need to reduce or eliminate its holdings in that company. The reduction
or elimination of the Fund’s holdings in the company may have an adverse impact
on the liquidity of the Fund’s underlying portfolio holdings and on Fund
performance. Issuer Risk: Fund performance depends on the performance of
individual companies in which the Fund invests. Changes to the financial
condition of any of those companies may cause the value of their securities to
decline. Management Risk: The Fund is subject to the risk that the Adviser’s
investment management strategy may cause the Fund to underperform the market or
its relevant benchmark or adversely affect the ability of the Fund to achieve
its investment objective. Market Risk: The Fund's NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns. Market Trading Risk: The Fund faces numerous market trading risks,
including the potential lack of an active market for Shares, losses from trading
in secondary markets, and disruption in the creation/redemption process of the
Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller number of issuers or may
invest a larger proportion of its assets in a single issuer. As a result, the
gains and losses on a single investment may have a greater impact on the Fund’s
NAV and may make the Fund more volatile than more diversified funds. Passive
Investment Risk: The Fund is not actively managed and the Adviser does not
attempt to take defensive positions in declining markets. Unlike many investment
companies, the Fund does not utilize an investing strategy that seeks returns in
excess of its Underlying Index. Therefore, it would not necessarily buy or sell
a security unless that security is added or removed, respectively, from the
Underlying Index, even if that security generally is underperforming.
120 Risks Related to
Investing in the Financials Sector: Performance of companies in the financials
sector may be adversely impacted by many factors, including, among others,
government regulations, economic conditions, credit rating downgrades, changes
in interest rates, and decreased liquidity in credit markets. This sector has
experienced significant losses in the recent past, and the impact of more
stringent capital requirements and of recent or future regulation on any
individual financial company or on the sector as a whole cannot be predicted.
Risks Related to Investing in the Nordic Region: Investments are concentrated in
companies in Sweden, Denmark, Norway and Finland. The Nordic economies are
heavily dependent on natural resources, trade amongst one another and with the
members of the European Union, and have historically generous welfare programs.
Securities Lending Risk: Securities lending involves a risk of loss because the
borrower may fail to return the securities in a timely manner or at all. If the
Fund is not able to recover the securities loaned, it may sell the collateral
and purchase a replacement security in the market. Lending securities entails a
risk of loss to the Fund if and to the extent that the market value of the
loaned securities increases and the collateral is not increased accordingly.
Additionally, the Fund will bear any loss on the investment of cash collateral
it receives. These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a risk that
the Fund may not be able to recall the securities in sufficient time to vote on
material proxy matters. Securities Market Risk: Because the securities markets
in certain countries in which the Fund may invest are small in size,
underdeveloped, and are less regulated and less correlated to global economic
cycles than those markets located in more developed countries, the securities
markets in these countries are subject to greater risks associated with market
volatility, lower market capitalization, lower trading volume, illiquidity,
inflation, greater price fluctuations and uncertainty regarding the existence of
trading markets. Tracking Error Risk: The performance of the Fund may diverge
from that of the Underlying Index. Trading Halt Risk: An exchange or market may
close or issue trading halts on specific securities, or the ability to buy or
sell certain securities or financial instruments may be restricted, which may
result in the Fund being unable to buy or sell certain securities or financial
instruments. In such circumstances, the Fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses. Valuation Risk: The sales price the Fund could
receive for a security may differ from the Fund’s valuation of the security and
may differ from the value used by the Underlying Index, particularly for
securities that trade in low value or volatile markets or that are valued using
a fair value methodology. The value of the securities in the Fund's portfolio
may change on days when shareholders will not be able to purchase or sell the
Fund's Shares. PERFORMANCE INFORMATION The bar chart and table that follow show
how the Fund performed on a calendar year basis and provide an indication of the
risks of investing in the Fund by showing changes in the Fund’s performance from
year to year and by showing how the Fund’s average annual returns for the
indicated periods compare with the Fund’s benchmark index and a broad measure of
market performance. The Fund’s past performance (before and after taxes) is not
necessarily indicative of how the Fund will perform in the future. Updated
performance information is available online at www.globalxfunds.com.
121 Annual Total Returns
(Years Ended December 31,) Best Quarter: 09/30/10 23.67% Worst Quarter: 09/30/11
-25.12% Average Annual Total Returns (for the Period Ended December 31, 2014)
One Year Ended December 31, 2014 Five Year Ended December 31, 2014 Since
Inception (8/17/2009) Global X FTSE Nordic Region ETF: ·Return before taxes
·Return after taxes on distributions1 ·Return after taxes on distributions and
sale of Fund Shares1 -4.64% -5.19% -1.66% 9.30% 9.09% 7.76% 11.01% 10.80% 9.18%
FTSE Nordic 30 Index (net) (Index returns do not reflect deductions for fees,
expenses, or taxes) -3.87% 9.24% 11.14% S&P 500® Index (Index returns do not
reflect deductions for fees, expenses, or taxes) 13.69% 15.45% 17.25% 1
After-tax returns are calculated using the historical highest individual U.S.
federal marginal income tax rates and do not reflect the impact of state and
local taxes. Your actual after-tax returns will depend on your specific tax
situation and may differ from those shown above. After-tax returns are not
relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts (IRAs).
FUND MANAGEMENT Investment Adviser: Global X Management Company LLC. Portfolio
Managers: The professionals primarily responsible for the day-to-day management
of the Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang
Kim, CFA (“Portfolio Managers”). Messrs. del Ama and Gonzalez have been
Portfolio Managers of the Fund since August 17, 2009. Messrs. Berruga and Kim
have been Portfolio Managers of the Fund since February 15, 2014.
122 OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and financial intermediary compensation,
please turn to the sections of this Prospectus entitled “Purchase and Sale of
Fund Shares,” “Tax Information,” and “Payments to Broker-Dealers and Other
Financial Intermediaries” on page 157 of the Prospectus.
123 Global X MSCI Norway
ETF Ticker: NORW Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The Global X
MSCI Norway ETF (formerly, Global X FTSE Norway 30 ETF) (“Fund”) seeks
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the MSCI Norway IMI 25/50 Index (“Underlying
Index”). FEES AND EXPENSES This table describes the fees and expenses that you
may pay if you buy and hold shares (“Shares”) of the Fund. You will also incur
usual and customary brokerage commissions when buying and selling Shares. Annual
Fund Operating Expenses (expenses that you pay each year as a percentage of the
value of your investment): Management Fees: 0.50% Distribution and Service
(12b-1) Fees: None Other Expenses: 0.00% Total Annual Fund Operating Expenses:
0.50% Example: The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be: One Year Three Years
Five Years Ten Years $51 $160 $280 $628 Portfolio Turnover: The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or
"turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. During the most
recent fiscal year, the Fund’s portfolio turnover rate was 26.50% of the average
value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES The Fund invests at
least 80% of its total assets in the securities of the Underlying Index and in
American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs")
based on the securities in the Underlying Index. The Fund also invests at least
80% of its total assets in securities of companies that are domiciled in,
principally traded in or whose revenues are primarily from Norway. The Fund’s
80% investment policies are non-fundamental and require 60 days’ prior written
notice to shareholders before they can be changed. The Fund may lend securities
representing up to one-third of the value of the Fund’s total assets (including
the value of the collateral received). The Underlying Index is designed to
measure broad-based equity market performance in Norway, as defined by MSCI,
Inc. ("MSCI"), the provider of the Underlying Index ("Index Provider"). The
Underlying Index consists of stocks traded primarily on the Norwegian stock
exchange. The Underlying Index may include large-, mid- or small-capitalization
companies. The Fund’s investment objective and Underlying Index may be changed
without shareholder approval. The Underlying Index is sponsored by the Index
Provider, which is an organization that is independent of the Fund and Global X
Management Company LLC, the investment adviser for the Fund (“Adviser”). The
Index Provider determines the relative weightings of the securities in the
Underlying Index and publishes information regarding the market value of the
Underlying Index.
124 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Energy Sector. SUMMARY OF PRINCIPAL RISKS As with any investment, you could
lose all or part of your investment in the Fund, and the Fund's performance
could trail that of other investments. There is no guarantee that the Fund will
achieve its investment objective. The Fund is subject to the principal risks
noted below, any of which may adversely affect the Fund's net asset value
("NAV"), trading price, yield, total return and ability to meet its investment
objective, as well as other risks that are described in greater detail in the
Additional Information About the Funds’ Strategies and Risks section of the
Prospectus and in the Statement of Additional Information ("SAI"). ADR/GDR Risk:
To the extent the Fund seeks exposure to foreign companies, the Fund’s
investments may be in the form of depositary receipts or other securities
convertible into securities of foreign issuers, including ADRs and GDRs. While
the use of ADRs and GDRs, which are traded on exchanges and represent an
ownership in a foreign security, provide an alternative to directly purchasing
the underlying foreign securities in their respective national markets and
currencies, investments in ADRs and GDRs continue to be subject to certain of
the risks associated with investing directly in foreign securities. Asset Class
Risk: Securities in the Underlying Index or the Fund's portfolio may
underperform in comparison to the general securities markets or other asset
classes. Commodity Exposure Risk: The Fund invests in Norway, which is
susceptible to fluctuations in certain commodity markets. Any negative changes
in commodity markets could have an adverse impact on the economy of Norway.
Concentration Risk: To the extent that the Underlying Index concentrates in the
securities of issuers in a particular country, industry, market, asset class, or
sector, the Fund will also concentrate its investments to approximately the same
extent. By concentrating its investments in a country, industry, market, asset
class, or sector, the Fund faces more risks than if it were diversified broadly
over numerous countries, industries, markets, asset classes, or sectors. Such
risks, any of which may adversely affect the companies in which the Fund
invests, may include, but are not limited to, the following: general economic
conditions or cyclical market patterns that could negatively affect supply and
demand; competition for resources, adverse labor relations, political or world
events; obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular country, industry, market, asset class, or sector. In addition, at
times, such country, industry, market, asset class, or sector may be out of
favor and underperform other similar categories or the market as a whole. For
additional details on these risks, please see Risks Related to Investing in
Norway and Risks Related to Investing in the Energy Sector. Currency Risk:
Because the Fund's NAV is determined in U.S. dollars, the Fund's NAV could
decline if Norway's currency depreciates against the U.S. dollar. Custody Risk:
Less developed markets are more likely to experience problems with the clearing
and settling of trades and the holding of securities by local banks, agents and
depositories.
125 Equity Securities
Risk: Equity securities are subject to changes in value and their values may be
more volatile than other asset classes, as a result of such factors as a
company’s business performance, investor perceptions, stock market trends and
general economic conditions. European Economic Risk: The economies of Europe are
highly dependent on each other, both as key trading partners and as in many
cases as fellow members maintaining the euro. Reduction in trading activity
among European countries may cause an adverse impact on each nation’s individual
economies. The European financial markets have recently experienced volatility
and adverse trends due to concerns about rising government debt levels, ability
to service debt, and potential for defaults of several European countries,
including Greece, Spain, Ireland, Italy and Portugal. Investments in Eastern
European markets involve risks not typically associated with investments in
securities of issuers in more developed countries that may negatively affect the
value of your investment in the Fund. An investment in Eastern European issuers
may subject the Fund to legal, regulatory, political, currency, security and
economic risks specific to Eastern Europe. The securities markets in Eastern
European countries are substantially smaller and inexperienced, with less
government supervision and regulation of stock exchanges and less liquid and
more volatile than securities markets in the United States or Western European
countries. Foreign Security Risk: Investments in the securities of foreign
issuers (including investments in ADRs and GDRs) are subject to the risks
associated with investing in those foreign markets, such as heightened risks of
inflation or nationalization. In addition, securities of foreign issuers may
lose value due to political, economic and geographic events affecting a foreign
issuer or market. During periods of social, political or economic instability in
a country or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Geographic Risk: A natural disaster could occur in Norway,
which could affect the economy or particular business operations of companies
economically tied to Norway. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Management Risk: The Fund is subject to the risk that the
Adviser’s investment management strategy may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. Market Risk: The Fund's NAV could decline over
short periods due to short-term market movements and over longer periods during
market downturns. Market Trading Risk: The Fund faces numerous market trading
risks, including the potential lack of an active market for Shares, losses from
trading in secondary markets, and disruption in the creation/redemption process
of the Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Non-Correlation Risk: The Fund’s return may not match the
return of the Underlying Index for a number of reasons. For example, the Fund
incurs operating expenses not applicable to the Underlying Index, and incurs
costs in buying and selling securities, especially when rebalancing the Fund’s
securities holdings to reflect changes in the composition of the Underlying
Index. In addition, the performance of the Fund and the Underlying Index may
vary due to asset valuation differences and differences between the Fund’s
portfolio and the Underlying Index resulting from legal restrictions, costs or
liquidity constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller number of issuers or may
invest a larger proportion of its assets in a single issuer. As a result, the
gains and losses on a single investment may have a greater impact on the Fund’s
NAV and may make the Fund more volatile than more diversified funds. Passive
Investment Risk: The Fund is not actively managed and the Adviser does not
attempt to take defensive positions in declining markets. Unlike many investment
companies, the Fund does not utilize an investing strategy that seeks returns in
excess of its Underlying Index. Therefore, it would not necessarily buy or sell
a security unless that security is added or removed, respectively, from the
Underlying Index, even if that security generally is underperforming.
126 Risks Related to
Investing in Norway: Investments in Norwegian issuers may subject the Fund to
legal, regulatory, political, currency, security, and economic risks specific to
Norway. Norway is a major producer of oil and gas, and Norway's economy is
subject to the risk of fluctuations on oil and gas prices. The high value of the
Norwegian krone as compared to other currencies could have a damaging effect on
Norwegian exports and investments. In recent years, labor costs in Norway have
increased faster than those of its major trading partners, eroding industrial
competitiveness. Risks Related to Investing in the Energy Sector: The value of
securities issued by companies in the energy sector may decline for many
reasons, including, without limitation, changes in energy prices; international
politics; energy conservation; the success of exploration projects; natural
disasters or other catastrophes; changes in exchange rates, interest rates, or
economic conditions; changes in demand for energy products and services; and tax
and other government regulatory policies. Securities Lending Risk: Securities
lending involves a risk of loss because the borrower may fail to return the
securities in a timely manner or at all. If the Fund is not able to recover the
securities loaned, it may sell the collateral and purchase a replacement
security in the market. Lending securities entails a risk of loss to the Fund if
and to the extent that the market value of the loaned securities increases and
the collateral is not increased accordingly. Additionally, the Fund will bear
any loss on the investment of cash collateral it receives. These events could
also trigger adverse tax consequences for the Fund. As securities on loan may
not be voted by the Fund, there is a risk that the Fund may not be able to
recall the securities in sufficient time to vote on material proxy matters.
Small- and Mid-Capitalization Companies Risk: Small- and mid-capitalization
companies often have greater price volatility, lower trading volume and less
liquidity than larger more established companies. In addition, these companies
are often subject to less analyst coverage and may be in early and less
predictable periods of their corporate existences. These companies tend to have
smaller revenues, narrower product lines, less management depth and experience,
smaller shares of their product or service markets, fewer financial resources
and less competitive strength than larger companies. Securities Market Risk:
Because the securities markets in Norway are small in size, underdeveloped, and
are less regulated and less correlated to global economic cycles than those
markets located in more developed countries, the securities markets in Norway
are subject to greater risks associated with market volatility, lower market
capitalization, lower trading volume, illiquidity, inflation, greater price
fluctuations and uncertainty regarding the existence of trading markets.
Tracking Error Risk: The performance of the Fund may diverge from that of the
Underlying Index. Trading Halt Risk: An exchange or market may close or issue
trading halts on specific securities, or the ability to buy or sell certain
securities or financial instruments may be restricted, which may result in the
Fund being unable to buy or sell certain securities or financial instruments. In
such circumstances, the Fund may be unable to rebalance its portfolio, may be
unable to accurately price its investments and/or may incur substantial trading
losses. Valuation Risk: The sales price the Fund could receive for a security
may differ from the Fund’s valuation of the security and may differ from the
value used by the Underlying Index, particularly for securities that trade in
low value or volatile markets or that are valued using a fair value methodology.
The value of the securities in the Fund's portfolio may change on days when
shareholders will not be able to purchase or sell the Fund's Shares. PERFORMANCE
INFORMATION The bar chart and table that follow show how the Fund performed on a
calendar year basis and provide an indication of the risks of investing in the
Fund by showing changes in the Fund’s performance from year to year and by
showing how the Fund’s average annual returns for the indicated periods compare
with the Fund’s benchmark index and a broad measure of market performance. On
July 15, 2014, the name of the Fund changed from the Global X FTSE Norway 30 ETF
to the Global X MSCI Norway ETF to reflect a change to the Fund's Index Provider
from FTSE International Limited to MSCI, Inc. and a change in the Fund's
Underlying Index from FTSE Norway 30 Index to MSCI Norway IMI 25/50 Index. The
Fund’s past performance (before and after taxes) is not necessarily indicative
of how the Fund will perform in the future. Updated performance information is
available online at www.globalxfunds.com.
127 Annual Total Returns
(Years Ended December 31,) Best Quarter: 03/31/12 16.32% Worst Quarter: 09/30/11
-25.50% Average Annual Total Returns (for the Periods Ended December 31, 2014)
Year Ended December 31, 2014 Since Inception (11/09/2010) Global X MSCI Norway
ETF: ·Return before taxes ·Return after taxes on distributions1 ·Return after
taxes on distributions and sale of Fund Shares1 -22.84% -23.91% -11.82% -1.54%
-1.91% -0.68% Hybrid MSCI Norway IMI 25/50 Index/FTSE Norway 30 Index (net)2
(Index returns do not reflect deductions for fees, expenses, or taxes) -22.54%
-1.48% FTSE Norway 30 Index (net) (Index returns do not reflect deductions for
fees, expenses, or taxes) -21.71% -1.22% S&P 500® Index (Index returns do
not reflect deductions for fees, expenses, or taxes) 13.69% 16.05% 1 After-tax
returns are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns will depend on your specific tax situation
and may differ from those shown above. After-tax returns are not relevant to
investors who hold Shares of the Fund through tax-deferred arrangements, such as
401(k) plans or individual retirement accounts (IRAs). 2 Index performance
reflects the performance of the FTSE Norway 30 Index through July 14, 2014 and
the MSCI Norway IMI 25/50 Index thereafter. Effective July 15, 2014, the Fund
changed its index from FTSE Norway 30 Index to the MSCI Norway IMI 25/50 Index
("New Index"). This change was effected due to the planned migration to the New
Index, potentially allowing for broader access to the local market.
128 FUND MANAGEMENT
Investment Adviser: Global X Management Company LLC. Portfolio Managers: The
professionals primarily responsible for the day-to-day management of the Fund
are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang Kim, CFA
(“Portfolio Managers”). Messrs. del Ama and Gonzalez have been Portfolio
Managers of the Fund since November 9, 2010. Messrs. Berruga and Kim have been
Portfolio Managers of the Fund since February 15, 2014. OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and financial intermediary compensation,
please turn to the sections of this Prospectus entitled “Purchase and Sale of
Fund Shares,” “Tax Information,” and “Payments to Broker-Dealers and Other
Financial Intermediaries” on page 157 of the Prospectus.
129 Global X FTSE
Portugal 20 ETF Ticker: PGAL Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The
Global X FTSE Portugal 20 ETF (“Fund”) seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the FTSE Portugal 20 Index (“Underlying Index”). FEES AND EXPENSES
This table describes the fees and expenses that you may pay if you buy and hold
shares (“Shares”) of the Fund. You will also incur usual and customary brokerage
commissions when buying and selling Shares. Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment): Management Fees: 0.55% Distribution and Service (12b-1) Fees: None
Other Expenses (Custody Fees): 0.06% Total Annual Fund Operating Expenses: 0.61%
Example: The following example is intended to help you compare the cost of
investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be: One Year Three Years
Five Years Ten Years $62 $195 $340 $762 Portfolio Turnover: The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or
"turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. During the most
recent fiscal year, the Fund's portfolio turnover rate was 53.58% of the average
value of its portfolio. PRINCIPAL INVESTMENT STRATEGIES The Fund will invest at
least 80% of its total assets in the securities of the Underlying Index and in
American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs")
based on the securities in the Underlying Index. The Fund will invest at least
80% of its total assets in securities on companies that are domiciled in,
principally traded in or whose revenues are primarily from Portugal. The Fund’s
80% investment policies are non-fundamental and require 60 days’ prior written
notice to shareholders before they can be changed. The Fund may lend securities
representing up to one-third of the value of the Fund's total assets (including
the value of the collateral received). The Underlying Index is designed to
reflect broad-based equity market performance in Portugal, as defined by FTSE
International Limited ("FTSE"), the provider of the Underlying Index ("Index
Provider"). As of January 1, 2015, the Underlying Index had 20 constituents. The
Fund’s investment objective and Underlying Index may be changed without
shareholder approval. The Underlying Index is sponsored by the Index Provider,
which is an organization that is independent of the Fund and Global X Management
Company LLC, the investment adviser for the Fund (“Adviser”). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying Index.
130 The Adviser uses a
“passive” or indexing approach to try to achieve the Fund’s investment
objective. Unlike many investment companies, the Fund does not try to outperform
the Underlying Index and does not seek temporary defensive positions when
markets decline or appear overvalued. The Fund generally will use a replication
strategy. A replication strategy is an indexing strategy that involves investing
in the securities of the Underlying Index in approximately the same proportions
as in the Underlying Index. However, the Fund may utilize a representative
sampling strategy with respect to the Underlying Index when a replication
strategy might be detrimental or disadvantageous to shareholders, such as when
there are practical difficulties or substantial costs involved in compiling a
portfolio of equity securities to replicate the Underlying Index, in instances
in which a security in the Underlying Index becomes temporarily illiquid,
unavailable or less liquid, or as a result of legal restrictions or limitations
(such as tax diversification requirements) that apply to the Fund but not the
Underlying Index. The Adviser expects that, over time, the correlation between
the Fund’s performance and that of the Underlying Index, before fees and
expenses, will exceed 95%. A correlation percentage of 100% would indicate
perfect correlation. If the Fund uses a replication strategy, it can be expected
to have greater correlation to the Underlying Index than if it uses a
representative sampling strategy. The Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Utilities Sector. SUMMARY OF PRINCIPAL RISKS As with any investment, you
could lose all or part of your investment in the Fund, and the Fund's
performance could trail that of other investments. There is no guarantee that
the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
Asset Class Risk: Securities in the Underlying Index or the Fund's portfolio may
underperform in comparison to the general securities markets or other asset
classes. Concentration Risk: Because the Fund's investments are concentrated in
Portuguese securities and the utilities sector, the Fund will be susceptible to
losses due to adverse occurrences affecting that country or market. To the
extent that the Underlying Index concentrates in the securities of issuers in a
particular country, industry, market, asset class, or sector, the Fund will also
concentrate its investments to approximately the same extent. By concentrating
its investments in a country, industry, market, asset class, or sector, the Fund
faces more risks than if it were diversified broadly over numerous countries,
industries, markets, asset classes, or sectors. Such risks, any of which may
adversely affect the companies in which the Fund invests, may include, but are
not limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a particular country,
industry, market, asset class, or sector. In addition, at times, such country,
industry, market, asset class, or sector may be out of favor and underperform
other similar categories or the market as a whole. For additional details on
these risks, please see Risks Related to Investing in Portugal and Risks Related
to Investing in the Utilities Sector. Currency Risk: The Fund may invest in
securities denominated in foreign currencies. Because the Fund's NAV is
determined in U.S. dollars, the Fund's NAV could decline if the euro depreciates
against the U.S. dollar. Custody Risk: Less developed markets are more likely to
experience problems with the clearing and settling of trades and the holding of
securities by local banks, agents and depositories. Equity Securities Risk:
Equity securities are subject to changes in value and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
131 European Economic
Risk: The economies of Europe are highly dependent on each other, both as key
trading partners and as in many cases as fellow members maintaining the euro.
Reduction in trading activity among European countries may cause an adverse
impact on each nation’s individual economies. The European financial markets
have recently experienced volatility and adverse trends due to concerns about
rising government debt levels, ability to service debt, and potential for
defaults of several European countries, including Greece, Spain, Ireland, Italy
and Portugal. Investments in Eastern European markets involve risks not
typically associated with investments in securities of issuers in more developed
countries that may negatively affect the value of your investment in the Fund.
An investment in Eastern European issuers may subject the Fund to legal,
regulatory, political, currency, security and economic risks specific to Eastern
Europe. The securities markets in Eastern European countries are substantially
smaller and inexperienced, with less government supervision and regulation of
stock exchanges and less liquid and more volatile than securities markets in the
United States or Western European countries. Foreign Security Risk: Investments
in the securities of foreign issuers (including investments in ADRs and GDRs)
are subject to the risks associated with investing in those foreign markets,
such as heightened risks of inflation or nationalization. In addition,
securities of foreign issuers may lose value due to political, economic and
geographic events affecting a foreign issuer or market. During periods of
social, political or economic instability in a country or region, the value of a
foreign security traded on U.S. exchanges, nonetheless, could be affected by,
among other things, increasing price volatility, illiquidity, or the closure of
the primary market on which the security (or the security underlying the ADR or
GDR) is traded. You may lose money due to political, economic and geographic
events affecting a foreign issuer or market. Geographic Risk: A natural disaster
could occur in Portugal, which could affect the economy or particular business
operations of companies economically tied to Portugal. Government Debt Risk:
Portugal currently has high levels of debt and public spending, which may stifle
economic growth, contribute to prolonged periods of recession or lower
Portugal’s sovereign debt rating and adversely impact investments in the Fund.
Investable Universe of Companies Risk: The investable universe of companies in
which a Fund may invest may be limited. If a company no longer meets the Index
Provider’s criteria for inclusion in the Underlying Index, the Fund may need to
reduce or eliminate its holdings in that company. The reduction or elimination
of the Fund’s holdings in the company may have an adverse impact on the
liquidity of the Fund’s underlying portfolio holdings and on Fund performance.
Issuer Risk: Fund performance depends on the performance of individual companies
in which the Fund invests. Changes to the financial condition of any of those
companies may cause the value of their securities to decline. Management Risk:
The Fund is subject to the risk that the Adviser’s investment management
strategy may cause the Fund to underperform the market or its relevant benchmark
or adversely affect the ability of the Fund to achieve its investment objective.
Market Risk: The Fund's NAV could decline over short periods due to short-term
market movements and over longer periods during market downturns. Market Trading
Risk: The Fund faces numerous market trading risks, including the potential lack
of an active market for Shares, losses from trading in secondary markets, and
disruption in the creation/redemption process of the Fund. Any of these factors
may lead to the Shares trading at a premium or discount to NAV. Non-Correlation
Risk: The Fund’s return may not match the return of the Underlying Index for a
number of reasons. For example, the Fund incurs operating expenses not
applicable to the Underlying Index, and incurs costs in buying and selling
securities, especially when rebalancing the Fund’s securities holdings to
reflect changes in the composition of the Underlying Index. In addition, the
performance of the Fund and the Underlying Index may vary due to asset valuation
differences and differences between the Fund’s portfolio and the Underlying
Index resulting from legal restrictions, costs or liquidity constraints.
Non-Diversification Risk: The Fund is classified as a “non-diversified”
investment company under the 1940 Act. As a result, the Fund is subject to the
risk that it will be more volatile than a diversified fund because the Fund may
invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds. Passive Investment Risk: The
Fund is not actively managed and the Adviser does not attempt to take defensive
positions in declining markets. Unlike many investment companies, the Fund does
not utilize an investing strategy that seeks returns in excess of its Underlying
Index. Therefore, it would not necessarily buy or sell a security unless that
security is added or removed, respectively, from the Underlying Index, even if
that security generally is underperforming.
132 Risks Related to
Investing in Portugal: Investments are concentrated in companies in Portugal.
Portugal’s economy is comprised of several sectors but is heavily dependent on
the services sector. Decreasing demand for Portuguese products and services or
changes in governmental regulations on trade may have a significantly adverse
effect on Portugal’s economy. The long-term credit assessment is not favorable
for Portugal, and serious problems persist with regard to public finances and
excessive debt levels. Risks Related to Investing in the Utilities Sector:
Companies in the utilities sector may be adversely affected by changes in
exchange rates, domestic and international competition and governmental
regulations on rates charged to customers. Privatization in the utilities sector
may subject companies to greater competition and losses in profitability.
Companies in the utilities industry may have difficulty obtaining an adequate
return on invested capital, raising capital, or financing large construction
programs during periods of inflation or unsettled capital markets. Securities
Lending Risk: Securities lending involves a risk of loss because the borrower
may fail to return the securities in a timely manner or at all. If the Fund is
not able to recover the securities loaned, it may sell the collateral and
purchase a replacement security in the market. Lending securities entails a risk
of loss to the Fund if and to the extent that the market value of the loaned
securities increases and the collateral is not increased accordingly.
Additionally, the Fund will bear any loss on the investment of cash collateral
it receives. These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a risk that
the Fund may not be able to recall the securities in sufficient time to vote on
material proxy matters. Securities Market Risk: Because securities markets in
Portugal are small in size, underdeveloped and are less regulated and less
correlated to global economic cycles than those markets located in more
developed countries, the securities markets in Portugal are subject to greater
risks associated with market volatility, lower market capitalization, lower
trading volume, illiquidity, inflation, greater price fluctuations and
uncertainty regarding the existence of trading markets. Small- and
Mid-Capitalization Companies Risk: Small- and mid-capitalization companies often
have greater price volatility, lower trading volume and less liquidity than
larger more established companies. In addition, these companies are often
subject to less analyst coverage and may be in early and less predictable
periods of their corporate existences. These companies tend to have smaller
revenues, narrower product lines, less management depth and experience, smaller
shares of their product or service markets, fewer financial resources and less
competitive strength than larger companies. Tracking Error Risk: The performance
of the Fund may diverge from that of the Underlying Index. Trading Halt Risk: An
exchange or market may close or issue trading halts on specific securities, or
the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses. Valuation Risk: The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology. The value of the securities
in the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares. PERFORMANCE INFORMATION The bar chart and
table that follow show how the Fund performed for the most recent calendar year
and provide an indication of the risks of investing in the Fund by showing the
Fund’s performance and by showing how the Fund’s average annual returns for the
indicated periods compare with the Fund’s benchmark index and a broad measure of
market performance. The Fund’s past performance (before and after taxes) is not
necessarily indicative of how the Fund will perform in the future. Updated
performance information is available online at www.globalxfunds.com.
133 Annual Total Returns
(Year Ended December 31,) Best Quarter: 03/31/14 15.60% Worst Quarter: 12/31/14
-22.97% Average Annual Total Returns (for the Periods Ended December 31, 2014)
Year Ended December 31, 2014 Since Inception (11/12/2013) Global X FTSE Portugal
20 ETF: ·Return before taxes ·Return after taxes on distributions1 ·Return after
taxes on distributions and sale of Fund Shares1 -31.49% -31.58% -17.27% -25.86%
-25.94% -19.35% FTSE Portugal 20 Index (net) (Index returns do not reflect
deductions for fees, expenses, or taxes) -30.63% -24.83% S&P 500® Index
(Index returns do not reflect deductions for fees, expenses, or taxes) 13.69%
16.79% 1 After-tax returns are calculated using the historical highest
individual U.S. federal marginal income tax rates and do not reflect the impact
of state and local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown above. After-tax returns
are not relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts (IRAs).
FUND MANAGEMENT Investment Adviser: Global X Management Company LLC. Portfolio
Managers: The professionals primarily responsible for the day-to-day management
of the Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang
Kim, CFA (“Portfolio Managers”). Messrs. del Ama and Gonzalez have been
Portfolio Managers of the Fund since November 12, 2013. Messrs. Berruga and Kim
have been Portfolio Managers of the Fund since February 15, 2014.
134 OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and financial intermediary compensation,
please turn to the sections of this Prospectus entitled “Purchase and Sale of
Fund Shares,” “Tax Information,” and “Payments to Broker-Dealers and Other
Financial Intermediaries” on page 157 of the Prospectus.
135 Global X Czech
Republic Index ETF Ticker: [ ] Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE
The Global X Czech Republic Index ETF (“Fund”) seeks to provide investment
results that correspond generally to the price and yield performance, before
fees and expenses, of the Solactive Czech Republic Index (“Underlying Index”).
FEES AND EXPENSES This table describes the fees and expenses that you may pay if
you buy and hold shares (“Shares”) of the Fund. You will also incur usual and
customary brokerage commissions when buying and selling Shares. Annual Fund
Operating Expenses (expenses that you pay each year as a percentage of the value
of your investment): Management Fees: 0.68% Distribution and Service (12b-1)
Fees: None Other Expenses (Custody Fees):1 0.08% Total Annual Fund Operating
Expenses: 0.76% 1 “Other Expenses” reflect estimated expenses for the Fund’s
first fiscal year of operations. Example: The following example is intended to
help you compare the cost of investing in the Fund with the cost of investing in
other funds. This example does not take into account customary brokerage
commissions that you pay when purchasing or selling Shares of the Fund in the
secondary market. The example assumes that you invest $10,000 in the Fund for
the time periods indicated and then sell all of your Shares at the end of those
periods. The example also assumes that your investment has a 5% return each year
and that the Fund's operating expenses remain the same. Although your actual
costs may be higher or lower, based on these assumptions, your costs would be:
One Year Three Years $78 $243 Portfolio Turnover: The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund’s performance. The Fund had not yet commenced
investment operations as of the most recent fiscal year end. Thus, no portfolio
turnover rate is provided for the Fund. PRINCIPAL INVESTMENT STRATEGIES The Fund
will invest at least 80% of its total assets in the securities of the Underlying
Index and in American Depositary Receipts ("ADRs") and Global Depositary
Receipts ("GDRs") based on the securities in the Underlying Index. The Fund’s
80% investment policy is non-fundamental and requires 60 days’ prior written
notice to shareholders before it can be changed. The Underlying Index is
designed to reflect broad-based equity market performance in the Czech Republic,
as defined by Solactive AG, the provider of the Underlying Index ("Index
Provider"). As of January 1, 2015, the Underlying Index had 25 constituents. The
Fund’s investment objective and Underlying Index may be changed without
shareholder approval. The Underlying Index is sponsored by the Index Provider,
which is an organization that is independent of the Fund and Global X Management
Company LLC, the investment adviser for the Fund (“Adviser”). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying Index. The
Adviser uses a “passive” or indexing approach to try to achieve the Fund’s
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
136 The Fund generally
will use a replication strategy. A replication strategy is an indexing strategy
that involves investing in the securities of the Underlying Index in
approximately the same proportions as in the Underlying Index. However, the Fund
may utilize a representative sampling strategy with respect to the Underlying
Index when a replication strategy might be detrimental or disadvantageous to
shareholders, such as when there are practical difficulties or substantial costs
involved in compiling a portfolio of equity securities to replicate the
Underlying Index, in instances in which a security in the Underlying Index
becomes temporarily illiquid, unavailable or less liquid, or as a result of
legal restrictions or limitations (such as tax diversification requirements)
that apply to the Fund but not the Underlying Index. The Adviser expects that,
over time, the correlation between the Fund’s performance and that of the
Underlying Index, before fees and expenses, will exceed 95%. A correlation
percentage of 100% would indicate perfect correlation. If the Fund uses a
replication strategy, it can be expected to have greater correlation to the
Underlying Index than if it uses a representative sampling strategy. The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. SUMMARY OF PRINCIPAL RISKS As with any
investment, you could lose all or part of your investment in the Fund, and the
Fund's performance could trail that of other investments. There is no guarantee
that the Fund will achieve its investment objective. The Fund is subject to the
principal risks noted below, any of which may adversely affect the Fund's net
asset value ("NAV"), trading price, yield, total return and ability to meet its
investment objective, as well as other risks that are described in greater
detail in the Additional Information About the Funds’ Strategies and Risks
section of the Prospectus and in the Statement of Additional Information
("SAI"). ADR/GDR Risk: To the extent the Fund seeks exposure to foreign
companies, the Fund’s investments may be in the form of depositary receipts or
other securities convertible into securities of foreign issuers, including ADRs
and GDRs. While the use of ADRs and GDRs, which are traded on exchanges and
represent an ownership in a foreign security, provide an alternative to directly
purchasing the underlying foreign securities in their respective national
markets and currencies, investments in ADRs and GDRs continue to be subject to
certain of the risks associated with investing directly in foreign securities.
Asset Class Risk: Securities in the Underlying Index or the Fund's portfolio may
underperform in comparison to the general securities markets or other asset
classes. Concentration Risk: Because the Fund's investments are concentrated in
Czech Republic securities and the industrials sector, the Fund will be
susceptible to loss due to adverse occurrences affecting this country and
sector. To the extent that the Underlying Index concentrates in the securities
of issuers in a particular country, industry, market, asset class, or sector,
the Fund will also concentrate its investments to approximately the same extent.
By concentrating its investments in a country, industry, market, asset class, or
sector, the Fund faces more risks than if it were diversified broadly over
numerous countries, industries, markets, asset classes, or sectors. Such risks,
any of which may adversely affect the companies in which the Fund invests, may
include, but are not limited to, the following: general economic conditions or
cyclical market patterns that could negatively affect supply and demand;
competition for resources, adverse labor relations, political or world events;
obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular country, industry, market, asset class, or sector. In addition, at
times, such country, industry, market, asset class, or sector may be out of
favor and underperform other similar categories or the market as a whole. For
additional details on these risks, please see Risks Related to Investing in the
Czech Republic and Risks Related to Investing in the Industrials Sector.
Currency Risk: The Fund may invest in securities denominated in foreign
currencies. Because the Fund's NAV is determined in U.S. dollars, the Fund's NAV
could decline if the euro depreciates against the U.S. dollar. Custody Risk:
Less developed markets are more likely to experience problems with the clearing
and settling of trades and the holding of securities by local banks, agents and
depositories. Emerging Market Risk: The Czech Republic is an emerging market
country, which may be subject to a greater risk of loss than investments in
developed markets. Securities markets of emerging market countries are less
liquid, subject to greater price volatility, have smaller market
capitalizations, have less government regulation, and are not subject to as
extensive and frequent accounting, financial, and other reporting requirements
as the securities markets of more developed countries. Equity Securities Risk:
Equity securities are subject to changes in value and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
137 European Economic
Risk: The economies of Europe are highly dependent on each other, both as key
trading partners and as in many cases as fellow members maintaining the euro.
Reduction in trading activity among European countries may cause an adverse
impact on each nation’s individual economies. The European financial markets
have recently experienced volatility and adverse trends due to concerns about
rising government debt levels, ability to service debt, and potential for
defaults of several European countries, including Greece, Spain, Ireland, Italy
and Portugal. Investments in Eastern European markets involve risks not
typically associated with investments in securities of issuers in more developed
countries that may negatively affect the value of your investment in the Fund.
An investment in Eastern European issuers may subject the Fund to legal,
regulatory, political, currency, security and economic risks specific to Eastern
Europe. The securities markets in Eastern European countries are substantially
smaller and inexperienced, with less government supervision and regulation of
stock exchanges and less liquid and more volatile than securities markets in the
United States or Western European countries. Foreign Security Risk: Investments
in the securities of foreign issuers (including investments in ADRs and GDRs)
are subject to the risks associated with investing in those foreign markets,
such as heightened risks of inflation or nationalization. In addition,
securities of foreign issuers may lose value due to political, economic and
geographic events affecting a foreign issuer or market. During periods of
social, political or economic instability in a country or region, the value of a
foreign security traded on U.S. exchanges, nonetheless, could be affected by,
among other things, increasing price volatility, illiquidity, or the closure of
the primary market on which the security (or the security underlying the ADR or
GDR) is traded. You may lose money due to political, economic and geographic
events affecting a foreign issuer or market. Geographic Risk: A natural disaster
could occur in Czech Republic, which could affect the economy or particular
business operations of companies economically tied to Czech Republic. Investable
Universe of Companies Risk: The investable universe of companies in which a Fund
may invest may be limited. If a company no longer meets the Index Provider’s
criteria for inclusion in the Underlying Index, the Fund may need to reduce or
eliminate its holdings in that company. The reduction or elimination of the
Fund’s holdings in the company may have an adverse impact on the liquidity of
the Fund’s underlying portfolio holdings and on Fund performance. Issuer Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of their securities to decline. Management Risk: The Fund is
subject to the risk that the Adviser’s investment management strategy may cause
the Fund to underperform the market or its relevant benchmark or adversely
affect the ability of the Fund to achieve its investment objective. Market Risk:
The Fund's NAV could decline over short periods due to short-term market
movements and over longer periods during market downturns. Market Trading Risk:
The Fund faces numerous market trading risks, including the potential lack of an
active market for Shares, losses from trading in secondary markets, and
disruption in the creation/redemption process of the Fund. Any of these factors
may lead to the Shares trading at a premium or discount to NAV. Non-Correlation
Risk: The Fund’s return may not match the return of the Underlying Index for a
number of reasons. For example, the Fund incurs operating expenses not
applicable to the Underlying Index, and incurs costs in buying and selling
securities, especially when rebalancing the Fund’s securities holdings to
reflect changes in the composition of the Underlying Index. In addition, the
performance of the Fund and the Underlying Index may vary due to asset valuation
differences and differences between the Fund’s portfolio and the Underlying
Index resulting from legal restrictions, costs or liquidity constraints.
Non-Diversification Risk: The Fund is classified as a “non-diversified”
investment company under the 1940 Act. As a result, the Fund is subject to the
risk that it will be more volatile than a diversified fund because the Fund may
invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds. Passive Investment Risk: The
Fund is not actively managed and the Adviser does not attempt to take defensive
positions in declining markets. Unlike many investment companies, the Fund does
not utilize an investing strategy that seeks returns in excess of its Underlying
Index. Therefore, it would not necessarily buy or sell a security unless that
security is added or removed, respectively, from the Underlying Index, even if
that security generally is underperforming. Risks Related to Investing in Czech
Republic: Investments are concentrated in companies in the Czech Republic. The
Czech Republic’s economy is heavily dependent on the manufacturing and export of
industrial materials and machinery. The Czech
138 Republic and
surrounding regions have a history of ethnic unrest and conflict. If conflict
were to renew in the future, it could have a significant adverse impact on the
Fund. Risks Related to Investing in the Industrials Sector: Investments in
securities in the industrials sector are subject to fluctuations in supply and
demand for their specific product or service. The products of manufacturing
companies may face product obsolescence due to rapid technological developments.
Government regulation, world events and economic conditions affect the
performance of companies in the industrials sector. Companies also may be
adversely affected by environmental damage and product liability claims.
Securities Market Risk: Because securities markets in the Czech Republic are
small in size, underdeveloped and are less regulated and less correlated to
global economic cycles than those markets located in more developed countries,
the securities markets in the Czech Republic are subject to greater risks
associated with market volatility, lower market capitalization, lower trading
volume, illiquidity, inflation, greater price fluctuations and uncertainty
regarding the existence of trading markets. Small- and Mid-Capitalization
Companies Risk: Small- and mid-capitalization companies often have greater price
volatility, lower trading volume and less liquidity than larger more established
companies. In addition, these companies are often subject to less analyst
coverage and may be in early and less predictable periods of their corporate
existences. These companies tend to have smaller revenues, narrower product
lines, less management depth and experience, smaller shares of their product or
service markets, fewer financial resources and less competitive strength than
larger companies. Tracking Error Risk: The performance of the Fund may diverge
from that of the Underlying Index. Trading Halt Risk: An exchange or market may
close or issue trading halts on specific securities, or the ability to buy or
sell certain securities or financial instruments may be restricted, which may
result in the Fund being unable to buy or sell certain securities or financial
instruments. In such circumstances, the Fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses. Valuation Risk: The sales price the Fund could
receive for a security may differ from the Fund’s valuation of the security and
may differ from the value used by the Underlying Index, particularly for
securities that trade in low value or volatile markets or that are valued using
a fair value methodology. The value of the securities in the Fund's portfolio
may change on days when shareholders will not be able to purchase or sell the
Fund's Shares. PERFORMANCE INFORMATION The Fund has not commenced operations as
of the date of this Prospectus. Thus, no bar chart or Average Annual Total
Returns table is included for the Fund. FUND MANAGEMENT Investment Adviser:
Global X Management Company LLC. Portfolio Managers: The professionals primarily
responsible for the day-to-day management of the Fund are Bruno del Ama, CFA,
Jose C. Gonzalez, Luis Berruga and Chang Kim, CFA (“Portfolio Managers”).
Messrs. del Ama, Gonzalez, Berruga, and Kim have been Portfolio Managers of the
Fund since inception. OTHER IMPORTANT INFORMATION REGARDING FUND SHARES For
important information about purchase and sale of Fund Shares, tax information
and financial intermediary compensation, please turn to the sections of this
Prospectus entitled “Purchase and Sale of Fund Shares,” “Tax Information,” and
“Payments to Broker-Dealers and Other Financial Intermediaries” on page 157 of
the Prospectus.
139 Global X MSCI Nigeria
ETF Ticker: NGE Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The Global X MSCI
Nigeria ETF (formerly, Global X Nigeria Index ETF) (“Fund”) seeks to provide
investment results that correspond generally to the price and yield performance,
before fees and expenses, of the MSCI All Nigeria Select 25/50 Index
(“Underlying Index”). FEES AND EXPENSES This table describes the fees and
expenses that you may pay if you buy and hold shares (“Shares”) of the Fund. You
will also incur usual and customary brokerage commissions when buying and
selling Shares. Annual Fund Operating Expenses (expenses that you pay each year
as a percentage of the value of your investment): Management Fees: 0.68%
Distribution and Service (12b-1) Fees: None Other Expenses (Custody): 0.24%
Total Annual Fund Operating Expenses: 0.92% Expense Reimbursement and/or Fee
Waiver:1 (0.24)% Total Annual Fund Operating Expenses After Fee Waiver and/or
Expense Reimbursement: 0.68% 1 Pursuant to an Expense Limitation Agreement, the
Adviser has contractually agreed to reimburse or waive fees and/or limit Fund
expenses to the extent necessary to assure that the operating expenses of the
Fund (exclusive of taxes, brokerage fees, commissions, and other transaction
expenses, interest, and extraordinary expenses (such as litigation and
indemnification expenses)) will not exceed 0.68% of the Fund’s average daily net
assets per year until at least March 1, 2016. Pursuant to the Expense Limitation
Agreement, the Fund (at a later date) may reimburse the Adviser for the fees it
reimbursed or waived and/or limited pursuant to the Expense Limitation Agreement
during any of the prior three fiscal years, provided that, among other things,
reimbursement to be made to the Adviser does not cause Total Annual Fund
Operating Expenses of the Fund to exceed 0.68% during the year in which it is
paid and the Board of Trustees has approved in advance such reimbursement to the
Adviser. Example: The following example is intended to help you compare the cost
of investing in the Fund with the cost of investing in other funds. This example
does not take into account customary brokerage commissions that you pay when
purchasing or selling Shares of the Fund in the secondary market. The example
assumes that you invest $10,000 in the Fund for the time periods indicated and
then sell all of your Shares at the end of those periods. The example also
assumes that your investment has a 5% return each year and that the Fund's
operating expenses remain the same. Although your actual costs may be higher or
lower, based on these assumptions, your costs would be: One Year Three Years
Five Years Ten Years $69 $269 $486 $1,109 Portfolio Turnover: The Fund pays
transaction costs, such as commissions, when it buys and sells securities (or
"turns over" its portfolio). A higher portfolio turnover rate may indicate
higher transaction costs and may result in higher taxes when Shares are held in
a taxable account. These costs, which are not reflected in annual fund operating
expenses or in the example, affect the Fund’s performance. During the most
recent fiscal year, the Fund's portfolio turnover rate was 54.75%. PRINCIPAL
INVESTMENT STRATEGIES The Fund will invest at least 80% of its total assets in
the securities of the Underlying Index and in American Depositary Receipts
("ADRs") and Global Depositary Receipts ("GDRs") based on the securities in the
Underlying Index. The Fund’s 80% investment policy is non-fundamental and
requires 60 days’ prior written notice to shareholders before it can be changed.
140 The Underlying Index
is designed to reflect broad-based equity market performance in Nigeria, as
defined by MSCI, Inc. ("MSCI"), the provider of the Underlying Index ("Index
Provider"). As of January 1, 2015, the Underlying Index had 23 constituents. The
Fund’s investment objective and Underlying Index may be changed without
shareholder approval. The Underlying Index is sponsored by the Index Provider,
which is an organization that is independent of the Fund and Global X Management
Company LLC, the investment adviser for the Fund (“Adviser”). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying Index. The
Adviser uses a “passive” or indexing approach to try to achieve the Fund’s
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued. The Fund generally will use a
replication strategy. A replication strategy is an indexing strategy that
involves investing in the securities of the Underlying Index in approximately
the same proportions as in the Underlying Index. However, the Fund may utilize a
representative sampling strategy with respect to the Underlying Index when a
replication strategy might be detrimental or disadvantageous to shareholders,
such as when there are practical difficulties or substantial costs involved in
compiling a portfolio of equity securities to replicate the Underlying Index, in
instances in which a security in the Underlying Index becomes temporarily
illiquid, unavailable or less liquid, or as a result of legal restrictions or
limitations (such as tax diversification requirements) that apply to the Fund
but not the Underlying Index. The Adviser expects that, over time, the
correlation between the Fund’s performance and that of the Underlying Index,
before fees and expenses, will exceed 95%. A correlation percentage of 100%
would indicate perfect correlation. If the Fund uses a replication strategy, it
can be expected to have greater correlation to the Underlying Index than if it
uses a representative sampling strategy. The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2014, the Underlying Index was concentrated in
the Consumer Staples and Financials Sectors. SUMMARY OF PRINCIPAL RISKS As with
any investment, you could lose all or part of your investment in the Fund, and
the Fund's performance could trail that of other investments. There is no
guarantee that the Fund will achieve its investment objective. The Fund is
subject to the principal risks noted below, any of which may adversely affect
the Fund's net asset value ("NAV"), trading price, yield, total return and
ability to meet its investment objective, as well as other risks that are
described in greater detail in the Additional Information About the Funds’
Strategies and Risks section of the Prospectus and in the Statement of
Additional Information ("SAI"). ADR/GDR Risk: To the extent the Fund seeks
exposure to foreign companies, the Fund’s investments may be in the form of
depositary receipts or other securities convertible into securities of foreign
issuers, including ADRs and GDRs. While the use of ADRs and GDRs, which are
traded on exchanges and represent an ownership in a foreign security, provide an
alternative to directly purchasing the underlying foreign securities in their
respective national markets and currencies, investments in ADRs and GDRs
continue to be subject to certain of the risks associated with investing
directly in foreign securities. African Economic Risk: Investment in African
securities involves heightened risks including, among others, expropriation and/
or nationalization of assets, confiscatory taxation, political instability,
including authoritarian and/or military involvement in governmental
decision-making, armed conflict, the impact on the economy as a result of civil
war, and social instability as a result of religious, ethnic and/or
socioeconomic unrest and, in certain countries, genocidal warfare. Certain
countries in Africa generally have less developed capital markets than
traditional emerging market countries, and, consequently, the risks of investing
in foreign securities are magnified in such countries. Asset Class Risk:
Securities in the Underlying Index or the Fund's portfolio may underperform in
comparison to the general securities markets or other asset classes. Cash
Transaction Risk: Unlike most ETFs, the Fund expects to effect a portion of its
creations and redemptions for cash, rather than in-kind securities. As a result,
an investment in the Fund may be less tax-efficient than an investment in a more
conventional ETF. Concentration Risk: Because the Fund's investments are
concentrated in Nigerian securities and the consumer and financials sectors, the
Fund will be susceptible to losses due to adverse occurrences affecting that
country or sectors. To the extent that the Underlying Index concentrates in the
securities of issuers in a particular country, industry, market, asset class, or
sector, the Fund
141 will also concentrate
its investments to approximately the same extent. By concentrating its
investments in a country, industry, market, asset class, or sector, the Fund
faces more risks than if it were diversified broadly over numerous countries,
industries, markets, asset classes, or sectors. Such risks, any of which may
adversely affect the companies in which the Fund invests, may include, but are
not limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a particular country,
industry, market, asset class, or sector. In addition, at times, such country,
industry, market, asset class, or sector may be out of favor and underperform
other similar categories or the market as a whole. For additional details on
these risks, please see Risks Related to Investing in Nigeria, Risks Related to
Investing in the Consumer Sector, and Risks Related to Investing in the
Financials Sector. Currency Risk: The Fund may invest in securities denominated
in foreign currencies. Because the Fund's NAV is determined in U.S. dollars, the
Fund's NAV could decline if the Nigerian currency depreciates against the U.S.
dollar. Custody Risk: Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories. Emerging Market Risk: Securities
markets of emerging market countries are less liquid, subject to greater price
volatility, have smaller market capitalizations, have less government
regulation, and are not subject to as extensive and frequent accounting,
financial, and other reporting requirements as the securities markets of more
developed countries. Equity Securities Risk: Equity securities are subject to
changes in value and their values may be more volatile than other asset classes,
as a result of such factors as a company’s business performance, investor
perceptions, stock market trends and general economic conditions. Foreign
Security Risk: Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. In addition, securities of foreign issuers may lose value due
to political, economic and geographic events affecting a foreign issuer or
market. During periods of social, political or economic instability in a country
or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Frontier Market Risk: Frontier markets countries generally
have smaller economies or less developed capital markets than traditional
emerging markets, and, as a result, the risks of investing in emerging markets
countries are magnified in frontier countries. The economies of frontier
countries are less correlated to global economic cycles than those of their more
developed counterparts and their markets have low trading volumes and the
potential for extreme price volatility and illiquidity. These factors make
investing in frontier countries significantly riskier than in other countries
and any one of them could cause the price of the Fund's Shares to decline.
Geographic Risk: A natural disaster could occur in Nigeria, which could affect
the economy or particular business operations of companies economically tied to
Nigeria. Investable Universe of Companies Risk: The investable universe of
companies in which a Fund may invest may be limited. If a company no longer
meets the Index Provider’s criteria for inclusion in the Underlying Index, the
Fund may need to reduce or eliminate its holdings in that company. The reduction
or elimination of the Fund’s holdings in the company may have an adverse impact
on the liquidity of the Fund’s underlying portfolio holdings and on Fund
performance. Issuer Risk: Fund performance depends on the performance of
individual companies in which the Fund invests. Changes to the financial
condition of any of those companies may cause the value of their securities to
decline. Management Risk: The Fund is subject to the risk that the Adviser’s
investment management strategy may cause the Fund to underperform the market or
its relevant benchmark or adversely affect the ability of the Fund to achieve
its investment objective. Market Risk: The Fund's NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns.
142 Market Trading Risk:
The Fund faces numerous market trading risks, including the potential lack of an
active market for Shares, losses from trading in secondary markets, and
disruption in the creation/redemption process of the Fund. Any of these factors
may lead to the Shares trading at a premium or discount to NAV. Non-Correlation
Risk: The Fund’s return may not match the return of the Underlying Index for a
number of reasons. For example, the Fund incurs operating expenses not
applicable to the Underlying Index, and incurs costs in buying and selling
securities, especially when rebalancing the Fund’s securities holdings to
reflect changes in the composition of the Underlying Index. In addition, the
performance of the Fund and the Underlying Index may vary due to asset valuation
differences and differences between the Fund’s portfolio and the Underlying
Index resulting from legal restrictions, costs or liquidity constraints.
Non-Diversification Risk: The Fund is classified as a “non-diversified”
investment company under the 1940 Act. As a result, the Fund is subject to the
risk that it will be more volatile than a diversified fund because the Fund may
invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds. Passive Investment Risk: The
Fund is not actively managed and the Adviser does not attempt to take defensive
positions in declining markets. Unlike many investment companies, the Fund does
not utilize an investing strategy that seeks returns in excess of its Underlying
Index. Therefore, it would not necessarily buy or sell a security unless that
security is added or removed, respectively, from the Underlying Index, even if
that security generally is underperforming. Premium/Discount Risk: Disruptions
to creations and redemptions, the existence of extreme market volatility or
potential lack of an active trading market for Shares may result in Shares
trading at a significant premium or discount to NAV. If a shareholder purchases
Shares at a time when the market price is at a premium to the NAV or sells
Shares at a time when the market price is at a discount to the NAV, the
shareholder may sustain losses. Privatization Risk: Nigeria has privatized
certain entities and industries. Privatized entities may lose money or be
re-nationalized. Risks Related to Investing in Nigeria: Investments are
concentrated in companies in Nigeria. The economic development of Nigeria has
been significantly hindered by military rule, mismanagement, corruption and
ethnic conflict. The Nigerian economy is heavily dependent on oil, and the
industry makes up a significant portion of Nigeria’s GDP. Religious and social
conflict is present in Nigeria, often resulting in the outbreak of violence,
particularly in the Niger Delta, which is Nigeria’s main oil-producing region.
Nigeria also suffers from the prevalence of organized crime and corruption,
which makes it more difficult for citizens and companies to do business in
Nigeria and has significant impact on the Nigerian economy. The persistence of
organized crime and corruption may continue to drag on economic growth in the
country. Outbreaks of communicable diseases in the region may impair Nigeria’s
economic growth. Nigeria has imposed capital controls to varying degrees in the
past, which may make it more difficult to invest in companies in Nigeria or
repatriate currency and which may negatively impact long-term investment. Risks
Related to Investing in the Consumer Staples Sector: The consumer staples sector
may be affected by marketing campaigns, changes in consumer demands, government
regulations and changes in commodity prices. Risks Related to Investing in the
Financials Sector: Performance of companies in the financials sector may be
adversely impacted by many factors, including, among others, government
regulations, economic conditions, credit rating downgrades, changes in interest
rates, and decreased liquidity in credit markets. This sector has experienced
significant losses in the recent past, and the impact of more stringent capital
requirements and of recent or future regulation on any individual financial
company or on the sector as a whole cannot be predicted. Risks Related to
Investing in the Oil Sector: The oil industry is cyclical and highly dependent
on the market price of oil. The market value of companies in the oil industry
are strongly affected by the levels and volatility of global oil prices, oil
supply and demand, capital expenditures on exploration and production, energy
conservation efforts, the prices of alternative fuels, exchange rates and
technological advances. Companies in this sector are subject to substantial
government regulation and contractual fixed pricing, which may increase the cost
of business and limit these companies’ earnings. A significant portion of their
revenues depend on a relatively small number of customers, including
governmental entities and utilities. As a result, governmental budget restraints
may have a material adverse effect on the stock prices of companies in the
industry. Securities Market Risk: Because securities markets in Nigeria are
small in size, underdeveloped and are less regulated and less correlated to
global economic cycles than those markets located in more developed countries,
the securities markets in Nigeria are subject to greater risks associated with
market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations and uncertainty regarding the
existence of trading markets.
143 Small- and
Mid-Capitalization Companies Risk: Small- and mid-capitalization companies often
have greater price volatility, lower trading volume and less liquidity than
larger more established companies. In addition, these companies are often
subject to less analyst coverage and may be in early and less predictable
periods of their corporate existences. These companies tend to have smaller
revenues, narrower product lines, less management depth and experience, smaller
shares of their product or service markets, fewer financial resources and less
competitive strength than larger companies. Tracking Error Risk: The performance
of the Fund may diverge from that of the Underlying Index. Trading Halt Risk: An
exchange or market may close or issue trading halts on specific securities, or
the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses. Valuation Risk: The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology. The value of the securities
in the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares. PERFORMANCE INFORMATION The bar chart and
table that follow show how the Fund performed for the most recent calendar year
and provide an indication of the risks of investing in the Fund by showing the
Fund’s performance and by showing how the Fund’s average annual returns for the
indicated periods compare with the Fund’s benchmark index and a broad measure of
market performance. On August 15, 2014, the name of the Fund changed from the
Global X Nigeria Index ETF to the Global X MSCI Nigeria ETF to reflect a change
to the Fund's Index Provider from Solactive AG to MSCI, Inc. and a change in the
Fund's Underlying Index from Solactive Nigeria Index to MSCI All Nigeria Select
25/50 Index. The Fund's past performance (before and after taxes) is not
necessarily indicative of how the Fund will perform in the future. Updated
performance information is available online at www.globalxfunds.com.
144 Annual Total Returns
(Years Ended December 31,) Best Quarter: 06/30/14 14.72% Worst Quarter: 12/31/14
-28.83% Average Annual Total Returns (for the Periods Ended December 31, 2014)
Year Ended December 31, 2014 Since Inception (04/02/2013) Global X MSCI Nigeria
ETF: ·Return before taxes ·Return after taxes on distributions1 ·Return after
taxes on distributions and sale of Fund Shares1 -31.91% -32.44% -17.75% -17.97%
-18.43% -13.38% Hybrid MSCI All Nigeria Select 25/50 Index/Solactive Nigeria
Index (net)2 (Index returns do not reflect deductions for fees, expenses, or
taxes) -31.04% -17.06% Solactive Nigeria Index (net) (Index returns do not
reflect deductions for fees, expenses, or taxes) -33.14% -18.45% S&P 500®
Index (Index returns do not reflect deductions for fees, expenses, or taxes)
13.69% 19.22% 1 After-tax returns are calculated using the historical highest
individual U.S. federal marginal income tax rates and do not reflect the impact
of state and local taxes. Your actual after-tax returns will depend on your
specific tax situation and may differ from those shown above. After-tax returns
are not relevant to investors who hold Shares of the Fund through tax-deferred
arrangements, such as 401(k) plans or individual retirement accounts (IRAs). 2
Index performance reflects the performance of the Solactive Nigeria Index
through August 14, 2014 and the MSCI All Nigeria Select 25/50 Index thereafter.
Effective August 15, 2014, the Fund changed its index from Solactive Nigeria
Index to the MSCI All Nigeria Select 25/50 Index ("New Index"). This change was
effected due to the planned migration to the New Index, potentially allowing for
broader access to the local market.
145 FUND MANAGEMENT
Investment Adviser: Global X Management Company LLC. Portfolio Managers: The
professionals primarily responsible for the day-to-day management of the Fund
are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang Kim, CFA
(“Portfolio Managers”). Messrs. del Ama and Gonzalez have been Portfolio
Managers of the Fund since April 2, 2013. Messrs. Berruga and Kim have been
Portfolio Managers of the Fund since February 15, 2014. OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and financial intermediary compensation,
please turn to the sections of this Prospectus entitled “Purchase and Sale of
Fund Shares,” “Tax Information,” and “Payments to Broker-Dealers and Other
Financial Intermediaries” on page 157 of the Prospectus.
146 Global X MSCI
Pakistan ETF Ticker: PAK Exchange: NYSE Arca, Inc. INVESTMENT OBJECTIVE The
Global X MSCI Pakistan ETF (formerly, Global X Pakistan KSE-30 ETF) (“Fund”)
seeks to provide investment results that correspond generally to the price and
yield performance, before fees and expenses, of the MSCI All Pakistan 25/50
Index (“Underlying Index”). FEES AND EXPENSES This table describes the fees and
expenses that you may pay if you buy and hold shares (“Shares”) of the Fund. You
will also incur usual and customary brokerage commissions when buying and
selling Shares. Annual Fund Operating Expenses (expenses that you pay each year
as a percentage of the value of your investment): Management Fees: 0.68%
Distribution and Service (12b-1) Fees: None Other Expenses (Custody Fees):1
0.20% Total Annual Fund Operating Expenses: 0.88% 1 “Other Expenses” reflect
estimated expenses for the Fund’s first fiscal year of operations. Example: The
following example is intended to help you compare the cost of investing in the
Fund with the cost of investing in other funds. This example does not take into
account customary brokerage commissions that you pay when purchasing or selling
Shares of the Fund in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be: One Year Three Years $90 $281 Portfolio
Turnover: The Fund pays transaction costs, such as commissions, when it buys and
sells securities (or "turns over" its portfolio). A higher portfolio turnover
rate may indicate higher transaction costs and may result in higher taxes when
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
The Fund had not yet commenced investment operations as of the most recent
fiscal year end. Thus, no portfolio turnover rate is provided for the Fund
PRINCIPAL INVESTMENT STRATEGIES The Fund will invest at least 80% of its total
assets in the securities of the Underlying Index and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund will invest at least 80% of its
total assets in securities on companies that are domiciled in, principally
traded in or whose revenues are primarily from Pakistan. The Fund’s 80%
investment policies are non-fundamental and require 60 days’ prior written
notice to shareholders before they can be changed. The Underlying Index is
designed to represent the performance of the broad Pakistan equity universe,
while including a minimum number of constituents, as defined by MSCI, Inc.
("MSCI"), the provider of the Underlying Index ("Index Provider"). The broad
Pakistan equity universe includes securities that are classified in Pakistan
according to the MSCI Global Investable Market Index Methodology, together with
companies that are headquartered or listed in Pakistan and carry out the
majority of their operations in Pakistan. The Fund’s investment objective and
Underlying Index may be changed without shareholder approval.
147 The Underlying Index
is sponsored by the Index Provider, which is an organization that is independent
of the Fund and Global X Management Company LLC, the investment adviser for the
Fund (“Adviser”). The Index Provider determines the relative weightings of the
securities in the Underlying Index and publishes information regarding the
market value of the Underlying Index. The Adviser uses a “passive” or indexing
approach to try to achieve the Fund’s investment objective. Unlike many
investment companies, the Fund does not try to outperform the Underlying Index
and does not seek temporary defensive positions when markets decline or appear
overvalued. The Fund generally will use a replication strategy. A replication
strategy is an indexing strategy that involves investing in the securities of
the Underlying Index in approximately the same proportions as in the Underlying
Index. However, the Fund may utilize a representative sampling strategy with
respect to the Underlying Index when a replication strategy might be detrimental
or disadvantageous to shareholders, such as when there are practical
difficulties or substantial costs involved in compiling a portfolio of equity
securities to replicate the Underlying Index, in instances in which a security
in the Underlying Index becomes temporarily illiquid, unavailable or less
liquid, or as a result of legal restrictions or limitations (such as tax
diversification requirements) that apply to the Fund but not the Underlying
Index. The Adviser expects that, over time, the correlation between the Fund’s
performance and that of the Underlying Index, before fees and expenses, will
exceed 95%. A correlation percentage of 100% would indicate perfect correlation.
If the Fund uses a replication strategy, it can be expected to have greater
correlation to the Underlying Index than if it uses a representative sampling
strategy. The Fund concentrates its investments (i.e., holds 25% or more of its
total assets) in a particular industry or group of industries to approximately
the same extent that the Underlying Index is concentrated. SUMMARY OF PRINCIPAL
RISKS As with any investment, you could lose all or part of your investment in
the Fund, and the Fund's performance could trail that of other investments.
There is no guarantee that the Fund will achieve its investment objective. The
Fund is subject to the principal risks noted below, any of which may adversely
affect the Fund's net asset value ("NAV"), trading price, yield, total return
and ability to meet its investment objective, as well as other risks that are
described in greater detail in the Additional Information About the Funds’
Strategies and Risks section of the Prospectus and in the Statement of
Additional Information ("SAI"). ADR/GDR Risk: To the extent the Fund seeks
exposure to foreign companies, the Fund’s investments may be in the form of
depositary receipts or other securities convertible into securities of foreign
issuers, including ADRs and GDRs. While the use of ADRs and GDRs, which are
traded on exchanges and represent an ownership in a foreign security, provide an
alternative to directly purchasing the underlying foreign securities in their
respective national markets and currencies, investments in ADRs and GDRs
continue to be subject to certain of the risks associated with investing
directly in foreign securities. Asian Economic Risk: Decreasing Asian imports,
new trade regulations, changes in exchange rates, a recession in Asia or a
slowing of economic growth in this region could have an adverse impact on the
economy of Pakistan. Asset Class Risk: Securities in the Underlying Index or the
Fund's portfolio may underperform in comparison to the general securities
markets or other asset classes. Cash Transactions Risk: Unlike most ETFs, the
Fund intends to effect all creations and redemptions principally for cash,
rather than in-kind securities. As a result, an investment in the Fund may be
less tax-efficient than an investment in a more conventional ETF. Concentration
Risk: Because the Fund's investments are concentrated in Pakistan securities,
the Fund will be susceptible to loss due to adverse occurrences affecting this
country or market. To the extent that the Underlying Index concentrates in the
securities of issuers in a particular country, industry, market, asset class, or
sector, the Fund will also concentrate its investments to approximately the same
extent. By concentrating its investments in a country, industry, market, asset
class, or sector, the Fund faces more risks than if it were diversified broadly
over numerous countries, industries, markets, asset classes, or sectors. Such
risks, any of which may adversely affect the companies in which the Fund
invests, may include, but are not limited to, the following: general economic
conditions or cyclical market patterns that could negatively affect supply and
demand; competition for resources, adverse labor relations, political or world
events; obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular country, industry, market, asset class, or sector. In addition, at
times, such country, industry, market, asset class, or sector may be out of
favor and underperform other similar categories or the market as a whole. For
additional details on these risks, please see Risks Related to Investing in
Pakistan.
148 Currency Risk: The
Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Pakistani currency depreciates against the U.S. dollar. Custody Risk: Less
developed markets are more likely to experience problems with the clearing and
settling of trades and the holding of securities by local banks, agents and
depositories. Emerging Market Risk: Pakistan is an emerging market country,
which may be subject to a greater risk of loss than investments in developed
markets. Securities markets of emerging market countries are less liquid,
subject to greater price volatility, have smaller market capitalizations, have
less government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries. Equity Securities Risk: Equity securities
are subject to changes in value and their values may be more volatile than other
asset classes, as a result of such factors as a company’s business performance,
investor perceptions, stock market trends and general economic conditions.
Foreign Security Risk: Investments in the securities of foreign issuers
(including investments in ADRs and GDRs) are subject to the risks associated
with investing in those foreign markets, such as heightened risks of inflation
or nationalization. In addition, securities of foreign issuers may lose value
due to political, economic and geographic events affecting a foreign issuer or
market. During periods of social, political or economic instability in a country
or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Frontier Market Risks: Frontier market countries generally
have smaller economies or less developed capital markets than traditional
emerging markets, and, as a result, the risks of investing in emerging market
countries are magnified in frontier market countries. The economies of frontier
market countries are less correlated to global economic cycles than those of
their more developed counterparts and their markets have low trading volumes and
the potential for extreme price volatility and illiquidity. These factors make
investing in frontier market countries significantly riskier than in other
countries and any one of them could cause the price of the Fund’s Shares to
decline. Geographic Risk: A natural disaster could occur in Pakistan, which
could affect the economy or particular business operations of companies
economically tied to Pakistan. Government Debt Risk: Pakistan currently has high
levels of debt and public spending, which may stifle economic growth, contribute
to prolonged periods of recession or lower Pakistan’s sovereign debt rating and
adversely impact investments in the Fund. Investable Universe of Companies Risk:
The investable universe of companies in which a Fund may invest may be limited.
If a company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Management Risk: The Fund is subject to the risk that the
Adviser’s investment management strategy may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. Market Risk: The Fund's NAV could decline over
short periods due to short-term market movements and over longer periods during
market downturns. Market Trading Risk: The Fund faces numerous market trading
risks, including the potential lack of an active market for Shares, losses from
trading in secondary markets, and disruption in the creation/redemption process
of the Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Middle East Economic Risk: Pakistan and other Middle Eastern
markets are only in the earliest stages of development and may be considered
"frontier markets." Certain economies in the Middle East depend to a significant
degree upon exports of primary commodities such as oil. A sustained decrease in
commodity prices could have a significant negative impact on all aspects of the
economy in the region. Middle Eastern governments have exercised and continue to
exercise substantial influence over many
149 aspects of the
private sector. Countries in the Middle East may be affected by political
instability, war or the threat of war, regional instability, terrorist
activities and religious, ethnic and/or socioeconomic unrest. Recent unrest and
instability in the larger Middle East region has adversely impacted many
economies in the region. Recent political instability and protests in the Middle
East and North Africa (which has ethnic, religious and economic ties to the
Middle East) have caused significant disruptions to many industries.
Non-Correlation Risk: The Fund’s return may not match the return of the
Underlying Index for a number of reasons. For example, the Fund incurs operating
expenses not applicable to the Underlying Index, and incurs costs in buying and
selling securities, especially when rebalancing the Fund’s securities holdings
to reflect changes in the composition of the Underlying Index. In addition, the
performance of the Fund and the Underlying Index may vary due to asset valuation
differences and differences between the Fund’s portfolio and the Underlying
Index resulting from legal restrictions, costs or liquidity constraints.
Non-Diversification Risk: The Fund is classified as a “non-diversified”
investment company under the 1940 Act. As a result, the Fund is subject to the
risk that it will be more volatile than a diversified fund because the Fund may
invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds. Passive Investment Risk: The
Fund is not actively managed and the Adviser does not attempt to take defensive
positions in declining markets. Unlike many investment companies, the Fund does
not utilize an investing strategy that seeks returns in excess of its Underlying
Index. Therefore, it would not necessarily buy or sell a security unless that
security is added or removed, respectively, from the Underlying Index, even if
that security generally is underperforming. Risks Related to Investing in
Pakistan: Pakistan’s economy is heavily dependent on exports and subject to high
interest rates, economic volatility, inflation, currency devaluations, high
unemployment rates and high level of debt and public spending. There is also the
possibility of nationalization, expropriation or confiscatory taxation, security
market restrictions, political changes, government regulation or diplomatic
developments (including war or terrorist attacks), which could affect adversely
the economy of Pakistan or the value of the Fund’s investments. As an emerging
country, Pakistan’s economy is susceptible to economic, political and social
instability; unanticipated economic, political or social developments could
impact economic growth. Pakistan is also subject to natural disaster risk. In
addition, recent political instability and protests in the Middle East have
caused significant disruptions to many industries. Continued political and
social unrest in these areas may negatively affect the value of your investment
in the Fund. Pakistan has recently seen elevated levels of ethnic and religious
conflict, in some cases resulting in violence or acts of terrorism. Escalation
of these conflicts would have an adverse effect on Pakistan’s economy.
Securities Market Risk: Because the securities markets in Pakistan are small in
size, underdeveloped, and are less regulated and less correlated to global
economic cycles than those markets located in more developed countries, the
securities markets in Pakistan are subject to greater risks associated with
market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations and uncertainty regarding the
existence of trading markets. Tracking Error Risk: The performance of the Fund
may diverge from that of the Underlying Index. Trading Halt Risk: An exchange or
market may close or issue trading halts on specific securities, or the ability
to buy or sell certain securities or financial instruments may be restricted,
which may result in the Fund being unable to buy or sell certain securities or
financial instruments. In such circumstances, the Fund may be unable to
rebalance its portfolio, may be unable to accurately price its investments
and/or may incur substantial trading losses. Valuation Risk: The sales price the
Fund could receive for a security may differ from the Fund’s valuation of the
security and may differ from the value used by the Underlying Index,
particularly for securities that trade in low value or volatile markets or that
are valued using a fair value methodology. The value of the securities in the
Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares. PERFORMANCE INFORMATION The Fund has not
commenced operations as of the date of this Prospectus. Thus, no bar chart or
Average Annual Total Returns table is included for the Fund. FUND MANAGEMENT
Investment Adviser: Global X Management Company LLC.
150 Portfolio Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang Kim, CFA
(“Portfolio Managers”). Messrs. del Ama, Gonzalez, Berruga, and Kim have been
Portfolio Managers of the Fund since inception. OTHER IMPORTANT INFORMATION
REGARDING FUND SHARES For important information about purchase and sale of Fund
Shares, tax information and financial intermediary compensation, please turn to
the sections of this Prospectus entitled “Purchase and Sale of Fund Shares,”
“Tax Information,” and “Payments to Broker-Dealers and Other Financial
Intermediaries” on page 157 of the Prospectus.
151 Global X Central Asia
& Mongolia Index ETF Ticker: AZIA Exchange: NYSE Arca, Inc. INVESTMENT
OBJECTIVE The Global X Central Asia & Mongolia Index ETF (“Fund”) seeks to
provide investment results that correspond generally to the price and yield
performance, before fees and expenses, of the Solactive Central Asia &
Mongolia Index (“Underlying Index”). FEES AND EXPENSES This table describes the
fees and expenses that you may pay if you buy and hold shares (“Shares”) of the
Fund. You will also incur usual and customary brokerage commissions when buying
and selling Shares. Annual Fund Operating Expenses (expenses that you pay each
year as a percentage of the value of your investment): Management Fees: 0.68%
Distribution and Service (12b-1) Fees: None Other Expenses (Custody Fees): 0.01%
Total Annual Fund Operating Expenses: 0.69% Example: The following example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest $10,000 in the Fund
for the time periods indicated and then sell all of your Shares at the end of
those periods. The example also assumes that your investment has a 5% return
each year and that the Fund's operating expenses remain the same. Although your
actual costs may be higher or lower, based on these assumptions, your costs
would be: One Year Three Years Five Years Ten Years $70 $221 $384 $859 Portfolio
Turnover: The Fund pays transaction costs, such as commissions, when it buys and
sells securities (or "turns over" its portfolio). A higher portfolio turnover
rate may indicate higher transaction costs and may result in higher taxes when
Shares are held in a taxable account. These costs, which are not reflected in
annual fund operating expenses or in the example, affect the Fund’s performance.
During the most recent fiscal year, the Fund's portfolio turnover rate was
55.76%. PRINCIPAL INVESTMENT STRATEGIES The Fund will invest at least 80% of its
total assets in the securities of the Underlying Index and in American
Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on
the securities in the Underlying Index. The Fund’s 80% investment policy is
non-fundamental and requires 60 days’ prior written notice to shareholders
before it can be changed. The Underlying Index is designed to reflect
broad-based equity market performance in the Central Asian countries of
Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan, as
defined by Solactive AG, the provider of the Underlying Index ("Index
Provider"). As of January 1, 2015, the Underlying Index had 20 constituents. The
Fund’s investment objective and Underlying Index may be changed without
shareholder approval. The Underlying Index is sponsored by the Index Provider,
which is an organization that is independent of the Fund and Global X Management
Company LLC, the investment adviser for the Fund (“Adviser”). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying Index. The
Adviser uses a “passive” or indexing approach to try to achieve the Fund’s
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
152 The Fund generally
will use a replication strategy. A replication strategy is an indexing strategy
that involves investing in the securities of the Underlying Index in
approximately the same proportions as in the Underlying Index. However, the Fund
may utilize a representative sampling strategy with respect to the Underlying
Index when a replication strategy might be detrimental or disadvantageous to
shareholders, such as when there are practical difficulties or substantial costs
involved in compiling a portfolio of equity securities to replicate the
Underlying Index, in instances in which a security in the Underlying Index
becomes temporarily illiquid, unavailable or less liquid, or as a result of
legal restrictions or limitations (such as tax diversification requirements)
that apply to the Fund but not the Underlying Index. The Adviser expects that,
over time, the correlation between the Fund’s performance and that of the
Underlying Index, before fees and expenses, will exceed 95%. A correlation
percentage of 100% would indicate perfect correlation. If the Fund uses a
replication strategy, it can be expected to have greater correlation to the
Underlying Index than if it uses a representative sampling strategy. The Fund
concentrates its investments (i.e., holds 25% or more of its total assets) in a
particular industry or group of industries to approximately the same extent that
the Underlying Index is concentrated. As of December 31, 2014, the Underlying
Index was concentrated in the Energy and Materials Sectors. SUMMARY OF PRINCIPAL
RISKS As with any investment, you could lose all or part of your investment in
the Fund, and the Fund's performance could trail that of other investments.
There is no guarantee that the Fund will achieve its investment objective. The
Fund is subject to the principal risks noted below, any of which may adversely
affect the Fund's net asset value ("NAV"), trading price, yield, total return
and ability to meet its investment objective, as well as other risks that are
described in greater detail in the Additional Information About the Funds’
Strategies and Risks section of the Prospectus and in the Statement of
Additional Information ("SAI"). ADR/GDR Risk: To the extent the Fund seeks
exposure to foreign companies, the Fund’s investments may be in the form of
depositary receipts or other securities convertible into securities of foreign
issuers, including ADRs and GDRs. While the use of ADRs and GDRs, which are
traded on exchanges and represent an ownership in a foreign security, provide an
alternative to directly purchasing the underlying foreign securities in their
respective national markets and currencies, investments in ADRs and GDRs
continue to be subject to certain of the risks associated with investing
directly in foreign securities. Asian Economic Risk: Decreasing Asian imports,
new trade regulations, changes in exchange rates, a recession in Asia or a
slowing of economic growth in this region could have an adverse impact on the
economies of Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and
Uzbekistan. Asset Class Risk: Securities in the Underlying Index or the Fund's
portfolio may underperform in comparison to the general securities markets or
other asset classes. Concentration Risk: Because the Fund's investments are
concentrated in Central Asian securities and the energy and materials sectors,
the Fund will be susceptible to loss due to adverse occurrences affecting these
countries or sectors. To the extent that the Underlying Index concentrates in
the securities of issuers in a particular country, industry, market, asset
class, or sector, the Fund will also concentrate its investments to
approximately the same extent. By concentrating its investments in a country,
industry, market, asset class, or sector, the Fund faces more risks than if it
were diversified broadly over numerous countries, industries, markets, asset
classes, or sectors. Such risks, any of which may adversely affect the companies
in which the Fund invests, may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources, adverse labor relations,
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular country, industry, market, asset class,
or sector. In addition, at times, such country, industry, market, asset class,
or sector may be out of favor and underperform other similar categories or the
market as a whole. For additional details on these risks, please see Risks
Related to Investing in Central Asia, Risks Related to Investing in the Energy
Sector, and Risks Related to Investing in the Materials Sector. Currency Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if any
Central Asian currency depreciates against the U.S. dollar. Custody Risk: Less
developed markets are more likely to experience problems with the clearing and
settling of trades and the holding of securities by local banks, agents and
depositories.
153 Emerging Market Risk:
Securities markets of emerging market countries are less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries. Equity Securities Risk: Equity securities
are subject to changes in value and their values may be more volatile than other
asset classes, as a result of such factors as a company’s business performance,
investor perceptions, stock market trends and general economic conditions.
Foreign Security Risk: Investments in the securities of foreign issuers
(including investments in ADRs and GDRs) are subject to the risks associated
with investing in those foreign markets, such as heightened risks of inflation
or nationalization. In addition, securities of foreign issuers may lose value
due to political, economic and geographic events affecting a foreign issuer or
market. During periods of social, political or economic instability in a country
or region, the value of a foreign security traded on U.S. exchanges,
nonetheless, could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Frontier Market Risks: Frontier market countries generally
have smaller economies or less developed capital markets than traditional
emerging markets, and, as a result, the risks of investing in emerging market
countries are magnified in frontier market countries. The economies of frontier
market countries are less correlated to global economic cycles than those of
their more developed counterparts and their markets have low trading volumes and
the potential for extreme price volatility and illiquidity. These factors make
investing in frontier market countries significantly riskier than in other
countries and any one of them could cause the price of the Fund’s Shares to
decline. Geographic Risk: A natural disaster could occur in Central Asia, which
could affect the economy or particular business operations of companies
economically tied to Central Asia. Investable Universe of Companies Risk: The
investable universe of companies in which a Fund may invest may be limited. If a
company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s underlying portfolio
holdings and on Fund performance. Issuer Risk: Fund performance depends on the
performance of individual companies in which the Fund invests. Changes to the
financial condition of any of those companies may cause the value of their
securities to decline. Management Risk: The Fund is subject to the risk that the
Adviser’s investment management strategy may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. Market Risk: The Fund's NAV could decline over
short periods due to short-term market movements and over longer periods during
market downturns. Market Trading Risk: The Fund faces numerous market trading
risks, including the potential lack of an active market for Shares, losses from
trading in secondary markets, and disruption in the creation/redemption process
of the Fund. Any of these factors may lead to the Shares trading at a premium or
discount to NAV. Micro-Capitalization Companies Risk: The Fund may invest in
micro-capitalization companies. Micro-capitalization companies are subject to
substantially greater risks of loss and price of fluctuations because their
earnings and revenues tend to be less predictable (and some companies may be
experiencing significant losses), and their share prices tend to be more
volatile and their markets less liquid than companies with larger market
capitalizations. The shares of micro-capitalization companies tend to trade less
frequently than those of larger, more established companies, which can adversely
affect the pricing of these securities and the future ability to sell these
securities. Non-Correlation Risk: The Fund’s return may not match the return of
the Underlying Index for a number of reasons. For example, the Fund incurs
operating expenses not applicable to the Underlying Index, and incurs costs in
buying and selling securities, especially when rebalancing the Fund’s securities
holdings to reflect changes in the composition of the Underlying Index. In
addition, the performance of the Fund and the Underlying Index may vary due to
asset valuation differences and differences between the Fund’s portfolio and the
Underlying Index resulting from legal restrictions, costs or liquidity
constraints. Non-Diversification Risk: The Fund is classified as a
“non-diversified” investment company under the 1940 Act. As a result, the Fund
is subject to the risk that it will be more volatile than a diversified fund
because the Fund may invest its assets in a smaller
154 number of issuers or
may invest a larger proportion of its assets in a single issuer. As a result,
the gains and losses on a single investment may have a greater impact on the
Fund’s NAV and may make the Fund more volatile than more diversified funds.
Passive Investment Risk: The Fund is not actively managed and the Adviser does
not attempt to take defensive positions in declining markets. Unlike many
investment companies, the Fund does not utilize an investing strategy that seeks
returns in excess of its Underlying Index. Therefore, it would not necessarily
buy or sell a security unless that security is added or removed, respectively,
from the Underlying Index, even if that security generally is underperforming.
Premium/Discount Risk: Disruptions to creations and redemptions, the existence
of extreme market volatility or potential lack of an active trading market for
Shares may result in Shares trading at a significant premium or discount to NAV.
If a shareholder purchases Shares at a time when the market price is at a
premium to the NAV or sells Shares at a time when the market price is at a
discount to the NAV, the shareholder may sustain losses. Risks Related to
Investing in Central Asia: Investments are concentrated in companies in
Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. The
countries in Central Asia present different economic and political conditions
from those in Western markets, and less social, political and economic
stability. In addition, the ability of companies to efficiently conduct their
business activities in Central Asia is subject to changes in government policy
or shifts in political attitudes within countries in the region. Any adverse
change in the relationship with major trading partners such as China, or
significant economic or political turmoil in China itself, may also have a
significant negative impact on the financial markets in Central Asia. Risks
Related to Investing in the Energy Sector: The value of securities issued by
companies in the energy sector may decline for many reasons, including, without
limitation, changes in energy prices; international politics; energy
conservation; the success of exploration projects; natural disasters or other
catastrophes; changes in exchange rates, interest rates, or economic conditions;
changes in demand for energy products and services; and tax and other government
regulatory policies. Risks Related to Investing in the Materials Sector:
Companies in the materials sector are affected by commodity price volatility,
exchange rates, import controls and worldwide competition. At times, worldwide
production of industrial materials has exceeded demand, leading to poor
investment returns or outright losses. Issuers in the materials sector are at
risk of depletion of resources, technical progress, labor relations,
governmental regulations and environmental damage and product liability claims.
Securities Market Risk: Because the securities markets in certain countries in
which the Fund may invest are small in size, underdeveloped, and are less
regulated and less correlated to global economic cycles than those markets
located in more developed countries, the securities markets in these countries
are subject to greater risks associated with market volatility, lower market
capitalization, lower trading volume, illiquidity, inflation, greater price
fluctuations and uncertainty regarding the existence of trading markets. Small-
and Mid-Capitalization Companies Risk: Small- and mid-capitalization companies
often have greater price volatility, lower trading volume and less liquidity
than larger more established companies. In addition, these companies are often
subject to less analyst coverage and may be in early and less predictable
periods of their corporate existences. These companies tend to have smaller
revenues, narrower product lines, less management depth and experience, smaller
shares of their product or service markets, fewer financial resources and less
competitive strength than larger companies. Tracking Error Risk: The performance
of the Fund may diverge from that of the Underlying Index. Trading Halt Risk: An
exchange or market may close or issue trading halts on specific securities, or
the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses. Valuation Risk: The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology. The value of the securities
in the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares. PERFORMANCE INFORMATION The bar chart and
table that follow show how the Fund performed for the most recent calendar year
and provide an indication of the risks of investing in the Fund by showing the
Fund’s performance and by showing how the Fund’s average annual returns for the
indicated periods compare with the Fund’s benchmark index and a broad measure of
market performance. The Fund’s past
155 performance (before
and after taxes) is not necessarily indicative of how the Fund will perform in
the future. Updated performance information is available online at
www.globalxfunds.com. Annual Total Returns (Year Ended December 31,) Best
Quarter: 06/30/14 12.10% Worst Quarter: 12/31/14 -20.34% Average Annual Total
Returns (for the Period Ended December 31, 2014) Year Ended December 31, 2014
Since Inception (04/02/2013) Global X Central Asia & Mongolia Index ETF:
·Return before taxes ·Return after taxes on distributions1 ·Return after taxes
on distributions and sale of Fund Shares1 -21.34% -21.71% -11.43% -16.16%
-16.56% -11.83% Solactive Central Asia & Mongolia Index (net) (Index returns
do not reflect deductions for fees, expenses, or taxes) -19.20% -14.75% S&P
500® Index (Index returns do not reflect deductions for fees, expenses, or
taxes) 13.69% 19.22% 1 After-tax returns are calculated using the historical
highest individual U.S. federal marginal income tax rates and do not reflect the
impact of state and local taxes. Your actual after-tax returns will depend on
your specific tax situation and may differ from those shown above. After-tax
returns are not relevant to investors who hold Shares of the Fund through
tax-deferred arrangements, such as 401(k) plans or individual retirement
accounts (IRAs). FUND MANAGEMENT Investment Adviser: Global X Management Company
LLC.
156 Portfolio Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Bruno del Ama, CFA, Jose C. Gonzalez, Luis Berruga and Chang Kim, CFA
(“Portfolio Managers”). Messrs. del Ama and Gonzalez have been Portfolio
Managers of the Fund since April 2, 2013. Messrs. Berruga and Kim have been
Portfolio Managers of the Fund since February 15, 2014. OTHER IMPORTANT
INFORMATION REGARDING FUND SHARES For important information about purchase and
sale of Fund Shares, tax information and financial intermediary compensation,
please turn to the sections of this Prospectus entitled “Purchase and Sale of
Fund Shares,” “Tax Information,” and “Payments to Broker-Dealers and Other
Financial Intermediaries” on page 157 of the Prospectus.
157 PURCHASE AND SALE OF
FUND SHARES Shares of the Funds are or will be listed and traded at market
prices on a national securities exchange (the "Exchange"). Shares may only be
purchased and sold on the Exchange through a broker-dealer. The price of Shares
is based on market price, and because ETF shares trade at market prices rather
than at NAV, Shares may trade at a price greater than NAV (a premium) or less
than NAV (a discount). Only “Authorized Participants” (as defined in the SAI)
who have entered into agreements with the Fund’s distributor, SEI Investments
Distribution Co. ("Distributor"), may engage in creation or redemption
transactions directly with the Fund. The Fund will only issue or redeem Shares
that have been aggregated into blocks of 50,000 Shares or multiples thereof
("Creation Units"). The Fund will issue or redeem Creation Units in return for a
basket of cash and/or securities that the Fund specifies each Business Day. TAX
INFORMATION The Fund intends to make distributions that may be taxable to you as
ordinary income or capital gains, unless you are investing through a
tax-deferred arrangement such as a 401(k) plan or an individual retirement
account ("IRA"), in which case distributions from such tax-deferred arrangements
may be taxable to you. PAYMENTS TO BROKER-DEALERS AND OTHER FINANCIAL
INTERMEDIARIES The Adviser and its related companies may pay broker/dealers or
other financial intermediaries (such as a bank) for the sale of the Fund Shares
and related services. These payments may create a conflict of interest by
influencing your broker/dealer, sales persons or other intermediary or its
employees or associated persons to recommend the Fund over another investment.
Ask your financial adviser or visit your financial intermediary’s website for
more information.
158 ADDITIONAL
INFORMATION ABOUT THE FUNDS’ STRATEGIES AND RISKS ADDITIONAL STRATEGIES In
addition to the investment strategies discussed above under Fund
Summaries—Principal Investment Strategies, each Fund may use the following
investment strategies: Leverage: Each Fund may borrow money from a bank as
permitted under the 1940 Act, and as interpreted or modified by a regulatory
authority having jurisdiction, from time to time. For example, a Fund may borrow
money at fiscal quarter end to maintain the required level of diversification to
qualify as a “regulated investment company” (“RIC”) for purposes of the Internal
Revenue Code of 1986, as amended (the “Code”). Securities Lending: Each Fund may
lend its portfolio securities to the extent noted under Fund Summaries-Principal
Investment Strategies. In connection with such loans, each Fund receives liquid
collateral equal to at least 102% of the value of domestic equity securities and
ADRs and 105% of the value of the foreign equity securities (other than ADRs)
being lent. This collateral is marked-to-market on a daily basis. ADDITIONAL
RISKS The Funds are subject to the risks described below. Some or all of these
risks may adversely affect a Fund’s NAV, trading price, yield, total return
and/or its ability to meet its objectives. ADR/GDR Risk: To the extent the Fund
seeks exposure to foreign companies, the Fund’s investments may be in the form
of depositary receipts or other securities convertible into securities of
foreign issuers, including ADRs and GDRs. While the use of ADRs and GDRs, which
are traded on exchanges and represent an ownership in a foreign security,
provide an alternative to directly purchasing the underlying foreign securities
in their respective national markets and currencies, investments in ADRs and
GDRs continue to be subject to certain of the risks associated with investing
directly in foreign securities. African Economic Risk African Economic Risk
applies to the Global X Next Emerging & Frontier ETF and Global X MSCI
Nigeria ETF. Investing in the economies of African countries involves risks not
typically associated with investments in securities of issuers in more developed
economies, countries or geographic regions, which may negatively affect the
value of investments in the Fund. Such heightened risks include, among others,
expropriation and/or nationalization of assets, restrictions on and government
intervention in international trade, confiscatory taxation, political
instability, including authoritarian and/or military involvement in governmental
decision making, armed conflict, civil war, and social instability as a result
of religious, ethnic and/or socioeconomic unrest. The securities markets in
Africa are underdeveloped and are often considered to be less correlated to
global economic cycles than markets located in more developed countries or
geographic regions. Securities markets in Africa are subject to greater risks
associated with market volatility, lower market capitalization, lower trading
volume, illiquidity, inflation, greater price fluctuations, uncertainty
regarding the existence of trading markets, governmental control and heavy
regulation of labor and industry. Moreover, trading on securities markets may be
suspended altogether. Certain governments in Africa may restrict or control to
varying degrees the ability of foreign investors to invest in securities of
issuers located or operating in those countries. These restrictions and/or
controls may at times limit or prevent foreign investment in securities of
issuers located or operating in countries in Africa. Moreover, certain countries
in Africa may require governmental approval or special licenses prior to
investment by foreign investors; may limit the amount of investment by foreign
investors in a particular industry and/or issuer; may limit such foreign
investment to a certain class of securities of an issuer that may have less
advantageous rights than the classes available for purchase by domestic
investors of those countries; and/or may impose additional taxes on foreign
investors. These factors, among others, make investing in issuers located or
operating in countries in Africa significantly riskier than investing in issuers
located or operating in more developed countries.
159 Asian Economic Risk
Asian Economic Risk applies to the Global X China Consumer ETF, Global X China
Energy ETF, Global X China Financials ETF, Global X China Industrials ETF,
Global X China Materials ETF, Global X China Mid Cap ETF, Global X NASDAQ China
Technology ETF, Global X MSCI Argentina ETF, Global X Southeast Asia ETF, Global
X FTSE Bangladesh Index ETF, Global X MSCI Pakistan ETF, Global X Next Emerging
& Frontier ETF and Global X Central Asia & Mongolia Index ETF. Certain
Asian economies have experienced high inflation, high unemployment, currency
devaluations and restrictions, and over- extension of credit. Many Asian
economies have experienced rapid growth and industrialization, and there is no
assurance that this growth rate will be maintained. During the recent global
recession, many of the export-driven Asian economies experienced the effects of
the economic slowdown in the United States and Europe, and certain Asian
governments implemented stimulus plans, low-rate monetary policies and currency
devaluations. Economic events in any one Asian country may have a significant
economic effect on the entire Asian region, as well as on major trading partners
outside Asia. Any adverse event in the Asian markets may have a significant
adverse effect on some or all of the economies of the countries in which a Fund
invests. Many Asian countries are subject to political risk, including
corruption and regional conflict with neighboring countries. In addition, many
Asian countries are subject to social and labor risks associated with demands
for improved political, economic and social conditions. These risks, among
others, may adversely affect the value of a Fund’s investments. Asset Class Risk
The returns from the types of securities in which a Fund invests may
under-perform returns from the various general securities markets or different
asset classes. The stocks in the Underlying Indices may under-perform
fixed-income investments and stock market investments that track other markets,
segments and sectors. Different types of securities tend to go through cycles of
out- performance and under-performance in comparison to the general securities
markets. Cash Transactions Risk Cash Transactions Risk applies to the Global X
Brazil Mid Cap ETF, Global X Brazil Consumer ETF, Global X Brazil Financials
ETF, Global X Brazil Industrials ETF, Global X Brazil Materials ETF, Global X
Brazil Utilities ETF, Global X FTSE Andean 40 ETF, Global X Southeast Asia ETF.,
Global X MSCI Colombia ETF, Global X FTSE Andean 40 ETF, Global X Southeast Asia
ETF, Global X FTSE Bangladesh Index ETF, Global X Next Emerging & Frontier
ETF, and Global X MSCI Nigeria ETF. Unlike most ETFs, the Funds intend to effect
all creations and redemptions principally or partially for cash, rather than
in-kind securities. As a result, an investment in one of the Funds may be less
tax-efficient than an investment in a more conventional ETF. ETFs generally are
able to make in-kind redemptions and avoid being taxed on gain on the
distributed portfolio securities at the Fund level. Because the Funds currently
intend to affect all redemptions principally or partially for cash, rather than
in-kind distributions, it may be required to sell portfolio securities in order
to obtain the cash needed to distribute redemption proceeds. If the Fund
recognizes gain on these sales, this generally will cause the Fund to recognize
gain it might not otherwise have recognized, or to recognize such gain sooner
than would otherwise be required if it were to distribute portfolio securities
in-kind. The Funds generally intend to distribute these gains to shareholders to
avoid being taxed on this gain at the Fund level and otherwise comply with the
special tax rules that apply to it. This strategy may cause shareholders to be
subject to tax on gains they would not otherwise be subject to, or at an earlier
date than, if they had made an investment in a different ETF. Moreover, cash
transactions may have to be carried out over several days if the securities
market is relatively illiquid and may involve considerable brokerage fees and
taxes. Brazil may also impose higher local tax rates on transactions involving
certain companies. In addition, these factors may result in wider spreads
between the bid and the offered prices of the Fund’s Shares than for more
conventional ETFs. Commodity Exposure Risk Commodity Exposure Risk applies to
the Global X Brazil Consumer ETF, Global X Brazil Financials ETF, Global X
Brazil Industrials ETF, Global X Brazil Materials ETF, Global X Brazil Mid Cap
ETF, Global X Brazil Utilities ETF, Global X FTSE Andean 40 ETF, Global X MSCI
Colombia ETF, Global X Next Emerging & Frontier ETF, Global X FTSE Nordic
Region ETF and Global X MSCI Norway ETF. To the extent that its Underlying Index
or portfolio invests in securities and markets that are susceptible to
fluctuations in certain commodity markets, any negative changes in commodity
markets could have a great impact on a Fund. Commodity prices may be influenced
of characterized by unpredictable factors, including, where applicable, high
volatility, changes in supply and demand relationships, weather, agriculture,
trade, changes in interest rates and monetary and other governmental policies,
action and inaction. Securities of companies held by a Fund that are dependent
on a single commodity, or are concentrated on a single commodity sector, may
typically exhibit even higher volatility attributable to commodity prices.
160 Concentration Risk In
following its methodology, an Underlying Index will be concentrated to a
significant degree in securities of issuers located in a single country, market,
industry, group of industries, asset class, or sector. To the extent that the
Underlying Index concentrates in the securities of issuers in such an area, a
Fund will also concentrate its investments to approximately the same extent. By
concentrating its investments in a single country, market, industry, group of
industries, asset class, or sector, a Fund faces more risks than if it were
diversified broadly over numerous such areas. Such risks, any of which may
adversely affect the companies in which a Fund invests, may include, but are not
limited to, the following: general economic conditions or cyclical market
patterns that could negatively affect supply and demand; competition for
resources, adverse labor relations, political or world events; obsolescence of
technologies; and increased competition or new product introductions that may
affect the profitability or viability of companies in a country, market,
industry, group of industries, asset class, or sector. In addition, at times,
such country, market, industry, group of industries, asset class, or sector may
be out of favor and underperform other such categories or the market as a whole.
Currency Risk Foreign currencies are subject to risks, which include changes in
the debt level and trade deficit of the country issuing the foreign currency;
inflation rates of the United States and the country issuing the foreign
currency; investors’ expectations concerning inflation rates; interest rates of
the United States and the country issuing the foreign currency; investors’
expectations concerning interest rates; investment and trading activities of
mutual funds, hedge funds and currency funds; and global or regional political,
economic or financial events and situations. In addition, a foreign currency in
which a Fund invests may not maintain its long-term value in terms of purchasing
power in the future. When the price of a foreign currency in which a Fund
invests declines, it may have an adverse impact on the Fund. Foreign exchange
rates are influenced by the factors identified above and may also be influenced
by: changing supply and demand for a particular currency; monetary policies of
governments (including exchange control programs, restrictions on local
exchanges or markets and limitations on foreign investment in a country or on
investment by residents of a country in other countries); changes in balances of
payments and trade; trade restrictions; and currency devaluations and
revaluations. Also, governments from time to time intervene in the currency
markets, directly and by regulation, in order to influence prices directly.
These events and actions are unpredictable. The resulting volatility in the U.S.
dollar/foreign currency exchange rate could materially and adversely affect the
performance of a Fund. Custody Risk Custody risk refers to risks in the process
of clearing and settling trades and to the holding of securities by local banks,
agents and depositories. Low trading volumes and volatile prices in less
developed markets make trades harder to complete and settle. Local agents are
held only to the standard of care of the local markets. Governments or trade
groups may compel local agents to hold securities in designated depositories
that are subject to independent evaluation. The less developed a country’s
securities market, the greater the likelihood of custody problems occurring.
Emerging Market Risk Emerging market risk is the risk that the securities
markets of emerging countries are less liquid, subject to greater price
volatility, have smaller market capitalizations, have less government regulation
and are not subject to as extensive and frequent accounting, financial and other
reporting requirements as the securities markets of more developed countries, as
has historically been the case. The risks of foreign investment are heightened
when the issuer is located in an emerging country. Emerging countries are
generally located in the Asia and Pacific regions, the Middle East, Eastern
Europe, Latin America and Africa. A Fund’s purchase and sale of portfolio
securities in certain emerging countries may be constrained by limitations
relating to daily changes in the prices of listed securities, periodic trading
or settlement volume and/or limitations on aggregate holdings of foreign
investors. Such limitations may be computed based on the aggregate trading
volume by or holdings of a Fund, the Adviser, its affiliates and their
respective clients and other service providers. A Fund may not be able to sell
securities in circumstances where price, trading or settlement volume
limitations have been reached. Foreign investment in the securities markets of
certain emerging countries is restricted or controlled to varying degrees, which
may limit investment in such countries or increase the administrative costs of
such investments. For example, certain Asian countries require government
approval prior to investments by foreign persons or limit investment by foreign
persons to only a
161 specified percentage
of an issuer's outstanding securities or a specific class of securities which
may have less advantageous terms (including price) than securities of the issuer
available for purchase by nationals. In addition, certain countries may restrict
or prohibit investment opportunities in issuers or industries deemed important
to national interests. Such restrictions may affect the market price, liquidity
and rights of securities that may be purchased by a Fund. The repatriation of
both investment income and capital from certain emerging countries is subject to
restrictions, such as the need for governmental consents. In situations where a
country restricts direct investment in securities (which may occur in certain
Asian, Latin American and other countries), a Fund may invest in such countries
through other investment funds in such countries. Many emerging countries have
recently experienced currency devaluations and substantial (and, in some cases,
extremely high) rates of inflation. Other emerging countries have experienced
economic recessions. These circumstances have had a negative effect on the
economies and securities markets of those emerging countries. Economies in
emerging countries generally are dependent heavily upon commodity prices and
international trade and, accordingly, have been and may continue to be affected
adversely by the economies of their trading partners, trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade. As a result, emerging countries are particularly vulnerable to downturns
of the world economy. The recent global financial crisis tightened international
credit supplies and weakened the global demand for their exports. As a result,
certain of these economies faced significant economic difficulties, which caused
some emerging market economies to fall into recession. Recovery from such
conditions may be gradual and/or halting as weak economic conditions in
developed markets may continue to suppress demand for exports from emerging
countries. Many emerging countries are subject to a substantial degree of
economic, political and social instability. Governments of some emerging
countries are authoritarian in nature or have been installed or removed as a
result of military coups, while governments in other emerging countries have
periodically used force to suppress civil dissent. Disparities of wealth, the
pace and success of democratization, and ethnic, religious and racial
disaffection, among other factors, have also led to social unrest, violence
and/or labor unrest in some emerging countries. Many emerging markets have
experienced strained international relations due to border disputes, historical
animosities or other defense concerns. These situations may cause uncertainty in
the markets and may adversely affect the performance of these economies.
Unanticipated political or social developments may result in sudden and
significant investment losses. Investing in emerging countries involves greater
risk of loss due to expropriation, nationalization, confiscation of assets and
property or the imposition of restrictions on foreign investments and on
repatriation of capital invested. As an example, in the past some Eastern
European governments have expropriated substantial amounts of private property,
and many claims of the property owners have never been fully settled. There is
no assurance that similar expropriations will not occur in other emerging market
countries, including China. A Fund’s investment in emerging countries may also
be subject to withholding or other taxes, which may be significant and may
reduce the return to the Fund from an investment in such countries. Settlement
and clearance procedures in emerging countries are frequently less developed and
reliable than those in the United States and may involve a Fund’s delivery of
securities before receipt of payment for their sale. In addition, significant
delays may occur in certain markets in registering the transfer of securities.
Settlement, clearance or registration problems may make it more difficult for a
Fund to value its portfolio securities and could cause the Fund to miss
attractive investment opportunities, to have a portion of its assets uninvested
or to incur losses due to the failure of a counterparty to pay for securities
the Fund has delivered or the Fund’s inability to complete its contractual
obligations because of theft or other reasons. In addition, local agents and
depositories are subject to local standards of care that may not be as rigorous
as developed countries. Governments and other groups may also require local
agents to hold securities in depositories that are not subject to independent
verification. The less developed a country’s securities market, the greater the
risk to a Fund. The creditworthiness of the local securities firms used by a
Fund in emerging countries may not be as sound as the creditworthiness of firms
used in more developed countries. As a result, the Fund may be subject to a
greater risk of loss if a securities firm defaults in the performance of its
responsibilities. A Fund’s use of foreign currency management techniques in
emerging countries may be limited. Due to the limited market for these
instruments in emerging countries, all or a significant portion of a Fund's
currency exposure in emerging countries may not be covered by such instruments.
Rising interest rates, combined with widening credit spreads, could negatively
impact the value of emerging market debt and increase funding costs for foreign
issuers. In such a scenario, foreign issuers might not be able to service their
debt obligations, the market for emerging market debt could suffer from reduced
liquidity, and any investing Fund could lose money. Certain issuers in emerging
market countries may utilize share blocking schemes. Share blocking refers to a
practice, in certain foreign markets, where voting rights related to an issuer's
securities are predicated on these securities being blocked from trading
162 at the custodian or
sub-custodian level, for a period of time around a shareholder meeting. These
restrictions have the effect of barring the purchase and sale of certain voting
securities within a specified number of days before and, in certain instances,
after a shareholder meeting where a vote of shareholders will be taken. Share
blocking may prevent a Fund from buying or selling securities for a period of
time. During the time that shares are blocked trades in such securities will not
settle, The blocking period can last up to several weeks. The process for having
a blocking restriction lifted can be quite onerous with the particular
requirements varying widely by country. In addition, in certain countries, the
block cannot be removed. As a result of the ramifications of voting ballots in
markets that allow share blocking, the Adviser, on behalf of a Fund, reserves
the right to abstain from voting proxies in those markets. Equity Securities
Risk A Fund may invest in equity securities, which are subject to changes in
value that may be attributable to market perception of a particular issuer,
general stock market fluctuations that affect all issuers, or as a result of
such factors as a company’s business performance, investor perceptions, stock
market trends and general economic conditions. Investments in equity securities
may be more volatile than investments in other asset classes. European Economic
Risk European Economic Risk Applies to Global X FTSE Andean 40 ETF, Global X
FTSE Greece 20 ETF, Global X FTSE Nordic Region ETF, Global X MSCI Norway ETF,
Global X FTSE Portugal 20 ETF, Global X Next Emerging & Frontier ETF and
Global X Czech Republic Index ETF. The economies of Europe are highly dependent
on each other, both as key trading partners and as in many cases as fellow
members maintaining the euro. Reduction in trading activity among European
countries may cause an adverse impact on each nation’s individual economies. The
Economic and Monetary Union of the EU requires compliance with restrictions on
inflation rates, deficits, interest rates, debt levels and fiscal and monetary
controls, each of which may significantly affect every country in Europe.
Decreasing imports or exports, changes in governmental or EU regulations on
trade, changes in the exchange rate of the euro, the default or threat of
default by an EU member country or its sovereign debt, and recessions in an EU
member country may have a significant adverse effect on the economies of EU
member countries and their trading partners. The European financial markets have
recently experienced volatility and adverse trends due to concerns about rising
government debt levels of several European countries, including Greece, Spain,
Ireland, Italy and Portugal. These events have adversely affected the exchange
rate of the euro and may continue to significantly affect every country in
Europe. Responses to the financial problems by European governments, central
banks and others, including austerity measures and reforms, may not work, may
result in social unrest and may limit future growth and economic recovery or
have other unintended consequences. Further defaults or restructurings by
governments and other entities of their debt could have additional adverse
effects on economies, financial markets and asset valuations around the world.
In addition, one or more countries may abandon the euro, the common currency of
the EU, and/or withdraw from the EU. The impact of these actions, especially if
they occur in a disorderly fashion, is not clear but could be significant and
far-reaching. Outside of the EU, Iceland has also experienced adverse trends due
to high debt levels and excessive lending. An investment in Eastern European
issuers may subject the Fund to legal, regulatory, political, currency, security
and economic risks specific to Eastern Europe. Economies of certain Eastern
European countries rely heavily on export of commodities, including oil and gas,
and certain metals. As a result, such economies will be impacted by
international commodity prices and are particularly vulnerable to global demand
for these products. Acts of terrorism in certain Eastern European countries may
cause uncertainty in their financial markets and adversely affect the
performance of the issuers to which the Fund has exposure. The securities
markets in Eastern European countries are substantially smaller and
inexperienced, with less government supervision and regulation of stock
exchanges and less liquid and more volatile than securities markets in the
United States or Western European countries. Other risks related to investing in
securities of Eastern European issuers include: the absence of legal structures
governing private and foreign investments and private property; the possibility
of the loss of all or a substantial portion of the Fund’s assets invested in
Eastern European issuers as a result of expropriation; certain national policies
which may restrict the Fund’s investment opportunities, including, without
limitation, restrictions on investing in issuers or industries deemed sensitive
to relevant national interests. Foreign Security Risk Each Fund’s assets may be
invested within the equity markets of countries outside of the U.S. These
markets are subject to special risks associated with foreign investment,
including, but not limited to: lower levels of liquidity and market efficiency;
greater securities price volatility; exchange rate fluctuations and exchange
controls; less availability of public information about issuers;
163 limitations on
foreign ownership of securities; imposition of withholding or other taxes;
imposition of restrictions on the expatriation of the assets of a Fund; higher
transaction and custody costs and delays in settlement procedures; difficulties
in enforcing contractual obligations; lower levels of regulation of the
securities market; and weaker accounting, disclosure and reporting requirements.
Shareholder rights under the laws of some foreign countries may not be as
favorable as U.S. laws. Thus, a shareholder may have more difficulty in
asserting its rights or enforcing a judgment against a foreign company than a
shareholder of a comparable U.S. company. Investment of more than 25% of a
Fund’s total assets in securities located in one country or region will subject
the Fund to increased country or region risk with respect to that country or
region. Frontier Market Risk Risks Related to investing in Frontier Markets
applies to the Global X Emerging & Frontier ETF, Global X MSCI Argentina
ETF, Global X MSCI Nigeria ETF, Global X FTSE Bangladesh Index ETF, Global X
MSCI Pakistan ETF and Global X Central Asia & Mongolia ETF. Frontier
countries generally have smaller economies or less developed capital markets
than traditional emerging markets, and, as a result, the risks of investing in
emerging market countries are magnified in frontier countries. The economies of
frontier countries are less correlated to global economic cycles than those of
their more developed counterparts and their markets have low trading volumes and
the potential for extreme price volatility and illiquidity. This volatility may
be further heightened by the actions of a few major investors. For example, a
substantial increase or decrease in cash flows of mutual funds investing in
these markets could significantly affect local stock prices and, therefore, the
price of Fund Shares. These factors make investing in frontier countries
significantly riskier than in other countries and any one of them could cause
the price of the Fund’s Shares to decline. Governments of many frontier
countries in which a Fund may invest may exercise substantial influence over
many aspects of the private sector. In some cases, the governments of such
frontier countries may own or control certain companies. Accordingly, government
actions could have a significant effect on economic conditions in a frontier
country and on market conditions, prices and yields of securities in such Fund’s
portfolio. Moreover, the economies of frontier countries may be heavily
dependent upon international trade and, accordingly, have been and may continue
to be, adversely affected by trade barriers, exchange controls, managed
adjustments in relative currency values and other protectionist measures imposed
or negotiated by the countries with which they trade. These economies also have
been and may continue to be adversely affected by economic conditions in the
countries with which they trade. Certain foreign governments in countries in
which the Funds may invest levy withholding or other taxes on dividend and
interest income. Although in some countries a portion of these taxes are
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from investments in such countries. From time to time,
certain of the companies in which the Funds may invest may operate in, or have
dealings with, countries subject to sanctions or embargoes imposed by the U.S.
government and the United Nations and/or countries identified by the U.S.
government as state sponsors of terrorism. A company may suffer damage to its
reputation if it is identified as a company which operates in, or has dealings
with, countries subject to sanctions or embargoes imposed by the U.S. government
and the United Nations and/or countries identified by the U.S. government as
state sponsors of terrorism. As an investor in such companies, the Funds will be
indirectly subject to those risks. Investment in equity securities of issuers
operating in certain frontier countries is restricted or controlled to varying
degrees. These restrictions or controls may at times limit or preclude foreign
investment in equity securities of issuers operating in certain frontier
countries and increase the costs and expenses of the Funds. Certain frontier
countries require governmental approval prior to investments by foreign persons,
limit the amount of investment by foreign persons in a particular issuer, limit
the investment by foreign persons only to a specific class of securities of an
issuer that may have less advantageous rights than the classes available for
purchase by domiciliaries of the countries and/or impose additional taxes on
foreign investors. Certain frontier countries may also restrict investment
opportunities in issuers in industries deemed important to national interests.
Frontier countries may require governmental approval for the repatriation of
investment income, capital or the proceeds of sales of securities by foreign
investors, such as the Funds. In addition, if deterioration occurs in a frontier
country’s balance of payments, the country could impose temporary restrictions
on foreign capital remittances. The Funds could be adversely affected by delays
in, or a refusal to grant, any required governmental approval for repatriation
of capital, as well as by the application to the Funds of any restrictions on
investments. Investing in local markets in frontier countries may require the
Funds to adopt special procedures, seek local government approvals or take other
actions, each of which may involve additional costs to the Funds.
164 Geographic Risk
Geographic risk is the risk that a Fund’s assets may be concentrated in
countries located in the same geographic region. This concentration will subject
a Fund to risks associated with that particular region, such as a natural
disaster. Government Debt Risk Government Debt Risk applies to the Global X FTSE
Greece 20 ETF, the Global X FTSE Portugal 20 ETF and the Global X MSCI Pakistan
ETF. Countries with high levels of public debt and spending may experience
stifled economic growth. Such countries may face higher borrowing costs and in
some cases may implement austerity measures that could have an adverse effect on
economic growth. Such developments could contribute to prolonged periods of
recession and adversely impact investments in the Funds. Investable Universe of
Companies Risk The investable universe of companies in which a Fund may invest
may be limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, a Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of a Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s underlying
portfolio holdings and on Fund performance. Issuer Risk Issuer risk is the risk
that any of the individual companies that a Fund invests in may perform badly,
causing the value of its securities to decline. Poor performance may be caused
by poor management decisions, competitive pressures, changes in technology,
disruptions in supply, labor problems or shortages, corporate restructurings,
fraudulent disclosures or other factors. Issuers may, in times of distress or on
their own discretion, decide to reduce or eliminate dividends, which would also
cause their stock prices to decline. Latin American Economic Risk Latin Economic
Risk applies to the Global X Next Emerging & Frontier ETF, Global X Brazil
Consumer ETF, Global X Brazil Financials ETF, Global X Brazil Industrials ETF,
Global X Materials ETF, Global X Brazil Mid Cap ETF, Global X Brazil Utilities
ETF, Global X FTSE Andean 40 ETF, Global X MSCI Colombia ETF, and Global X MSCI
Argentina ETF. Many economies in Latin America have experienced high interest
rates, economic volatility, inflation, currency devaluations and high
unemployment rates. Any adverse economic event in one country can have a
significant effect on other countries of this region. In addition, commodities
(such as oil, gas and minerals) represent a significant percentage of the
region's exports and many economies in this region, are particularly sensitive
to fluctuations in commodity prices. Leverage Risk Each Fund may borrow money at
fiscal quarter end to maintain the required level of diversification to qualify
as a RIC for purposes of the Code. As a result, a Fund may be exposed to the
risks of leverage, which may be considered a speculative investment technique.
Leverage magnifies the potential for gain and loss on amounts invested and
therefore increase the risks associated with investing in a Fund. If the value
of a Fund's assets increases, then leveraging would cause the Fund's NAV to
increase more sharply than it would have had the Fund not leveraged. Conversely,
if the value of a Fund's assets decreases, leveraging would cause the Fund's NAV
to decline more sharply than it otherwise would have had the Fund not leveraged.
The Fund may incur additional expenses in connection with borrowings. Management
Risk Each Fund may not fully replicate its Underlying Index and may hold
securities not included in its Underlying Index. Therefore, each Fund is subject
to management risk. That is, the Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective. The ability of the
Adviser to successfully implement each Fund’s investment strategies will
influence each Fund’s performance significantly.
165 Market Risk Market
risk is the risk that the value of the securities in which a Fund invests may go
up or down in response to the prospects of individual issuers and/or general
economic conditions. Price changes may be temporary or last for extended
periods. You could lose money over short periods due to fluctuation in a Fund’s
NAV in response to market movements, and over longer periods during market
downturns. Market Trading Risks Absence of Active Market Although Shares of a
Fund are or will be listed for trading on a U.S. exchange and may be listed on
certain foreign exchanges, there can be no assurance that an active trading
market for such Shares will develop or be maintained. Lack of Market Liquidity
Secondary market trading in Shares of a Fund may be halted by an exchange
because of market conditions or for other reasons. In addition, trading in
Shares is subject to trading halts caused by extraordinary market volatility
pursuant to “circuit breaker” rules. There can be no assurance that the
requirements necessary to maintain the listing of Shares will continue to be met
or will remain unchanged. Risks of Secondary Listings A Fund's Shares may be
listed or traded on U.S. and non-U.S. exchanges other than the U.S. exchange
where the Fund’s primary listing is maintained. There can be no assurance that a
Fund’s Shares will continue to trade on any such exchange or in any market or
that a Fund's Shares will continue to meet the requirements for listing or
trading on any exchange or in any market. A Fund's Shares may be less actively
traded in certain markets than others, and investors are subject to the
execution and settlement risks and market standards of the market where they or
their broker direct their trades for execution. Certain information available to
investors who trade Shares on a U.S. exchange during regular U.S. market hours
may not be available to investors who trade in other markets, which may result
in secondary market prices in such markets being less efficient. Secondary
Market Trading Risk Shares of a Fund may trade in the secondary market on days
when the Fund does not accept orders to purchase or redeem Shares. On such days,
Shares may trade in the secondary market with more significant premiums or
discounts than might be experienced on days when the Fund accepts purchase and
redemption orders. Secondary market trading in Fund Shares may be halted by a
stock exchange because of market conditions or other reasons. In addition,
trading in Fund Shares on a stock exchange or in any market may be subject to
trading halts caused by extraordinary market volatility pursuant to "circuit
breaker" rules on the stock exchange or market. There can be no assurance that
the requirements necessary to maintain the listing or trading of Fund Shares
will continue to be met or will remain unchanged. Shares of the Funds May Trade
at Prices Other Than NAV Shares of a Fund may trade at, above or below NAV. The
per share NAV of each Fund will fluctuate with changes in the market value of
such Fund’s holdings. The trading prices of Shares will fluctuate in accordance
with changes in its NAV as well as market supply and demand. The trading prices
of a Fund's Shares may deviate significantly from NAV during periods of market
volatility. Any of these factors may lead to the Fund's Shares trading at a
premium or discount to NAV. While the creation/redemption feature is designed to
make it likely that Shares normally will trade close to the Fund’s NAV, exchange
prices are not expected to correlate exactly with a Fund's NAV due to timing
reasons as well as market supply and demand factors. In addition, disruptions to
creations and redemptions or the existence of extreme market volatility may
result in trading prices that differ significantly from NAV. If a shareholder
purchases at a time when the market price is at a premium to the NAV or sells at
a time when the market price is at a discount to the NAV, the shareholder may
sustain losses. Since foreign exchanges may be open on days when a Fund does not
price Shares, the value of the securities in the Fund’s portfolio may change on
days when shareholders will not be able to purchase or sell Shares.
166 Costs of Buying or
Selling Fund Shares Buying or selling Fund Shares involves two types of costs
that apply to all securities transactions. When buying or selling Shares of a
Fund through a broker, you will likely incur a brokerage commission or other
charges imposed by brokers as determined by that broker. In addition, you may
incur the cost of the "spread" - that is, the difference between what
professional investors are willing to pay for Fund Shares (the "bid" price) and
the market price at which they are willing to sell Fund Shares (the "ask"
price). Because of the costs inherent in buying or selling Fund Shares, frequent
trading may detract significantly from investment results and an investment in
Fund Shares may not be advisable for investors who anticipate regularly making
small investments. Micro-Capitalization Companies Risk Micro-Capitalization
Companies Risk applies to the Global X Central Asia & Mongolia Index ETF.
The Fund may invest in micro-capitalization companies. These companies are
subject to substantially greater risks of loss and price fluctuations because
their earnings and revenues tend to be less predictable (and some companies may
be experiencing significant losses), and their share prices tend to be more
volatile and their markets less liquid than companies with larger market
capitalizations. Micro-capitalization companies may be newly formed or in the
early stages of development, with limited product lines, markets or financial
resources and may lack management depth. In addition, there may be less public
information available about these companies. The shares of micro-capitalization
companies tend to trade less frequently than those of larger, more established
companies, which can adversely affect the pricing of these securities and the
future ability to sell these securities. Also, it may take a long time before a
Fund realizes a gain, if any, on an investment in a micro-capitalization
company. Middle East Economic Risk Middle East Economic Risk applies to the
Global X Next Emerging & Frontier ETF and Global X MSCI Pakistan ETF.
Certain economies in the Middle East depend to a significant degree upon exports
of primary commodities such as oil. A sustained decrease in commodity prices
could have a significant negative impact on all aspects of the economy in the
region. Middle Eastern governments have exercised and continue to exercise
substantial influence over many aspects of the private sector. Countries in the
Middle East may be affected by political instability, war or the threat of war,
regional instability, terrorist activities and religious, ethnic and/or
socioeconomic unrest. Recent unrest and instability in the larger Middle East
region has adversely impacted many economies in the region. Recent political
instability and protests in the Middle East and North Africa (which has ethnic,
religious and economic ties to the Middle East) have caused significant
disruptions to many industries. Non-Correlation Risk A Fund’s return may not
match the return of the Underlying Index for a number of reasons. For example, a
Fund incurs operating expenses not applicable to the Underlying Index, and
incurs costs in buying and selling securities, especially when rebalancing the
Fund’s securities holdings to reflect changes in the composition of the
Underlying Index. In addition, the performance of a Fund and the Underlying
Index may vary due to asset valuation differences and differences between the
Fund’s portfolio and the Underlying Index resulting from legal restrictions,
costs or liquidity constraints. Non-Diversification Risk Each Fund is classified
as a “non-diversified” investment company under the 1940 Act. This means that
each Fund may invest most of its assets in securities issued by or representing
a small number of companies. As a result, each Fund may be more susceptible to
the risks associated with these particular companies, or to a single economic,
political or regulatory occurrence affecting these companies. Passive Investment
Risk Each Fund is not actively managed and may be affected by a general decline
in market segments relating to the respective Underlying Index. Each Fund
invests in securities included in, or representative of, the Underlying Index
regardless of their investment merits. The Adviser does not attempt to take
defensive positions in declining markets beyond the mechanics built into the
Underlying Index. Unlike many investment companies, a Fund does not utilize an
investing strategy that seeks returns in excess of its Underlying Index.
Therefore, a fund would not necessarily buy or sell a security unless that
security is added or removed, respectively, from the Underlying Index, even if
that security generally is underperforming.
167 Privatization Risk
Privatization Risk applies to the Global X China Consumer ETF, Global X China
Energy ETF, Global X China Financials ETF, Global X China Industrials ETF,
Global X China Materials ETF, Global X China Mid Cap ETF, Global X NASDAQ China
Technology ETF, Global X Brazil Consumer ETF, Global X Brazil Financials ETF,
Global X Brazil Industrials ETF, Global X Brazil Materials ETF, Global X Brazil
Mid Cap ETF, Global X Brazil Utilities ETF, Global X MSCI Argentina ETF, Global
X MSCI Nigeria ETF, Global X Next Emerging & Frontier ETF, and Global X FTSE
Bangladesh Index ETF. The countries in which the Funds invest have privatized
certain entities and industries. Historically, investors in some newly
privatized entities have suffered losses due to inability of the newly
privatized company to adjust quickly to a competitive environment or to changed
regulatory and legal standards. There is no assurance that similar losses will
not recur. Qualification as a Regulated Investment Company Each Fund must meet a
number of diversification requirements to qualify as a RIC under Section 851 of
the Code and, if qualified, to continue to qualify. If a Fund experiences
difficulty in meeting those requirements for any fiscal quarter, it might enter
into borrowings in order to increase the portion of the Fund’s total assets
represented by cash, cash items, and U.S. government securities shortly
thereafter and, as of the close of the following fiscal quarter, to attempt to
meet the requirements. However, a Fund may incur additional expenses in
connection with any such borrowings, and increased investments by the Fund in
cash, cash items, and U.S. government securities (whether the Funds make such
investments from borrowings) are likely to reduce the Fund’s return to
investors. Reliance on Trading Partners Risk A Fund may invest in economies that
are heavily dependent upon trading with key partners. Any reduction in this
trading, institution of tariffs or other trade barriers or a slowdown in the
economies of any of its key trading partners may cause an adverse impact on the
economies of the markets in which a Fund invests. Risks Related to Investing in
Argentina Risks Related to Investing in Argentina applies to the Global X MSCI
Argentina ETF. Argentina’s economy is heavily dependent on exports. Argentina’s
key trading and foreign investment partners are Brazil, China and the U.S.
Reduction in spending on Argentinean products and services, or changes in China,
the U.S., or any of the Latin American economies, trade regulations or currency
exchange rates may adversely impact the Argentinean economy. Argentina has
experienced a high level of debt and public spending. Argentina’s default on its
debt in 2001, as well as its nationalization of private pensions in 2008,
continues to impact the confidence of investors in Argentina, which might
adversely impact returns in a Fund. In 2014, minority bondholders of Argentina’s
previously defaulted debt sought, and won, an injunction that prohibited
Argentina from repaying bonds that had been renegotiated, unless they
simultaneously paid the holdout minority bondholders their full amount due as
well. Argentina’s willingness and ability to repay its sovereign debt is
currently in question, and the possibility of default is not unlikely, which
could limit its ability to borrow in the future. Argentina has experienced
periods of significant political instability and certain sectors and regions of
Argentina experience high unemployment, which may cause downturns in the
Argentinean market and adversely impact investments in a Fund. Heavy regulation
of labor and product markets is pervasive in Argentina and may stifle
Argentinean economic growth or contribute to prolonged periods of recession. For
example, Argentina’s government has made a decision to nationalize YPF S.A., its
nation’s largest energy company. Argentina has capital controls that could
impact the inflow and repatriation of capital and the free transfers of
securities. These capital controls could disrupt the creation/redemption
process, thereby adversely affecting trading of the Shares. For example, these
controls could cause the Shares to trade at a price that is materially different
from NAV. Risks Related to Investing in the Andean Region Risks Related to
Investing in the Andean Region applies to the Global X FTSE Andean 40 ETF The
Fund currently invests in the Andean countries of Chile, Colombia and Peru. The
economies of these countries have experienced periods of high interest rates,
economic volatility, inflation, currency devaluations and high unemployment
rates. Any adverse
168 economic event in one
country can have a significant effect on other countries of this region. In
addition, commodities (such as oil, gas and minerals) represent a significant
percentage of the regions' exports, and many economies in this region are
particularly sensitive to fluctuations in commodity prices. Chile’s economy is
export-dependent and relies heavily on trading relationships with certain key
trading partners, including China, Brazil, Japan, the United States and
Netherlands. Future changes in the price or the demand for Chilean exported
products by China, Brazil, Japan, the United States and Netherlands, changes in
these countries’ economies, trade regulations or currency exchange rates could
adversely impact the Chilean economy and the issuer’s to which the Fund has
exposure. The Chilean economy is subject to risks of social unrest, high
unemployment, governmental control and heavy regulation of the labor industry.
Any of these factors individually or in the aggregate could adversely affect
investments in the Fund. Historically, Chile has experienced periods of
political instability and certain sectors and regions of Chile have experienced
high unemployment. Any recurrence of these events may cause downturns in the
Chilean market and adversely impact investments in the Fund. Heavy regulation of
labor and product markets is pervasive in Chile and may stifle Chilean economic
growth or contribute to prolonged periods of recession. Colombia’s economy is
heavily dependent on exports. The oil, coal and coffee sectors of Colombia’s
economy account for a large portion of its exports. Any changes in these sectors
could have an adverse impact on the Colombian economy. Colombia’s key trading
and foreign investment partners are the U.S., Brazil, China, the E.U., Venezuela
and Mexico. Reduction in spending on Colombian products and services, or changes
in the U.S. or any of the Latin American economies, trade regulations or
currency exchange rates may adversely impact the Colombian economy. The level of
violence associated with internal conflicts and drug- trafficking in Colombia
has fallen but remains high by international standards. In the recent past,
Colombia has imposed stringent capital controls that have restricted the inflow
and repatriation of capital and the free transfers of securities. These controls
have since been eased but there can be no assurance that they will be reinstated
or changed again and without prior warning. These capital controls could disrupt
the creation/redemption process thereby adversely affecting trading of the
Shares. For example, these controls could cause the Shares to trade at a price
that is materially different from its NAV. Peru has historically experienced
high rates of inflation and may continue to do so in the future. An increase in
prices for commodities, the depreciation of Peruvian currency (Peruvian nuevo
sol) and potential future government measures seeking to maintain the value of
the currency in relation to other currencies, may trigger increases in inflation
in Peru and may also slow the rate of growth of its economy. Possibility of
political instability may cause uncertainty in the Peruvian stock market and as
a result, negatively impact issuers to which the Fund has exposure. In addition,
the market for Peruvian securities is directly influenced by the flow of
international capital and economic and market conditions of certain countries,
especially other emerging market countries in Latin America. The Peruvian
economy is subject to political, social, economic and regulatory risks which
could adversely affect investments in the Fund. However, Peru has entered into,
and is implementing, a bilateral trade agreement with the U.S. which is designed
to help protect private U.S. investments in Peru, develop market-oriented
policies in partner countries, and promote U.S. exports to Peru. This program
may have the effect of mitigating the potential risks listed for investing in
Peru. Peru has experienced periods of political instability and social unrest in
the past. Peru continues to experience significant unemployment in certain
regions as well as widespread underemployment. There may be a risk of loss due
to expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and on repatriation of capital
invested, particularly if the bilateral trade agreement with the U.S. is not
fully implemented or fails in its purpose. Peru has experienced economic
instability resulting from periods of high inflation and currency devaluations.
Since 2000, however, Peru’s currency has remained relatively stable against the
U.S. dollar. Heavy regulation of labor is pervasive in Peru and may stifle
Peruvian economic growth. Risks Related to Investing in the ASEAN Region Risks
Related to Investing in the ASEAN Region applies to the Global X Southeast Asia
ETF. Investments in the ASEAN region involve risks not typically associated with
investments in securities of issuers in more developed countries that may
negatively affect the value of your investment in the Fund. Singapore, Malaysia,
Thailand, Indonesia and the Philippines present different economic and political
conditions from those in Western markets, and less social, political and
economic stability. Singapore is a small island state with few raw material
resources and limited land area and is reliant on imports for its commodity
needs. Any fluctuations or shortages in the commodity markets could have a
negative impact on the Singaporean economy. Given its size and position,
Singapore is also sensitive to the socio-political and economic developments of
its neighbors, Indonesia and Malaysia, relying on both as markets for
Singapore’s service industry and on Malaysia for its raw water supply. Rising
labor costs and increasing environmental consciousness have led some
labor-intensive industries to relocate to countries with cheaper work forces,
and continued labor outsourcing may adversely affect the Singaporean economy.
169 The Malaysian
economy, among other things, is dependent upon external trade with other
economies, specifically the United States, China, Japan and Singapore. As a
result, Malaysia is dependent on the economies of these other countries and any
change in the price or demand for Malaysian exports may have an adverse impact
on the Malaysian economy. In addition, the Malaysian economy is heavily focused
on export of electronic goods. As a result, Malaysia’s reliance on the
electronics sector makes it vulnerable to economic downturns in, among other
sectors, the technology sector. Recent volatility in the exchange rate of the
Malaysian currency and general economic deterioration led to the imposition and
then reversal of stringent capital controls, a prohibition on repatriation of
capital and an indefinite prohibition on free transfers of securities. There can
be no assurance that a similar levy will not be reinstated by Malaysian
authorities in the future, to the possible detriment of the Fund and its
shareholders. Malaysian capital controls have been changed in significant ways
since they were adopted and without prior warning. There can be no assurance
that Malaysian capital controls will not be changed in the future in ways that
adversely affect the Fund and its shareholders. Thailand’s economy is
export-dependent and relies heavily on trading relationships with certain key
trading partners, including the United States, China, Japan and other Asian
countries. The recent financial crisis and political uncertainty weakened
Thailand’s economic growth by reducing domestic and international demand for
both goods and services. Future changes in the price or the demand for
Thailand’s exported products by the United States, China, Japan or other Asian
countries, or changes in these countries’ economies, trade regulations or
currency exchange rates could adversely impact the Thai economy and the issuers
to which the Fund has exposure. Economic and political instability have
contributed to high price volatility in the Thai equity and currency markets,
which could affect investments in the Fund. The Thai economy has experienced
periods of substantial inflation, currency devaluations and economic recessions,
any of which may have a negative effect on the Thai economy and securities
markets. Thailand has at times been destabilized by frequent government turnover
and significant political changes, including military coups. Recurrence of these
conditions, unanticipated or sudden changes in the political structure or other
Thai political events may result in sudden and significant investment losses.
The securities markets of Indonesia are underdeveloped and are often considered
to be less correlated to global economic cycles than those markets located in
more developed countries. As a result, securities markets in Indonesia are
subject to greater risks associated with market volatility, lower market
capitalization, lower trading volume, illiquidity, inflation, greater price
fluctuations, uncertainty regarding the existence of trading markets,
governmental control and heavy regulation of labor and industry. Moreover,
trading on securities markets may be suspended altogether. The government in
Indonesia may restrict or control to varying degrees the ability of foreign
investors to invest in securities of issuers located or operating in Indonesia.
These restrictions and/or controls may at times limit or prevent foreign
investment in securities of issuers located or operating in Indonesia. These
factors, among others, make investing in issuers located or operating in
Indonesia significantly riskier than investing in issuers located or operating
in more developed countries, and any one of them could cause a decline in the
value of the Fund’s Shares. The value of the Indonesian Rupiah may be subject to
a high degree of fluctuation. The Fund’s exposure to the Indonesian Rupiah and
changes in value of the Indonesian Rupiah versus the U.S. dollar may result in
reduced returns for the Fund. The Philippine economy, among other things, is
dependent upon external trade with other key trading partners, specifically
China, Japan and the United States. As a result, the Philippines is dependent on
the economies of these other countries and any change in the price or demand for
Philippine exports may have an adverse impact on its economy. The Philippine
economy is particularly dependent on exports of electronics and semiconductor
devices. The Philippines’ reliance on these sectors makes it vulnerable to
economic downturns in, among other sectors, the technology sector. The
Philippines have experienced acts of terrorism or strained international
relations due to territorial disputes, historical animosities or other defense
concerns including tensions relating to sovereignty over areas of the South
China Sea. These situations may cause uncertainty in the Philippine markets and
may adversely affect the performance of the Philippine economy. The Philippines
is subject to a considerable degree of economic, political and social
instability, which could adversely affect investments in the Fund. The
Philippine economy has recently experienced growth, which may not continue. The
economy is buoyed by remittances from 4-5 million Filipinos living abroad whose
ability to send money to the Philippines may be diminished by economic changes
in their country of residence. In the last 10 years, the Philippine elected
government has experienced pressure from coup attempts, a non-violent revolution
referred to as “people power”, and violent separatist movements in the southern
Philippine islands. Religious conflicts and a high poverty rate also create
increased risks for businesses in the Philippines. Risks Related to Investing in
Bangladesh Risks Related to Investing in Bangladesh applies to the Global X FTSE
Bangladesh Index ETF. Bangladesh faces many economic hurdles including weak
political institutions, government mismanagement of resources, poor
infrastructure, lack of privatization of industry and a labor force that has
outpaced job growth in the country. Political unrest is not uncommon in
Bangladesh, and in the past has involved protests and violence. The military
also plays a role in politics, and has used its power to back the government and
influence policy. Although the government has taken an active role to tackle
170 corruption,
Bangladesh still ranks consistently low on the government transparency indices
and this is undoubtedly a deterrent for foreign investment and economic growth.
The privatization of industries in Bangladesh has been slow, largely due to
worker unrest at state-owned enterprises. Opposition from government bureaucracy
and public sector unions has prevented much of the economic liberalization, and
capital markets in Bangladesh are still in need of reform with regard to the
treatment of foreign investors and foreign capital. Bangladesh’s economy is
heavily dependent on the agricultural sector and garment industry, with over 2/3
of the population involved in agriculture production. Many Asian countries,
including Bangladesh, are prone to frequent typhoons, damaging floods,
earthquakes and/or other natural disasters, which may adversely impact their
economies. Bangladesh’s economy, in particular, is more reliant on agriculture
than the U.S. economy and is therefore more susceptible to adverse changes in
weather. Securities markets in Bangladesh are subject to greater risks
associated with market volatility, lower market capitalization, lower trading
volume, illiquidity, inflation, greater price fluctuations and uncertainty
regarding the existence of trading markets. Moreover, trading on securities
markets may be suspended altogether. The governments might restrict or control
to varying degrees the ability of foreign investors to invest in securities of
issuers located or operating in Bangladesh as well as the repatriation of
investment income, capital or the proceeds of sales of securities by foreign
investors. Risks Related to Investing in Brazil Risks Related to Investing in
Brazil applies to the Global X Brazil Consumer ETF, Global X Brazil Mid Cap ETF,
Global X Brazil Financials ETF, Global X Brazil Industrials ETF, Global X Brazil
Materials ETF, and Global X Brazil Utilities ETF. Investments in securities of
Brazilian companies are subject to regulatory, economic and political risks
related to the significant influence that the Brazilian government exercises
over its economy. The Brazilian economy has historically been characterized by
frequent, and occasionally drastic, intervention by the Brazilian government.
Government efforts to check inflation and shape other aspects of the economy
have involved, among others, the setting of wage and price controls, blocking
access to bank accounts, imposing exchange controls and limiting imports. There
can be no assurances that similar measures will not be instituted in the future.
Such measures may have significant effects on the Funds’ investments. Brazil,
like many other South American countries, has historically experienced high
rates of inflation and may do so in the future. An increase in prices for
petroleum, the depreciation of the real and future governmental measures seeking
to maintain the value of the real in relation to the U.S. dollar, may trigger
increases in inflation in Brazil and may slow the rate of growth of the
Brazilian economy. Brazil also continues to suffer from a high level of debt and
public spending, which may stifle economic growth, contribute to prolonged
periods of recession or lower the country’s sovereign debt rating, all of which
may adversely impact the Funds’ investments. Investments in Brazilian securities
may be subject to certain restriction on foreign investment. Brazilian law
provides that whenever a serious imbalance in Brazil’s balance of payments
exists or is anticipated, the Brazilian government may impose temporary
restrictions on the remittance to foreign investors of the proceeds of their
investment in Brazil and on the conversion of Brazilian currency into foreign
currency. The likelihood of such restrictions may be affected by the extent of
Brazil’s foreign currency reserves, the availability of sufficient foreign
currency in the foreign exchange markets on the date a payment is due, the size
of Brazil’s debt service burden relative to the economy as a whole and political
constraints to which Brazil may be subject. There can be no assurance that the
Brazilian government will not impose restrictions or restrictive exchange
control policies in the future. Brazil is heavily dependent on export to the
United States, China and other countries in Latin America, especially fellow
member states in the Mercosur trade bloc. Reduction in spending on Brazilian
products and services, or adverse economic events, such as inflation, high
interest rates, currency devaluation, political upheaval and high unemployment
rates, in any of the trading partner states may impact the Brazilian economy.
Further, many economies in Latin America, including Brazil’s, are heavily
dependent on commodity exports and may be particularly sensitive to fluctuations
in commodity prices. Despite rapid development in recent years, Brazil still
suffers from high levels of corruption, crime and income disparity. There is the
possibility that such conditions may lead to social unrest and political
upheaval in the future, which may have adverse effects on the Funds’
investments. The market for Brazilian securities is influenced by the flow of
international capital and economic and market conditions of certain countries,
especially emerging market countries in Latin America. Adverse economic
conditions or developments in other emerging market countries have at times
significantly affected the availability of credit in the Brazilian economy and
resulted in considerable outflows of funds and declines in the amount of foreign
currency invested in Brazil.
171 Risks Related to
Investing in Central Asia Risks Related to Investing in Central Asia applies to
the Global X Central Asia & Mongolia Index ETF. The Fund is expected to
invest in securities in the Central Asian countries. Investments in these
markets involve risks not typically associated with investments in securities of
issuers in more developed countries that may negatively affect the value of your
investment in the Fund. Such heightened risks include, among others,
expropriation and/or nationalization of assets, restrictions on and government
intervention in international trade, confiscatory taxation, political
instability, including authoritarian and/or military involvement in governmental
decision making, armed conflict, the impact on the economy as a result of civil
war, and social instability as a result of religious, ethnic and/or
socioeconomic unrest. The countries in Central Asia present different economic
and political conditions from those in Western markets, and less social,
political and economic stability. Countries in the region may experience
political instability. Such instability could have an adverse effect on economic
or social conditions in these economies and may result in outbreaks of civil
unrest, terrorist attacks or threats or acts of war in the affected areas, any
of which could materially and adversely affect the companies in which the Fund
may invest. In addition, the ability of companies to efficiently conduct their
business activities in Central Asia is subject to changes in government policy
or shifts in political attitudes within countries in the region. Any adverse
change in the relationship with major trading partners such as China, or
significant economic or political turmoil in China itself, may also have a
significant negative impact on the financial markets in Central Asia. Government
policy may change to discourage foreign investment, nationalization of
industries may occur or other government limitations, restrictions or
requirements not currently foreseen may be implemented. In addition, assets in
Central Asian countries may be subject to nationalization, requisition or
confiscation, whether legitimate or not, by any authority or body. Securities
markets in Central Asian countries are subject to greater risks associated with
market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations and uncertainty regarding the
existence of trading markets. Moreover, trading on securities markets may be
suspended altogether. The governments might restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in Central Asia as well as the repatriation of investment
income, capital or the proceeds of sales of securities by foreign investors.
Risks Related to Investing in China Risks Related to Investing in China applies
to the Global X China Consumer ETF, Global X China Energy ETF, Global X China
Financials ETF, Global X China Industrials ETF, Global X China Materials ETF,
Global X China Mid Cap ETF, and Global X NASDAQ China Technology ETF. The
Chinese economy is subject to a considerable degree of economic, political and
social instability. Political and Social Risk The Chinese government is
authoritarian and has periodically used force to suppress civil dissent.
Disparities of wealth and the pace of economic liberalization may lead to social
turmoil, violence and labor unrest. In addition, China continues to experience
disagreements related to integration with Hong Kong and religious and
nationalist disputes in Tibet and Xinjiang. Unanticipated political or social
developments may result in sudden and significant investment losses. Heavy
Government Control and Regulations The Chinese government has implemented
significant economic reforms in order to liberalize trade policy, promote
foreign investment in the economy, reduce government control of the economy and
develop market mechanisms. There can be no assurance these reforms will continue
or that they will be effective. Despite recent reform and privatizations, heavy
regulation of investment and industry is still pervasive and the Chinese
government may restrict foreign ownership of Chinese corporations and
repatriation of assets. Economic Risk The Chinese economy has grown rapidly
during the past several years and there is no assurance that this growth rate
will be maintained. China may experience substantial rates of inflation or
economic recessions, causing a negative effect on the economy and securities
market. Delays in enterprise restructuring, slow development of well-functioning
financial markets and widespread
172 corruption have also
hindered performance of the Chinese economy and China continues to receive
substantial pressure from trading partners to liberalize official currency
exchange rates. If any of China’s primary trading partners, such as the United
States, the European Union, Japan and South Korea, were to experience adverse
economic conditions, the demand for Chinese exports could be reduced and this
would adversely impact the Chinese economy. The performance of the Chinese
economy may differ favorably or unfavorably from the U.S. economy in such
respects as growth of gross domestic product, rate of inflation, currency
depreciation, capital reinvestment, resource self-sufficiency and balance of
payments position. Expropriation Risk The Chinese government maintains a major
role in economic policy making and investing in China involves risk of loss due
to expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and on repatriation of capital
invested. Hong Kong Political Risk Hong Kong reverted to Chinese sovereignty on
July 1, 1997 as a Special Administrative Region (SAR) of the People’s Republic
of China under the principle of “one country, two systems.” Although China is
obligated to maintain the current capitalist economic and social system of Hong
Kong through June 30, 2047, the continuation of economic and social freedoms
enjoyed in Hong Kong is dependent on the government of China. Any attempt by
China to tighten its control over Hong Kong’s political, economic, legal or
social policies may result in an adverse effect on Hong Kong’s markets. In
addition, the Hong Kong dollar trades at a fixed exchange rate in relation to
(or, is “pegged” to) the U.S. dollar, which has contributed to the growth and
stability of the Hong Kong economy. However, it is uncertain how long the
currency peg will continue or what effect the establishment of an alternative
exchange rate system would have on the Hong Kong economy. Because the Fund’s NAV
is denominated in U.S. dollars, the establishment of an alternative exchange
rate system could result in a decline in the Fund’s NAV. Risks Related to
Investing in Czech Republic Risks Related to Investing in Czech Republic applies
to the Global X Czech Republic Index ETF. The Czech Republic’s economy is
heavily dependent on the manufacturing and export of industrial materials and
machinery. Key trading partners are member states of the European Union, most
notably Germany, Spain, Italy, France and the United Kingdom. Decreasing demand
for the Czech Republic’s products and services or changes in governmental
regulations on trade may have a significantly adverse effect on the Czech
economy. The Czech Republic and many of the Western European developed nations
are member states of the EU. As a result, these member states are dependent upon
one another economically and politically. The recent ratification of the Treaty
of Lisbon by EU member states is expected to further heighten the degree of
economic and political inter-dependence. This and other political or economic
developments could cause market disruptions and affect adversely the values of
securities held by the Fund. The Czech Republic and surrounding regions have a
history of ethnic unrest and conflict. If conflict were to renew in the future,
it could have a significant adverse impact on the Fund. Risks Related to
Investing in Colombia Risks Related to Investing in Colombia applies to the
Global X MSCI Colombia ETF. Colombia’s economy is heavily dependent on exports.
The oil, coal and coffee sectors of Colombia’s economy account for a large
portion of its exports. Any changes in these sectors could have an adverse
impact on the Colombian economy. Colombia’s key trading and foreign investment
partners are the U.S., Brazil, China, the E.U., Venezuela and Mexico. Reduction
in spending on Colombian products and services, or changes in the U.S. or any of
the Latin American economies, trade regulations or currency exchange rates may
adversely impact the Colombian economy. Colombia has experienced a high level of
debt and public spending, which may stifle economic growth, contribute to
prolonged periods of recession or lower the country’s sovereign debt rating and
adversely impact investments in the Fund. Colombia has experienced periods of
political instability, violence, and social unrest in the past. Although levels
of violence associated with internal conflicts and drug-trafficking have fallen,
they remain high by international standards. Moreover, ongoing tension between
Colombia and Venezuela could adversely affect the Colombian economy.
173 In the recent past,
Colombia has imposed stringent capital controls that have restricted the inflow
and repatriation of capital and the free transfers of securities. These controls
have since been eased but there can be no assurance that they will be reinstated
or changed again and without prior warning. These capital controls could disrupt
the creation/redemption process thereby adversely affecting trading of the
Shares. For example, these controls could cause the Shares to trade at a price
that is materially different from its NAV. Colombia is located in a part of the
world that has historically been prone to natural disasters such as earthquakes,
volcanoes, droughts, floods and tsunamis. In addition, emerging markets are
especially economically sensitive to environmental events. A substantial portion
of Colombia’s exports are from businesses in the agriculture and mining sectors
of its economy. Commodity prices or negative changes in these sectors could have
an adverse impact on Colombia’s economy and companies located in Colombia. Risks
Related to Investing in Greece Risks Related to Investing in Greece applies to
the Global X FTSE Greece 20 ETF. Greece’s economy is heavily dependent on the
services sector and has a large public sector. Key trading partners are member
states of the European Union ("EU"), most notably Germany, Spain, Italy and the
United Kingdom. Decreasing demand for Greek products and services or changes in
governmental regulations on trade may have a significantly adverse effect on
Greece’s economy. Greece and many of the Western European developed nations are
member states of the EU. As a result, these member states are dependent upon one
another economically and politically. The recent ratification of the Treaty of
Lisbon by EU member states is expected to further heighten the degree of
economic and political inter-dependence. This and other political or economic
developments could cause market disruptions and affect adversely the values of
securities held by the Fund. Greece has experienced recent periods of high,
persistent unemployment. Economic competitiveness has also decreased in recent
years, and structural weaknesses exist that could hamper growth and reduce
competitiveness further. The long-term credit assessment is not favorable for
Greece, and serious problems persist with regard to public finances and
excessive debt levels. It has also been revealed that the Greek government has
consistently and deliberately misreported its financial situation and economic
statistics in order to maintain the appearance of falling within the guidelines
of the monetary union. This practice allowed the Greek government to spend
beyond their means while concealing the actual deficit levels from the rest of
the EU. Greece’s ability to repay its sovereign debt is in question, and the
possibility of default is not unlikely, which could affect its ability to borrow
in the future. Greece has been required to impose harsh austerity measures on
its population in order to receive financial aid from the IMF and EU member
countries. These austerity measures have also led to social uprisings within
Greece, as citizens have protested – at times violently – the actions of their
government. The success of political parties in Greece opposed to austerity
measures may increase the possibility that Greece would rescind these austerity
measures and consequently fail to receive further financial aid from these
institutions. The persistence of these factors may seriously reduce the economic
performance of Greece and pose serious risks for the country’s economy in the
future.There is the possibility that Greece may exit the European Monetary
Union, which would result in immediate devaluation of the Greek currency and
potential for default. If this were to occur, Greece would face significant
risks related to the process of full currency redenomination as well as the
resulting instability of the Euro zone in general, which would have a severe
adverse effect on the value of the securities held by the Fund. Greece applies
foreign ownership limits in certain sectors, particularly with regard to
national strategically sensitive companies, such as those that administer
national infrastructure networks (e.g., telecommunications). Pre-approval from
an inter-ministerial committee is required if an investor is to raise its stake
in a national strategically sensitive company beyond 20 percent, a policy which
may continue in the future. There is the possibility that Greece may exit the
European Monetary Union in the future, which would result in immediate
devaluation of the Greek currency and potential for default. If this were to
occur, Greece would face significant risks related to the process of full
currency redenomination as well as the resulting instability of the Euro zone in
general. Risks Related to Investing in Nigeria Risks Related to Investing in
Nigeria applies to the Global MSCI Nigeria ETF. While Nigeria currently operates
under a Federal Republic system modeled after the U.S. government, historically
the economic development of Nigeria has been significantly hindered by military
rule, mismanagement, corruption and ethnic conflict. While the restoration of
democracy and economic liberalizations are positive steps for the country, there
is no guarantee that reforms will be effective and that the current method of
government will not succumb to similar issues of corruption and mismanagement.
174 The Nigerian economy
is heavily dependent on oil, and the industry makes up a significant portion of
Nigeria’s GDP. During the oil boom of the 1970’s, Nigeria accumulated
significant foreign debt to finance oil infrastructure developments, only to
later default on these interest payments when oil prices collapsed in the
1980’s. A sustained decrease in oil prices could have a significant negative
impact on all aspects of the economy of Nigeria. Religious and social conflict
is present in Nigeria, often resulting in the outbreak of violence, particularly
in the Niger Delta, which is Nigeria’s main oil-producing region. Several
petroleum operators in the region have sustained significant attacks from rebels
that target refineries and pipelines due to conflict over the petroleum rights
in the region. The Nigerian population is comprised of diverse religious,
linguistic and ethnic groups, and outlying provinces have, from time to time,
proved to be resistant of the central government’s control. While the Nigerian
government has imposed stricter penalties on religious violence in many parts of
the country, this is no guarantee that an outbreak of violence or sustained
conflict could not occur in the future. Nigeria also suffers from the prevalence
of organized crime and corruption, which makes it more difficult for citizens
and companies to do business in Nigeria and has significant impact on the
Nigerian economy. The persistence of organized crime and corruption may continue
to drag on economic growth in the country. Outbreaks of communicable diseases in
neighboring countries has adversely impacted the Nigerian economy in the past
and may do so again in the future. Securities markets in Nigeria are subject to
greater risks associated with market volatility, lower market capitalization,
lower trading volume, illiquidity, inflation, greater price fluctuations and
uncertainty regarding the existence of trading markets. Moreover, trading on
securities markets may be suspended altogether. The governments might restrict
or control to varying degrees the ability of foreign investors to invest in
securities of issuers located or operating in Nigeria as well as the
repatriation of investment income, capital or the proceeds of sales of
securities by foreign investors. Foreign investors may not purchase instruments
on the Nigerian Stock Exchange (NSE) “negative list” which includes companies
prospecting in crude oil and companies of a military and defense nature, nor
government securities (treasury bills and bonds) with a tenor of less than one
year, a policy which may continue in the future. Risks Related to Investing in
Pakistan Risks Related to Investing in Pakistan applies to the Global X MSCI
Pakistan ETF. Pakistan’s economy is heavily dependent on exports. The textile
sector of the Pakistani economy accounts for an outsized portion of exports,
comprising two-thirds of export income. Any changes in the sector could have an
adverse impact on the Pakistani economy. Pakistan’s key trading and foreign
investment partner is the United States. Reduction in spending on Pakistani
products and services, or changes in the U.S. economy, foreign policy, trade
regulation or currency exchange rate may adversely impact the Pakistani economy.
Pakistan has periodically received and currently receives financing and aid from
other countries and multilateral organizations. There is no guarantee that
international assistance will continue in the future, which could have a
materially adverse impact on the Pakistani economy. A growing national debt and
current-account deficit could also contribute to a slowdown in overall growth.
Pakistan’s economy is susceptible to a substantial degree to economic, political
and social instability. There remains the possibility that macroeconomic and
structural reforms can be slowed or reversed by political instability. The
Pakistani population is comprised of diverse religious, linguistic and ethnic
groups, and outlying provinces have, from time to time, proved to be resistant
of the central government’s control. Recently, acts of terrorism and armed
clashes between Pakistani troops, local tribesmen, the Taliban and foreign
extremists in the Swat Valley and the Waziristan area have resulted in
substantial casualties, population displacement and civil unrest. Pakistan, a
nuclear power, also has a history of hostility with neighboring countries, most
notably with India, also a nuclear power, including conflicts over the disputed
Kashmir region. The tensions between the two nations have spiked in the past in
the form of armed conflict between the national armies and non-state-sponsored
acts of terrorism. Unanticipated social, political and economic developments in
the Pakistan could result in substantial investment losses. There is also the
possibility of nationalization, expropriation or confiscatory taxation,
political changes, government regulation or diplomatic developments (including
war or terrorist attacks) which could affect adversely the economy of Pakistan
or the value of the Fund’s investments. In addition, recent political
instability and protests in North Africa and the Middle East have caused
significant disruptions to many industries. Continued political and social
unrest in these areas may negatively affect the value of your investment in the
Fund. Securities markets in Pakistan are subject to greater risks associated
with market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations and uncertainty regarding the
existence of trading markets. For example, the Karachi Stock Exchange introduced
new trading rules and restrictions in June 2008 as the equity market was rapidly
175 declining, which
created uncertainty among investors and was followed by further, significant
market declines. Moreover, trading on securities markets may be suspended
altogether. The governments might restrict or control to varying degrees the
ability of foreign investors to invest in securities of issuers located or
operating in Pakistan as well as the repatriation of investment income, capital
or the proceeds of sales of securities by foreign investors. Many Asian
countries, including Pakistan, are prone to frequent typhoons, damaging floods,
earthquakes and/or other natural disasters, which may adversely impact their
economies. Recent flooding in Pakistan has had a damaging social and economic
effect on the country. Pakistan’s economy, in particular, is more reliant on
agriculture than the U.S. economy and is therefore more susceptible to adverse
changes in weather. Political tension between Pakistan and the U.S. has
increased recently over the potential harboring of terrorists and continued
effects of U.S. involvement in neighboring countries such as Afghanistan. Any
deterioration in the relationship between Pakistan and the U.S. could have a
negative effect on Pakistan’s economy. Risks Related to Investing in Portugal
Risk Related to Investing in Portugal applies to the Global X FTSE Portugal 20
ETF. Portugal is a mixed economy but is heavily dependent on the services
sector. Key trading partners are member states of the EU, most notably Germany,
Spain, Italy and the United Kingdom. Decreasing demand for Portuguese products
and services or changes in governmental regulations on trade may have a
significantly adverse effect on Portugal’s economy. Portugal and many of the
Western European developed nations are member states of the EU. As a result,
these member states are dependent upon one another economically and politically.
The recent ratification of the Treaty of Lisbon by EU member states is expected
to further heighten the degree of economic and political inter-dependence. This
and other political or economic developments could cause market disruptions and
affect adversely the values of securities held by the Fund. Portugal has
experienced recent periods of high, persistent unemployment. Economic
competitiveness has also decreased in recent years, and structural weaknesses
exist that could hamper growth and reduce competitiveness further. The long-term
credit assessment is not favorable for Portugal, and serious problems persist
with regard to public finances and excessive debt levels. Portugal recently
requested financial assistance from the IMF and the European Financial Stability
Facility, demonstrating the severity of its public finance issues. The
persistence of excessive debt and continued financial assistance from outside
sources would not be favorable for the Portuguese economy. Portugal currently
imposes a stamp duty tax on brokerage fees, a policy that may continue in the
future. Risks Related to Investing in the Consumer Discretionary Sector Risks
Related to Investing in the Consumer Discretionary Sector applies to the Global
X China Consumer ETF and Global X Brazil Consumer ETF. The success of consumer
product manufacturers and retailers is tied closely to the performance of the
overall domestic and international economy, interest rates, competition and
consumer confidence. Success depends heavily on disposable household income and
consumer spending. Changes in demographics and consumer tastes can also affect
the demand for, and success of, consumer products and services in the
marketplace. Risks Related to Investing in the Consumer Staples Sector Risks
Related to Investing in the Consumer Staples Sector applies to the Global X
China Consumer ETF, Global X Brazil Consumer ETF and Global X MSCI Nigeria ETF.
Companies in the consumer staples sector are subject to government regulation
affecting their products, which may negatively impact such companies’
performance. For instance, government regulations may affect the permissibility
of using various food additives and production methods of companies that make
food products, which could affect company profitability. Tobacco companies may
be adversely affected by the adoption of proposed legislation and/or by
litigation. Also, the success of food, beverage, household and personal products
companies may be strongly affected by consumer interest, marketing campaigns and
other factors affecting supply and demand, including performance of the overall
domestic and international economy, interest rates, competition and consumer
confidence and spending.
176 Risks Related to
Investing in the Energy Sector Risks Related to Investing in the Energy Sector
applies to the Global X China Energy ETF, Global X MSCI Argentina ETF, Global X
MSCI Norway ETF, and Global X Central Asia & Mongolia ETF. Securities of
companies in the energy sector are subject to swift energy price and supply
fluctuations caused by events relating to international politics, energy
conservation, the success of exploration projects, and tax and other
governmental regulatory policies. Weak demand for the companies’ products or
services or for energy products and services in general, as well as negative
developments in these other areas, would adversely impact the Funds'
performance. Companies in the oil and gas sector (including alternative energy
suppliers) may be adversely affected by natural disasters or other catastrophes,
and may be at risk for environmental damage claims. These companies may also be
adversely affected by changes in exchange rates, interest rates, economic
conditions or world events in the regions that the companies operate (i.e.,
expropriation, nationalization, confiscation of assets and coups, social unrest,
violence or labor unrest). Most or all of the Funds' investments are in
companies located in emerging market countries, which may heighten these risks.
Companies engaged in the distribution of energy, including electricity and gas,
may be adversely affected by governmental limitation on rates charged to
customers. Deregulation and greater competition may adversely affect the
profitability of these companies and lead to diversification outside of their
original geographic regions and their traditional lines of business, potentially
increasing risk and making the price of their equity securities more volatile.
Risks Related to Investing in the Financials Sector Risks Related to Investing
in the Financials Sector applies to the Global X China Financials ETF, Global X
Brazil Financials ETF, Global X FTSE Andean 40 ETF, Global X MSCI Colombia ETF,
Global X FTSE Greece 20 ETF, Global X FTSE Nordic Region ETF, Global X MSCI
Nigeria ETF, and Global X Southeast Asia ETF. Companies in the financials sector
are subject to extensive governmental regulation, which may adversely affect the
scope of their activities, the prices they can charge and the amount of capital
they must maintain. Governmental regulation may change frequently. The
financials sector is exposed to risks that may impact the value of investments
in the financials sector more severely than investments outside this sector,
including operating with substantial financial leverage. The financials sector
may also be adversely affected by increases in interest rates and loan losses,
decreases in the availability of money or asset valuations and adverse
conditions in other related markets. Recently, the deterioration of the credit
markets has caused an adverse impact in a broad range of mortgage, asset-backed,
auction rate and other markets, including U.S. and international credit and
interbank money markets generally, thereby affecting a wide range of financial
services institutions and markets. This situation has created instability in the
financial services markets and caused certain financial services companies to
incur large losses or even become insolvent or bankrupt. Some financial services
companies have experienced downgrades in their credit ratings, declines in the
valuations of their assets, taken action to raise capital (such as the issuance
of debt or equity securities), or even ceased operations. These actions have
caused the securities of many financial services companies to decline in value.
Insurance companies may be subject to severe price competition. Adverse
economic, business or political developments affecting real estate, which may
include, but are not limited to, possible declines in the value of real estate,
adverse changes in national, state or local real estate conditions; obsolescence
of properties; changes in the availability, cost and terms of mortgage funds
(including changes in interest rates), the impact of changes in environmental
laws, overbuilding in a real estate company’s market, and environmental
problems, could have a major effect on the value of real estate securities
(which include REITs). Risks Related to Investing in the Industrials Sector
Risks Related to Investing in the Industrials Sector applies to the Global X
China Industrials ETF, Global X Brazil Industrials ETFand Global X Czech
Republic ETF. The stock prices of companies in the industrials sector are
affected by supply and demand both for their specific product or service and for
industrials sector products in general. The products of manufacturing companies
may face product obsolescence due to rapid technological developments and
frequent new product introduction. Government regulation, world events and
economic conditions affect the performance of companies in the industrials
sector. Companies in the industrials sector may be adversely affected by damages
from environmental claims and product liability claims. Risks Related to
Investing in the Materials Sector Risks Related to Investing in the Materials
Sector applies to the Global X China Materials ETF, Global X Central Asia &
Mongolia ETF and Global X Brazil Materials ETF.
177 Issuers in the
materials sector could be adversely affected by commodity price volatility,
exchange rates, import controls and worldwide competition. At times, worldwide
production of industrial materials has exceeded demand as a result of
over-building or economic downturns, leading to poor investment returns or
losses. Issuers in the materials sector are at risk for environmental damage and
product liability claims and may be adversely affected by depletion of
resources, technical progress, labor relations and governmental regulations.
Risks Related to Investing in the Oil Sector Risks Related to Investing in the
Oil Sector applies to the Global X MSCI Nigeria ETF. The oil industry is
cyclical and highly dependent on the market price of oil. The market value of
companies in the oil industry are strongly affected by the levels and volatility
of global oil prices, oil supply and demand, capital expenditures on exploration
and production, energy conservation efforts, the prices of alternative fuels,
exchange rates and technological advances. Companies in this sector are subject
to substantial government regulation and contractual fixed pricing, which may
increase the cost of business and limit these companies’ earnings. A significant
portion of their revenues depend on a relatively small number of customers,
including governmental entities and utilities. As a result, governmental budget
restraints may have a material adverse effect on the stock prices of companies
in the industry. Oil companies may also operate in countries with less developed
regulatory regimes or a history of expropriation, nationalization or other
adverse policies. Oil companies also face a significant civil liability from
accidents resulting in injury or loss of life or property, pollution or other
environmental mishaps, equipment malfunctions or mishandling of materials, and a
risk of loss from terrorism or other natural disasters. Any such event could
have serious consequences for the general population of the area affected and
result in a material adverse impact on the Fund’s portfolio securities and the
performance of the Fund. Oil companies can be significantly affected by the
supply of and demand for specific products and services, weather conditions,
exploration and production spending, government regulation, world events and
general economic conditions. Risks Related to Investing in the Technology Sector
Risks Related to Investing in the Technology Sector applies to the Global X
NASDAQ China Technology ETF. Market or economic factors impacting technology
companies and companies that rely heavily on technology advances could have a
major effect on the value of the Fund’s investments. The value of stocks of
technology companies and companies that rely heavily on technology is
particularly vulnerable to rapid changes in technology product cycles, rapid
product obsolescence, government regulation and increased competition, both
domestically and internationally, including competition from foreign competitors
with lower production costs. Technology companies and companies that rely
heavily on technology, especially those of smaller, less- seasoned companies,
tend to be more volatile than the overall market. These companies also are
heavily dependent on patent and intellectual property rights, the loss or
impairment of which may adversely affect profitability. Additionally, companies
in the technology sector may face dramatic and often unpredictable changes in
growth rates and competition for the services of qualified personnel. Risks
Related to Investing in the Utilities Sector Risks Related to Investing in the
Utilities Sector applies to the Global X Brazil Utilities ETF, Global X Brazil
Utilities ETF and Global X FTSE Portugal 20 ETF. Stock prices for companies in
the utilities sector are affected by supply and demand, operating costs,
government regulation, environmental factors, liabilities for environmental
damage and general civil liabilities, and rate caps or rate exchanges. Although
rate changes of a utility usually fluctuate in approximate correlation with
financing costs due to political and regulatory factors, rate changes ordinarily
occur only following a delay after the changes in financing costs. This factor
will tend to favorably affect a regulated utility company's earnings and
dividends in times of decreasing costs, but conversely, will tend to adversely
affect earnings and dividends are rising in times of rising costs. The value of
regulated utility equity securities may tend to have an inverse relationship to
the movement of interest rates. Certain utility companies have experienced full
or partial deregulation in recent years. These utility companies are frequently
more similar to industrial companies in that they are subject to greater
178 competition and have
been permitted by regulators to diversify outside of their original geographic
regions and their traditonal lines of business. These opportunities may permit
certain utility companies to earn more than their traditional regulated rate of
return. Some companies, however, may be forced to defend their core business and
may be less profitable. In addition, natural disasters, terrorist attacks,
government intervention or other factors may render a utility company's
equipment unusable or obsolete and negatively impact profitability. Securities
Lending Risk Securities Lending Risk applies to the Global X China Consumer ETF,
Global X Southeast Asia ETF, Global X MSCI Colombia ETF, Global X FTSE Greece 20
ETF, Global X FTSE Nordic Region ETF, Global X MSCI Norway ETF, and Global X
FTSE Portugal 20 ETF. A Fund may engage in lending its portfolio securities.
Although a Fund will receive collateral in connection with all loans of its
securities holdings, a Fund would be exposed to a risk of loss should a borrower
default on its obligation to return the borrowed securities (e.g., the loaned
securities may have appreciated beyond the value of the collateral held by a
Fund). In addition, a Fund will bear the risk of loss of any cash collateral
that it invests. Also, as securities on loan may not be voted by the Fund, there
is a risk that the Fund may not be able to recall the securities in sufficient
time to vote on material proxy matters. Securities Market Risk Because certain
securities markets in the countries in which the Funds may invest are small in
size, underdeveloped, and are less regulated and less correlated to global
economic cycles than those markets located in more developed countries (such as
the United States, Japan and most Western European countries), the securities
markets in such countries are subject to greater risks associated with market
volatility, lower market capitalization, lower trading volume, illiquidity,
inflation, greater price fluctuations and uncertainty regarding the existence of
trading markets. Moreover, trading on securities markets may be suspended
altogether. A Fund’s investment in securities in these countries is subject to
the risk that the liquidity of a particular security or investments generally
will shrink or disappear suddenly and without warning as a result of adverse
economic, market or political conditions or adverse investor perceptions,
whether or not accurate. Because of the lack of sufficient market liquidity, a
Fund may incur losses because it will be required to effect sales at a
disadvantageous time and then only at a substantial drop in price. Investments
in these countries may be more difficult to price precisely because of the
characteristics discussed above and lower trading volumes. Market volatility in
the countries in which a Fund invests may also be heightened by the actions of a
small number of investors. Brokerage firms in these countries may be fewer in
number and less established than brokerage firms in more developed markets.
Since a Fund may need to effect securities transactions through these brokerage
firms, the Fund is subject to the risk that these brokerage firms will not be
able to fulfill their obligations to the Fund (counterparty risk). This risk is
magnified to the extent a Fund effects securities transactions through a single
brokerage firm or a small number of brokerage firms. Small- and
Mid-Capitalization Companies Risk A Fund may invest a significant percentage of
its assets in small or medium-capitalization companies. If it does so, it may be
subject to certain risks associated with small- or medium-capitalization
companies. These companies often have greater price volatility, lower trading
volume and less liquidity than larger, more established companies. In addition,
these companies are often subject to less analyst coverage and may be in early
and less predictable periods of their corporate existences. These companies tend
to have smaller revenues, narrower product lines, less management depth and
experience, smaller shares of their product or service markets, fewer financial
resources and less competitive strength than larger companies. Tracking Error
Risk Each Fund’s return may not match the return of the Underlying Index for a
number of reasons. For example, a Fund incurs a number of operating expenses not
applicable to the Underlying Index and incurs costs associated with buying and
selling securities, especially when rebalancing a Fund’s securities holdings to
reflect changes in the composition of the Underlying Index and raising cash to
meet redemptions or deploying cash in connection with newly created Creation
Units. Because each Fund bears the costs and risks associated with buying and
selling securities, while such costs and risks are not factored into the return
of the Underlying
179 Index, a Fund’s
return may deviate significantly from the return of the Underlying Index. In
addition, the Fund may not be able to invest in certain securities included in
the Underlying Index, or invest in them in the exact proportions they represent
of the Underlying Index, due to legal restrictions or limitations imposed by the
government of a particular country or a lack of liquidity on stock exchanges in
which such securities trade. Each Fund is expected to value some or all of its
investments based on fair value prices. To the extent a Fund calculates its NAV
based on fair value prices and the value of the Underlying Index is based on
securities’ closing prices on local foreign markets (i.e., the value of the
Underlying Index is not based on fair value prices), the Fund’s ability to track
the Underlying Index may be adversely affected. Trading Halt Risk An exchange or
market may close or issue trading halts on specific securities, or the ability
to buy or sell certain securities or financial instruments may be restricted,
which may result in a Fund being unable to buy or sell certain securities or
financial instruments. In such circumstances, a Fund may be unable to rebalance
its portfolio, may be unable to accurately price its investments and/or may
incur substantial trading losses. U.S. Economic Risk The United States is a
significant trading partner of or foreign investor in certain countries in which
the Funds invest and the economies of these countries may be particularly
affected by changes in the U.S. economy. Decreasing U.S. imports, new trade
regulations, changes in the U.S. dollar exchange rate, a recession in the United
States or increases in foreclosures rates may have a material adverse effect on
economies of the countries in which such Fund invests. Valuation Risk The sales
price a Fund could receive for a security may differ from the Fund’s valuation
of the security and may differ from the value used by the Underlying Index,
particularly for securities that trade in low value or volatile markets or that
are valued using a fair value methodology. Because non-U.S. exchanges may be
open on days when a Fund does not price its Shares, the value of the securities
in the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares. PORTFOLIO HOLDINGS INFORMATION A description
of the Trust’s policies and procedures with respect to the disclosure of the
Funds’ portfolio securities is available in the Funds’ combined Statement of
Additional Information (“SAI”). The top holdings of each Fund can be found at
www.globalxfunds.com and Fund Fact sheets provide information regarding each
Fund’s top holdings and may be requested by calling 1-888-GX-Fund-1
(1-888-493-8631). FUND MANAGEMENT Investment Adviser Global X Management Company
LLC serves as the Adviser and the administrator for the Funds. Subject to the
supervision of the Board of Trustees, the Adviser is responsible for managing
the investment activities of the Funds and the Funds' business affairs and other
administrative matters. The Adviser has been a registered investment adviser
since 2008. The Adviser is a Delaware limited liability company with its
principal offices located at 623 Fifth Ave., 15th Floor, New York, New York
10022. As of February 17, 2015, the Adviser provided investment advisory
services for assets of approximately $3.8 billion. Pursuant to a Supervision and
Administration Agreement and subject to the general supervision of the Board of
Trustees of the Trust, the Adviser provides or causes to be furnished, all
supervisory, administrative and other services reasonably necessary for the
operation of the Funds and also bears the costs of various third-party services
required by the Funds, including audit, certain custody, portfolio accounting,
legal, transfer agency and printing costs. The Supervision and Administration
Agreement also requires the Adviser to provide investment advisory services to
the Funds pursuant to an Investment Advisory Agreement. Each Fund pays the
Adviser a fee (“Management Fee”) in return for providing investment advisory,
supervisory and administrative services under an all-in fee structure. For the
fiscal year ended October 31, 2014, the Funds paid a monthly Management Fee to
the Adviser at the following annual rates (stated as a percentage of the average
daily net assets of each Fund taken separately):
180 Fund Management Fee
Global X China Consumer ETF 0.65% Global X China Energy ETF 0.65% Global X China
Financials ETF 0.65% Global X China Industrials ETF 0.65% Global X China
Materials ETF 0.65% Global X NASDAQ China Technology ETF 0.65% Global X Brazil
Consumer ETF 0.77% Global X Brazil Financials ETF 0.77% Global X Brazil Mid Cap
ETF 0.69% Global X FTSE Andean 40 ETF 0.72% Global X MSCI Argentina ETF 0.74%
Global X MSCI Southeast Asia ETF 0.65% Global X MSCI Colombia ETF 0.68% Global X
Next Emerging & Frontier ETF 0.49% Global X FTSE Greece 20 ETF 0.55% Global
X FTSE Nordic Region ETF 0.50% Global X MSCI Norway ETF 0.50% Global X FTSE
Portugal 20 ETF 0.55% Global X MSCI Nigeria ETF 0.68% Global X Central Asia
& Mongolia Index ETF 0.68% The Global X China Mid Cap ETF, Global X Brazil
Industrials ETF, Global X Brazil Materials ETF, Global X Brazil Utilities ETF,
Global X FTSE Bangladesh Index ETF, Global X Czech Republic Index ETF, and
Global X MSCI Pakistan ETF were not operational during the fiscal year ended
October 31, 2014. The Management Fee for each of the Global X China Mid Cap ETF,
Global X Brazil Industrials ETF, Global X Brazil Materials ETF, Global X Brazil
Utilities ETF, Global X FTSE Bangladesh Index ETF, Global X Czech Republic Index
ETF, and Global X MSCI Pakistan ETF is at an annual rate (stated as a percentage
of the average daily net assets of the Fund) of 0.65%, 0.77%, 0.77%, 0.77%,
0.68%, 0.68%, 0.68%, respectively. In addition, each Fund bears other fees and
expenses that are not covered by the Supervision and Administration Agreement,
which may vary and will affect the total expense ratio of a Fund, such as taxes,
brokerage fees, commissions and other transaction expenses, interest and
extraordinary expenses (such as litigation and indemnification expenses). In
addition, the Global X MSCI Argentina ETF, Global X FTSE Bangladesh Index ETF,
Global X MSCI Colombia ETF, Global X Next Emerging & Frontier ETF, Global X
FTSE Greece 20 ETF, Global X FTSE Portugal 20 ETF, Global X Czech Republic Index
ETF, Global X MSCI Nigeria ETF, Global X MSCI Pakistan ETF, and Global X Central
Asia & Mongolia Index ETF pay asset-based custodial fees that are not
covered by the Supervision and Administration Agreement. The Adviser may earn a
profit on the Management Fee paid by the Funds. Also, the Adviser, and not
shareholders of the Funds, would benefit from any price decreases in third-party
services, including decreases resulting from an increase in net assets. Pursuant
to Expense Limitation Agreements, which expire on March 1, 2016, the Adviser
agreed to reimburse or waive fees and/ or limit expenses (other than taxes,
brokerage fees, commissions and other transaction expenses, interest and
extraordinary expenses (such as litigation and indemnification expenses)
(“Excluded Expenses”)) of the Global X MSCI Colombia ETF, so that the Fund's
Total Annual Fund Operating Expenses would not exceed 0.61% of its average daily
net assets, and of the Global X MSCI Nigeria ETF so that the Fund's Total Annual
Fund Operating Expenses would not exceed 0.68% of its average daily net assets.
Global X MSCI Colombia ETF and Global X MSCI Nigeria ETF fees may no longer be
waived or limited after that date. Approval of Advisory Agreement A discussion
regarding the basis for the Board of Trustees’ approval of the Supervision and
Administration Agreement and the related Investment Advisory Agreement for each
Fund (other than Global X China Mid Cap ETF, Global X Brazil Industrials ETF,
Global X Brazil Materials ETF, Global X Brazil Utilities ETF, Global X FTSE
Bangladesh Index ETF, Global X Czech Republic Index ETF, and Global X MSCI
Pakistan ETF) is available in the Funds’ Semi-Annual Report to Shareholders for
the fiscal half- year ended April 30. The Board of Trustees’ approval of the
Supervision and Administration Agreement and the related Investment Advisory
Agreement for the other Funds will be available in the Funds’ first Semi-Annual
Report or Annual Report to shareholders
181 for the period ended
April 30 or October 31, respectively. Portfolio Management The Portfolio
Managers who are currently responsible for the day-to-day management of the
Funds' portfolios are Bruno del Ama, Jose Gonzalez, Luis Berruga and Chang Kim.
Bruno del Ama: Bruno del Ama, CFA, has been Chief Executive Officer of the
Adviser since March 2008. Mr. del Ama received a Master's in Business
Administration from the Wharton Business School. Jose Gonzalez: Jose Gonzalez
has been Chairman of the Adviser since February 2014 and served as Chief
Operating Officer of the Adviser from March 2008 to January 2014. Mr. Gonzalez
is a registered representative of GWM Group, Inc. (“GWM”), a registered
broker-dealer. Mr. Gonzalez has been affiliated with GWM since 2006. Mr.
Gonzalez holds the Series 7, 24, and 63 licenses. Luis Berruga: Luis Berruga has
been Chief Operating Officer of the Adviser since February 2014. Previously, Mr.
Berruga was an investment banker at Jefferies in the financial services group
from 2012 through 2014 and a Regional Product Specialist in Morgan Stanley’s
Private Wealth Management Group from 2005 through 2012. Mr. Berruga received his
MBA from the Kellogg School of Management at Northwestern University. Chang Kim:
Chang Kim, CFA, has been Portfolio Manager of the Funds since February, 2014. He
joined the Adviser in September, 2009, where he was a Portfolio Analyst from
April 2010 until January 2014. Mr. Kim received his Bachelor of Arts from Yale
University in 2009. The SAI provides additional information about the Portfolio
Managers’ compensation structure, other accounts managed by the Portfolio
Managers, and the Portfolio Managers' ownership of securities of the Funds.
DISTRIBUTOR SEI Investments Distribution Co. ("Distributor") distributes
Creation Units for the Funds on an agency basis. The Distributor does not
maintain a secondary market in Shares. The Distributor has no role in
determining the policies of the Funds or the securities that are purchased or
sold by each Fund. The Distributor’s principal address is One Freedom Valley
Drive, Oaks, PA 19456. The Distributor is not affiliated with the Adviser.
BUYING AND SELLING FUND SHARES Shares of the Funds trade on the Exchange and in
the secondary market during the trading day. Shares can be bought and sold
throughout the trading day like other Shares of publicly-traded securities.
There is no minimum investment for purchases made on the Exchange. When buying
or selling Shares through a broker, you will incur customary brokerage
commissions and charges. In addition, you will also incur the cost of the
“spread,” which is the difference between what professional investors are
willing to pay for Shares (the “bid” price) and the price at which they are
willing to sell Shares (the “ask” price). The commission is frequently a fixed
amount and may be a significant proportional cost for investors seeking to buy
or sell small amounts of Shares. The spread with respect to Shares varies over
time based on a Fund’s trading volume and market liquidity, and is generally
lower if the Fund has a lot of trading volume and market liquidity and higher if
the Fund has little trading volume and market liquidity. Because of the costs of
buying and selling Shares, frequent trading may reduce investment return. Shares
of a Fund may be acquired or redeemed directly from the Fund only in Creation
Units or multiples thereof, as discussed in the "Creations and Redemptions"
section in the SAI. Once created, Shares generally trade in the secondary market
in amounts less than a Creation Unit. Shares of the Funds trade under the
trading symbols listed for each Fund in the Fund Summaries section of the
Prospectus. The Funds are listed on the Exchange, which is open for trading
Monday through Friday and is closed on weekends and the following holidays, as
observed: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good
Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and
Christmas Day.
182 Book Entry Shares of
the Funds are held in book-entry form, which means that no stock certificates
are issued. The Depository Trust Company (“DTC”) or its nominee is the record
owner of all outstanding Shares and is recognized as the owner of all Shares for
all purposes. Investors owning Shares are beneficial owners as shown on the
records of DTC or its participants. DTC serves as the securities depository for
all Shares. Participants include DTC, securities brokers and dealers, banks,
trust companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a
registered owner of Shares. Therefore, to exercise any rights as an owner of
Shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any securities that you hold in
book entry or “street name” form. FREQUENT TRADING Unlike frequent trading of
shares of a traditional open-end mutual fund (i.e., not exchange-traded shares),
frequent trading of Shares on the secondary market does not disrupt portfolio
management, increase a Fund's trading costs, lead to realization of capital
gains, or otherwise harm Fund shareholders because these trades do not involve a
Fund directly. A few institutional investors are authorized to purchase and
redeem each Fund's Shares directly with the Fund. When these trades are effected
in-kind (i.e., for securities, and not for cash), they do not cause any of the
harmful effects (noted above) that may result from frequent cash trades.
Moreover, each Fund imposes transaction fees on in-kind purchases and
redemptions of the Fund intended to cover the custodial and other costs incurred
by the Fund in effecting in-kind trades. These fees increase if an investor
substitutes cash in part or in whole for securities, reflecting the fact that
the Fund’s trading costs increase in those circumstances, although transaction
fees are subject to certain limits and therefore may not cover all related costs
incurred by a Fund. For these reasons, the Board of Trustees has determined that
it is not necessary to adopt policies and procedures to detect and deter
frequent trading and market-timing in Shares of the Funds. DISTRIBUTION AND
SERVICE PLAN The Board of Trustees of the Trust has adopted a Distribution and
Services Plan (“Plan”) pursuant to Rule 12b-1 under the 1940 Act. Under the
Plan, each Fund is authorized to pay distribution fees in connection with the
sale and distribution of its Shares and pay service fees in connection with the
provision of ongoing services to shareholders of each class and the maintenance
of shareholder accounts in an amount up to 0.25% of its average daily net assets
each year. No Rule 12b-1 fees are currently paid by a Fund, and there are no
current plans to impose these fees. However, in the event Rule 12b-1 fees are
charged in the future, because these fees are paid out of each Fund’s assets on
an ongoing basis, these fees will increase the cost of your investment in a
Fund. By purchasing Shares subject to distribution fees and service fees, you
may pay more over time than you would by purchasing Shares with other types of
sales charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the rules of
FINRA. The net income attributable to Shares will be reduced by the amount of
distribution fees and service fees and other expenses of a Fund. DIVIDENDS AND
DISTRIBUTIONS Dividends from net investment income, including any net foreign
currency gains, generally are declared and paid at least annually and any net
realized security gains are distributed at least annually. In order to improve
tracking error or comply with the distribution requirements of the Code,
dividends may be declared and paid more frequently than annually for a Fund.
Dividends and other distributions on Shares are distributed on a pro rata basis
to beneficial owners of such Shares. Dividend payments are made through DTC
participants to beneficial owners then of record with proceeds received from a
Fund. Dividends and security gain distributions are distributed in U.S. dollars
and cannot be automatically reinvested in additional Shares. No dividend
reinvestment service is provided by the Trust. Broker-dealers may make available
the DTC book-entry Dividend Reinvestment Service for use by beneficial owners of
a Fund for reinvestment of their dividend distributions. Beneficial owners
should contact their broker to determine the availability and costs of the
service and the details of participation therein. Brokers may require beneficial
owners to adhere to specific procedures and timetables. If this service is
available and used, dividend distributions of both income and realized gains
will be automatically reinvested in additional whole Shares purchased in the
secondary market.
183 TAXES The following
is a summary of certain tax considerations that may be relevant to an investor
in a Fund. Except where otherwise indicated, the discussion relates to investors
who are individual United States citizens or residents and is based on current
tax law. You should consult your tax advisor for further information regarding
federal, state, local and/or foreign tax consequences relevant to your specific
situation. Distributions. Each Fund receives income and gains on its
investments. The income, less expenses incurred in the operation of the Fund,
constitutes the Fund's net investment income from which dividends may be paid to
you. Each Fund intends to qualify as a regulated investment company ("RIC")
under the Internal Revenue Code ("Code") for federal tax purposes and to
distribute to shareholders substantially all of its net investment income and
net capital gain each year. Except as otherwise noted below, you will generally
be subject to federal income tax on a Fund’s distributions to you. For federal
income tax purposes, Fund distributions attributable to short-term capital gains
and net investment income are taxable to you as ordinary income. Distributions
attributable to net capital gains (the excess of net long-term capital gains
over net short-term capital losses) of a Fund generally are taxable to you as
long-term capital gains. This is true no matter how long you own your Shares or
whether you take distributions in cash of additional Shares. The maximum
long-term capital gain rate applicable to individuals is 20%. Distributions of
“qualifying dividends” will also generally be taxable to you at long-term
capital gain rates as long as certain requirements are met. In general, if 95%
or more of the gross income of a Fund (other than net capital gain) consists of
dividends received from domestic corporations or “qualified” foreign
corporations (“qualifying dividends”), then all distributions paid by a Fund to
individual shareholders will be treated as qualifying dividends. But if less
than 95% of the gross income of a Fund (other than net capital gain) consists of
qualifying dividends, then distributions paid by such Fund to individual
shareholders will be qualifying dividends only to the extent they are derived
from qualifying dividends earned by such Fund. For the lower rates to apply, you
must have owned your Shares for at least 61 days during the 121-day period
beginning on the date that is 60 days before such Fund’s ex-dividend date (and
such Fund will need to have met a similar holding period requirement with
respect to the Shares of the corporation paying the qualifying dividend). The
amount of a Fund’s distributions that qualify for this favorable treatment may
be reduced as a result of such Fund’s securities lending activities (if any), a
high portfolio turnover rate or investments in debt securities or
“non-qualified” foreign corporations. In addition, whether distributions
received from foreign corporations are qualifying dividends will depend on
several factors including the country of residence of the corporation making the
distribution. Accordingly, distributions from many of the Funds’ holdings may
not be qualifying dividends. A portion of distributions paid by a Fund to
shareholders that are corporations may also qualify for the dividends-received
deduction for corporations, subject to certain holding period requirements and
debt financing limitations. The amount of the dividends qualifying for this
deduction may, however, be reduced as a result of such Fund’s securities lending
activities, by a high portfolio turnover rate or by investments in debt
securities or foreign corporations. All dividends (including the deducted
portion) must be included in a corporation’s alternative minimum taxable income
calculations. Distributions from a Fund will generally be taxable to you in the
year in which they are paid, with one exception. Dividends and distributions
declared by a Fund in October, November or December and paid in January of the
following year are taxed as though they were paid on December 31. You should
note that if you buy Shares of a Fund shortly before it makes a distribution,
the distribution will be fully taxable to you even though, as an economic
matter, it simply represents a return of a portion of your investment. This
adverse tax result is known as “buying into a dividend.” You will be informed of
the amount of your ordinary income dividends, qualifying dividend income, and
capital gain distributions at the time they are paid, and you will be advised of
the tax status for federal income tax purposes shortly after the close of each
calendar year. If you have not held Shares for a full year, a Fund may designate
and distribute to you, as ordinary income or capital gain, a percentage of
income that is not equal to the actual amount of such income earned during the
period of your investment in such Fund. A Fund’s investments in partnerships,
including in partnerships defined as Qualified Publicly Traded Partnerships for
tax purposes, may result in such Fund being subject to state, local or foreign
income, franchise or withholding tax liabilities. Excise Tax Distribution
Requirements. Under the Internal Revenue Code (the "Code"), a nondeductible
excise tax of 4% is imposed on the excess of a RIC’s “required distribution” for
the calendar year ending within the RIC’s taxable year over the “distributed
amount” for such calendar year. The term “required distribution” means the sum
of (a) 98% of ordinary income (generally net investment income) for the calendar
year, (b) 98.2% of capital gain (both long-term and short-term) for the one-year
period ending on October 31 (or December 31, if such Fund so elects), and (c)
the sum of any untaxed, undistributed net investment income and
184 net capital gains of
the RIC for prior periods. The term “distributed amount” generally means the sum
of (a) amounts actually distributed by such Fund from its current year’s
ordinary income and capital gain net income and (b) any amount on which such
Fund pays income tax for the taxable year ending in the calendar year. Although
each Fund intends to distribute its net investment income and net capital gains
so as to avoid excise tax liability, such Fund may determine that it is in the
interest of shareholders to distribute a lesser amount. The Funds intend to
declare and pay these amounts in December (or in January, which must be treated
by you as received in December) to avoid these excise taxes, but can give no
assurances that their distributions will be sufficient to eliminate all such
taxes. Foreign Currencies. Under the Code, gains or losses attributable to
fluctuations in exchange rates which occur between the time a Fund accrues
interest or other receivables or accrues expenses or other liabilities
denominated in a foreign currency, and the time such Fund actually collects such
receivables or pays such liabilities, are treated as ordinary income or ordinary
loss. Similarly, gains or losses from the disposition of foreign currencies,
from the disposition of debt securities denominated in a foreign currency, or
from the disposition of a forward foreign currency contract which are
attributable to fluctuations in the value of the foreign currency between the
date of acquisition of the asset and the date of disposition also are treated as
ordinary income or loss. These gains or losses, referred to under the Code as
“section 988” gains or losses, increase or decrease the amount of such Fund’s
investment company taxable income available to be distributed to its
shareholders as ordinary income, rather than increasing or decreasing the amount
of such Fund’s net capital gain. Foreign Taxes. Each Fund will be subject to
foreign withholding taxes with respect to certain dividends or interest received
from sources in foreign countries. If at the close of the taxable year more than
50% in value of a Fund’s assets consists of stock in foreign corporations, such
Fund will be eligible to make an election to treat a proportionate amount of
those taxes as constituting a distribution to each shareholder, which would
allow you either (subject to certain limitations) (1) to credit that
proportionate amount of taxes against U.S. Federal income tax liability as a
foreign tax credit or (2) to take that amount as an itemized deduction. If a
Fund is not eligible or chooses not to make this election, it will be entitled
to deduct such taxes in computing the amounts it is required to distribute.
Sales and Exchanges. The sale of Shares is a taxable event on which a gain or
loss is recognized. The amount of gain or loss is based on the difference
between your tax basis in Shares and the amount you receive for them upon
disposition. Generally, you will recognize long-term capital gain or loss if you
have held your Shares for over one year at the time you sell or exchange them.
Gains and losses on Shares held for one year or less will generally constitute
short-term capital gains, except that a loss on Shares held six months or less
will be re-characterized as a long-term capital loss to the extent of any
long-term capital gain distributions that you have received on the Shares. A
loss realized on a sale or exchange of Shares may be disallowed under the
so-called “wash sale” rules to the extent the Shares disposed of are replaced
with other Shares of that same Fund within a period of 61 days beginning 30 days
before and ending 30 days after the Shares are disposed of, such as pursuant to
a dividend reinvestment in Shares of a Fund. If disallowed, the loss will be
reflected in an adjustment to the basis of the Shares acquired. IRAs and Other
Tax-Qualified Plans. The one major exception to the preceding tax principles is
that distributions on, and sales, exchanges and redemptions of, Shares held in
an IRA or other tax-qualified plan will not be currently taxable unless the
Shares were purchased with borrowed funds. Backup Withholding. Each Fund will be
required in certain cases to withhold and remit to the U.S. Treasury the
applicable back- up withholding rate of the dividends and gross sales proceeds
paid to any shareholder (i) who had provided either an incorrect tax
identification number or no number at all, (ii) who is subject to backup
withholding by the Internal Revenue Service, or (iii) who has failed to certify
to a Fund, when required to do so, that he or she is not subject to backup
withholding or is an “exempt recipient.” U.S. Tax Treatment of Foreign
Shareholders. A foreign shareholder generally will not be subject to U.S.
withholding tax in respect of proceeds from, or gain on, the redemption of
Shares or in respect of capital gain dividends (i.e., dividends attributable to
long- term capital gains of a Fund) unless, in the case of a shareholder who is
a non-resident alien individual, the shareholder is present in the United States
for 183 days or more during the taxable year and certain other conditions are
met. Foreign shareholders generally will be subject to U.S. withholding tax at a
rate of 30% (or a lower treaty rate, if applicable) on distributions by such
Fund of net investment income, other ordinary income, and the excess, if any, of
net short-term capital gain over net long-term capital loss for the year, unless
the distributions are effectively connected with a U.S. trade or business of the
shareholder. Nonresident, non-U.S. citizens will not be subject to tax on a
RIC's "interest-related dividends" or "short-term capital gain dividends".
Foreign shareholders should consult their tax advisors regarding the U.S. and
foreign tax consequences of investing in a Fund. Federal law requires that
mutual fund complexes or intermediaries report their shareholders' cost basis,
gain/loss, and holding period to the IRS on the Funds' shareholders’
Consolidated Form 1099s when “covered” securities are sold. Covered securities
are any RIC and/or dividend reinvestment plan shares acquired on or after
January 1, 2012.
185 General Disclaimer.
For those securities defined as "covered" under current IRS cost basis tax
reporting regulations, the Funds or intermediaries are responsible for
maintaining accurate cost basis and tax lot information for tax reporting
purposes. The Funds are not responsible for the reliability or accuracy of the
information for those securities that are not "covered." The Funds and their
service providers do not provide tax advice. You should consult independent
sources, which may include a tax professional, with respect to any decisions you
may make with respect to choosing a tax lot identification method. State and
Local Taxes. You may also be subject to state and local taxes on income and gain
attributable to your ownership of Shares. State income taxes may not apply,
however, to the portions of a Fund’s distributions, if any, that are
attributable to interest earned by a Fund on U.S. government securities. You
should consult your tax advisor regarding the tax status of distributions in
your state and locality. Consult Your Tax Professional. Your investment in a
Fund could have additional tax consequences. You should consult your tax
professional for information regarding all tax consequences applicable to your
investments in a Fund. More tax information relating to the Funds is also
provided in the Statement of Additional Information. This short summary is not
intended as a substitute for careful tax planning. DETERMINATION OF NET ASSET
VALUE Each Fund calculates its NAV as of the regularly scheduled close of
business of the New York Stock Exchange (“NYSE”) (normally 4:00 p.m. Eastern
time) on each day that the NYSE is open for business, based on prices at the
time of closing, provided that any assets or liabilities denominated in
currencies other than the U.S. dollar shall be translated into U.S. dollars at
the prevailing market rates on the date of valuation as quoted by one or more
major banks or dealers that make a two-way market in such currencies (or a data
service provider based on quotations received from such banks or dealers). The
NAV of each Fund is calculated by dividing the value of the net assets of such
Fund (i.e., the value of its total assets less total liabilities) by the total
number of outstanding Shares, generally rounded to the nearest cent. The price
of Fund shares is based on market price, and because ETF shares trade at market
prices rather than NAV, Shares may trade at a price greater than NAV (a premium)
or less than NAV (a discount). In calculating a Fund’s NAV, the Fund’s
investments are generally valued using market valuations. A market valuation
generally means a valuation (i) obtained from an exchange or a major market
maker (or dealer), (ii) based on a price quotation or other equivalent
indication of value supplied by an exchange, a pricing service, or a major
market maker (or dealer), or (iii) based on amortized cost, provided the
amortized cost is approximately the value on current sale of the security. In
the case of shares of funds that are not traded on an exchange, a market
valuation means such fund’s published NAV per share. A Fund may use various
pricing services or discontinue the use of any pricing service. In the event
that current market valuations are not readily available or such valuations do
not reflect current market values, the affected investments will be valued using
fair value pricing pursuant to the pricing policy and procedures approved by a
Fund’s Board of Trustees. A price obtained from a pricing service based on such
pricing service's valuation matrix may be used to fair value a security. The
frequency with which a Fund’s investments are valued using fair value pricing is
primarily a function of the types of securities and other assets in which the
Fund invests pursuant to its investment objective, strategies and limitations.
Investments that may be valued using fair value pricing include, but are not
limited to: (i) an unlisted security related to corporate actions; (ii) a
restricted security (i.e., one that may not be publicly sold without
registration under the Securities Act of 1933, as amended (the “Securities
Act”)); (iii) a security whose trading has been suspended or which has been
de-listed from its primary trading exchange; (iv) a security that is thinly
traded; (v) a security in default or bankruptcy proceedings for which there is
no current market quotation; (vi) a security affected by currency controls or
restrictions; and (vii) a security affected by a significant event (i.e., an
event that occurs after the close of the markets on which the security is traded
but before the time as of which the Fund’s NAV is computed and that may
materially affect the value of the Fund’s investments). Examples of events that
may be “significant events” are government actions, natural disasters, armed
conflict, acts of terrorism, and significant market fluctuations. Valuing a
Fund’s investments using fair value pricing will result in using prices for
those investments that may differ from current market valuations. Use of fair
value prices and certain current market valuations could result in a difference
between the prices used to calculate a Fund’s NAV and the prices used by the
Fund’s Underlying Index, which, in turn, could result in a difference between
the Fund’s performance and the performance of the Fund’s Underlying Index.
Because foreign markets may be open on different days than the days during which
a shareholder may purchase Shares, the value of a Fund’s investments may change
on days when shareholders are not able to purchase Shares. Additionally, due to
varying holiday schedules, redemption requests made on certain dates may result
in a settlement period exceeding seven calendar days. A list of the holiday
schedules of the foreign exchanges of each Fund’s Underlying Index, as well as
the dates on which a settlement period would exceed seven calendar days in 2015
and 2016, is contained in the SAI.
186 The value of assets
denominated in foreign currencies is converted into U.S. dollars using exchange
rates deemed appropriate by the Adviser. Any use of a different rate from the
rates used by each Index Provider may adversely affect a Fund’s ability to track
its Underlying Index. The right of redemption may be suspended or the date of
payment postponed with respect to a Fund (1) for any period during which the
NYSE or listing exchange is closed (other than customary weekend and holiday
closings), (2) for any period during which trading on the NYSE or listing
exchange is suspended or restricted, (3) for any period during which an
emergency exists as a result of which disposal of the Fund’s portfolio
securities or determination of its NAV is not reasonably practicable, or (4) in
such other circumstances as the SEC permits. PREMIUM/DISCOUNT INFORMATION
Information regarding how often the Shares of each Fund traded on the Exchange
at a price above (i.e., at a premium) or below (i.e., at a discount) the NAV of
the Fund during the past four calendar quarters can be found at
www.globalxfunds.com. TOTAL RETURN INFORMATION Each Fund (other than the Global
X China Mid Cap ETF, Global X Brazil Industrials ETF, Global X Brazil Materials
ETF, Global X Brazil Utilities ETF, Global X FTSE Bangladesh Index ETF, Global X
Czech Republic Index ETF, and Global X MSCI Pakistan ETF) had commenced
operations as of the most recent fiscal year end. The tables that follow present
information about the total returns of each of these Fund’s Underlying Index and
the total returns of each Fund. The information presented for each Fund is as of
its fiscal year ended October 31, 2014. “Annualized Total Returns” or
"Cumulative Total Returns" represent the total change in value of an investment
over the periods indicated. Each Fund’s per share NAV is the value of one share
of the Fund as calculated in accordance with the standard formula for valuing
mutual fund Shares. The NAV return is based on the NAV of each Fund and the
market return is based on the market prices of the Fund. The price used to
calculate market prices is determined by using the midpoint between the bid and
the ask on the primary stock exchange on which Shares of the Fund are listed for
trading, as of the time that the Fund’s NAV is calculated. Market and NAV
returns assume that dividends and capital gain distributions have been
reinvested in the Fund at market prices and NAV, respectively. An index is a
statistical composite that tracks a specified financial market or sector. Unlike
a Fund, an Underlying Index does not actually hold a portfolio of securities and
therefore does not incur the expenses incurred by the Fund. These expenses
negatively impact the performance of a Fund. Also, market returns do not include
brokerage commissions that may be payable on secondary market transactions. If
brokerage commissions were included, market returns would be lower. The returns
shown in the tables below do not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption or sale of Fund
Shares. The investment return and principal value of Shares of a Fund will vary
with changes in market conditions. Shares of a Fund may be worth more or less
than their original cost when they are redeemed or sold in the market. A Fund’s
past performance is no guarantee of future results.
187 Annualized Total
Returns Inception to 10/31/14 Annualized Inception to 10/31/2014 NAV MARKET
UNDERLYING INDEX Global X China Consumer ETF 1 -1.79% -1.82% -1.50% Global X
China Energy ETF 2 1.35% 1.28% 2.28% Global X China Financials ETF 3 -0.83%
-0.91% -0.50% Global X China Industrials ETF 4 -2.74% -2.65% -2.34% Global X
China Materials ETF 5 -12.60% -12.51% -11.84% Global X NASDAQ China Technology
ETF 6* 10.40% 10.24% 11.22 Global X Brazil Consumer ETF 7 2.56% 2.36% 3.71%
Global X Brazil Financials ETF 8 -5.13% -5.51% -4.56% Global X Brazil Mid Cap
ETF 9 -2.17% -2.30% -1.40% Global X FTSE Andean 40 ETF 10 -7.38% -7.47% -6.88%
Global X MSCI Argentina ETF 11** -7.85% -7.87% -6.95% Global X Southeast Asia
ETF 12 5.30% 5.35% 5.91% Global X MSCI Colombia ETF 13*** 18.26% 18.37% 19.42%
Global X FTSE Greece 20 ETF 14 1.67% 1.38% 2.75% Global X FTSE Nordic Region ETF
15 12.57% 12.62% 12.50% Global X MSCI Norway ETF 16**** 2.09% 2.21% 2.16% Global
X MSCI Nigeria ETF 17***** -8.98% -6.16% -8.13% Global X Central Asia &
Mongolia Index ETF 17 -9.81% -10.01% -9.26% 1 For the period since inception on
11/30/09 to 10/31/14 2 For the period since inception on 12/15/09 to 10/31/14 3
For the period since inception on 12/10/09 to 10/31/14 4 For the period since
inception on 11/30/09 to 10/31/14 5 For the period since inception on 01/12/10
to 10/31/14 6 For the period since inception on 12/08/09 to 10/31/14 7 For the
period since inception on 07/07/10 to 10/31/14 8 For the period since inception
on 07/28/10 to 10/31/14 9 For the period since inception on 06/21/10 to 10/31/14
10 For the period since inception on 02/02/11 to 10/31/14 11 For the period
since inception on 03/02/11 to 10/31/14 12 For the period since inception on
02/16/11 to 10/31/14 13 For the period since inception on 02/05/09 to 10/31/14
14 For the period since inception on 12/07/11 to 10/31/14 15 For the period
since inception on 08/17/09 to 10/31/14 16 For the period since inception on
11/09/10 to 10/31/14 17 For the period since inception on 04/02/13 to 10/31/14 *
Index performance reflects the performance of the Solactive China Technology
Index through December 12, 2011 and the NASDAQ OMX China Technology Index
thereafter. ** Index performance reflects the performance of the FTSE Argentina
20 Index through August 14, 2014 and the MSCI All Argentina 25/50 Index
thereafter. *** Index performance reflects the performance of the FTSE Colombia
20 Index through July 14, 2014 and the MSCI All Colombia Capped Index
thereafter. **** Index performance reflects the performance of the FTSE Norway
30 Index through July 14, 2014 and the MSCI Norway IMI 25/50 Index thereafter.
***** Index performance reflects the performance of the Solactive Nigeria Index
through August 14, 2014 and the MSCI All Nigeria Select 25/50 Index thereafter.
188 Cumulative Total
Returns Inception to 10/31/14 Cummulative Inception to 10/31/2014 NAV MARKET
UNDERLYING INDEX Global X China Consumer ETF 1 -8.49% -8.63% -7.18% Global X
China Energy ETF 2 6.75% 6.42% 11.64% Global X China Financials ETF 3 -4.00%
-4.38% -2.43% Global X China Industrials ETF 4 -12.79% -12.39% -11.01% Global X
China Materials ETF 5 -47.60% -47.36% -45.41% Global X NASDAQ China Technology
ETF 6* 62.32% 61.12% 68.39% Global X Brazil Consumer ETF 7 11.53% 10.58% 17.04%
Global X Brazil Financials ETF 8 -20.10% -21.44% -18.03% Global X Brazil Mid Cap
ETF 9 -9.11% -9.62% -5.97% Global X FTSE Andean 40 ETF 10 -24.94% -25.23%
-23.43% Global X MSCI Argentina ETF 11** -25.86% -25.92% -23.24% Global X
Southeast Asia ETF 12 21.06% 21.30% 23.72% Global X MSCI Colombia ETF 13***
161.68% 163.11% 176.82% Global X Next Emerging & Frontier ETF14 2.07% 1.23%
2.39% Global X FTSE Greece 20 ETF 15 4.93% 4.06% 8.20% Global X FTSE Nordic
Region ETF 16 85.21% 85.59% 84.71% Global X MSCI Norway ETF 17**** 8.56% 9.08%
8.87% Global X FTSE Portugal 20 ETF18 -15.89% -15.76% -14.66% Global X MSCI
Nigeria ETF 19***** -13.80% -9.55% -12.54% Global X Central Asia & Mongolia
Index ETF 19 -15.03% -15.34% -14.24% 1 For the period since inception on
11/30/09 to 10/31/14 2 For the period since inception on 12/15/09 to 10/31/14 3
For the period since inception on 12/10/09 to 10/31/14 4 For the period since
inception on 11/30/09 to 10/31/14 5 For the period since inception on 01/12/10
to 10/31/14 6 For the period since inception on 12/08/09 to 10/31/14 7 For the
period since inception on 07/07/10 to 10/31/14 8 For the period since inception
on 07/28/10 to 10/31/14 9 For the period since inception on 06/21/10 to 10/31/14
10 For the period since inception on 02/02/11 to 10/31/14 11 For the period
since inception on 03/02/11 to 10/31/14 12 For the period since inception on
02/16/11 to 10/31/14 13 For the period since inception on 02/05/09 to 10/31/14
14 For the period since inception on 11/06/13 to 10/31/14 15 For the period
since inception on 12/07/11 to 10/31/14 16 For the period since inception on
08/17/09 to 10/31/14 17 For the period since inception on 11/09/10 to 10/31/14
18 For the period since inception on 11/12/13 to 10/31/14 19 For the period
since inception on 04/02/13 to 10/31/14 * Index performance reflects the
performance of the Solactive China Technology Index through December 12, 2011
and the NASDAQ OMX China Technology Index thereafter. ** Index performance
reflects the performance of the FTSE Argentina 20 Index through August 14, 2014
and the MSCI All Argentina 25/50 Index thereafter. *** Index performance
reflects the performance of the FTSE Colombia 20 Index through July 14, 2014 and
the MSCI All Colombia Capped Index thereafter. **** Index performance reflects
the performance of the FTSE Norway 30 Index through July 14, 2014 and the MSCI
Norway IMI 25/50 Index thereafter. ***** Index performance reflects the
performance of the Solactive Nigeria Index through August 14, 2014 and the MSCI
All Nigeria Select 25/50 Index thereafter.
189 INFORMATION REGARDING
THE INDICES AND THE INDEX PROVIDERS Solactive China Consumer Total Return Index
The Solactive China Consumer Total Return Index is designed to reflect the
equity performance of the consumer sector in China. It is made up of securities
of companies which have their main business operations in the consumer sector
and generally includes companies whose businesses involve: general retail;
diversified consumer services; food production and retail; beverages; household
goods; leisure goods; personal goods; automobiles, auto components and
distributors; tobacco; media; and travel and leisure. Only securities which are
tradable for foreign investors without restrictions are eligible, such as Hong
Kong listed securities incorporated in mainland China (H-shares) or with main
business operations in China (Red chips), and Chinese ADRs and GDRs. The stocks
are screened for liquidity and weighted according to free-float market
capitalization. A specific capping methodology is applied at the semi-annual
index review to facilitate compliance with the rules governing the listing of
financial products on exchanges in the United States. The index is maintained by
Solactive AG. Solactive China Energy Total Return Index The Solactive China
Energy Total Return Index is designed to reflect the equity performance of the
energy sector in China. It is made up of securities of companies which have
their main business operations in the energy sector and generally includes
companies whose businesses involve: oil, gas, consumable fuels, alternative
energy and electricity production and distribution; and energy equipment and
services. Only securities which are tradable for foreign investors without
restrictions are eligible, such as Hong Kong listed securities incorporated in
mainland China (H-shares) or with main business operations in China (Red chips),
and Chinese ADRs and GDRs.. The stocks are screened for liquidity and weighted
according to modified free-float market capitalization. A specific capping
methodology is applied at the semi-annual index review to facilitate compliance
with the rules governing the listing of financial products on exchanges in the
United States. The index is maintained by Solactive AG. Solactive China
Financials Total Return Index The Solactive China Financials Total Return Index
is designed to reflect the equity performance of the financials sector in China.
It is made up of securities of companies which have their main business
operations in the financials sector and generally includes companies whose
businesses involve: banking; insurance; real estate; and financial services.
Only securities which are tradable for foreign investors without restrictions
are eligible, such as Hong Kong listed securities incorporated in mainland China
(H- shares) or with main business operations in China (Red chips), and Chinese
ADRs and GDRs. The stocks are screened for liquidity and weighted according to
modified free-float market capitalization. A specific capping methodology is
applied at the semi-annual index review to facilitate compliance with the rules
governing the listing of financial products on exchanges in the United States.
The index is maintained by Solactive AG. Solactive China Industrials Total
Return Index The Solactive China Industrials Total Return Index is designed to
reflect the equity performance of the industrial sector in China. It is made up
of securities of companies which have their main business operations in the
industrial sector and generally includes companies whose businesses involve:
construction and materials; electronic and electrical equipment; industrial
engineering; industrial transportation; and support services; and trading
companies, shipbuilding and aerospace. Only securities which are tradable for
foreign investors without restrictions are eligible, such as Hong Kong listed
securities incorporated in mainland China (H-shares) or with main business
operations in China (Red chips), and Chinese ADRs and GDRs. The stocks are
screened for liquidity and weighted according to modified free-float market
capitalization. A specific capping methodology is applied at the semi-annual
index review to facilitate compliance with the rules governing the listing of
financial products on exchanges in the United States. The index is maintained by
Solactive AG. Solactive China Materials Total Return Index The Solactive China
Materials Total Return Index is designed to reflect the equity performance of
the basic materials sector in China. It is made up of securities of companies
which have their main business operations in the basic materials sector and
generally includes companies whose businesses involve: chemicals; metals and
mining; and forestry and paper products. Only securities which are tradable for
foreign investors without restrictions are eligible, such as Hong Kong listed
securities incorporated in mainland China (H-shares) or with main business
operations in China (Red chips), and Chinese ADRs and GDRs. The stocks are
screened for liquidity and weighted according to modified free-float market
capitalization. A specific capping methodology is applied at the semi-annual
index review to facilitate compliance with the rules governing the listing of
financial products on exchanges in the United States. The index is maintained by
Solactive AG.
190 Solactive China Mid
Cap Index The Solactive China Mid Cap Index is designed to reflect the equity
performance of Chinese mid-market capitalization companies. It is comprised of
the 40 highest ranked companies whose market capitalization is less than 10
billion as of the date of its inclusion in the index. Only securities which are
tradable for foreign investors without restrictions are eligible, such as Hong
Kong listed securities incorporated in mainland China (H-shares) or with main
business operations in China (Red chips), and Chinese ADRs and GDRs. The stocks
are screened for liquidity and weighted according to modified free-float market
capitalization. A specific capping methodology is applied at the semi-annual
index review to facilitate compliance with the rules governing the listing of
financial products on exchanges in the United States. The index is maintained by
Solactive AG. NASDAQ OMX China Technology Index The NASDAQ OMX China Technology
Index is designed to track the performance of the technology sector in China. It
is made up of securities of companies which have their main business operations
in the technology sector and generally includes companies whose businesses
involve: computer services; internet; software; computer hardware; electronic
office equipment; semiconductors; and telecommunications equipment. Only
securities which are tradable for foreign investors without restrictions are
eligible, such as Shanghai and Shenzhen B-shares, Hong Kong listed securities
incorporated in mainland China (H-shares) or with main business operations in
China (Red chips), and Chinese ADRs. The stocks are screened for liquidity and
weighted according to float adjusted modified market-capitalization. The index
is maintained by NASDAQ OMX. Solactive Brazil Consumer Index The Solactive
Brazil Consumer Index is designed to reflect the equity performance of the
consumer sector in Brazil. It is comprised of securities of companies which have
their main business operations in the consumer sector and are domiciled,
principally traded in or have their main business operations in Brazil. The
stocks are screened for liquidity and weighted according to modified free- float
market capitalization. A specific capping methodology is applied at the
semi-annual index review to facilitate compliance with the rules governing the
listing of financial products on exchanges in the United States. The index is
maintained by Solactive AG. Solactive Brazil Financials Index The Solactive
Brazil Financials Index is designed to reflect the equity performance of the
financials sector in Brazil. It is comprised of securities of companies which
have their main business operations in the financials sector and are domiciled,
principally traded in or have their main business operations in Brazil. The
stocks are screened for liquidity and weighted according to modified free- float
market capitalization. A specific capping methodology is applied at the
semi-annual index review to facilitate compliance with the rules governing the
listing of financial products on exchanges in the United States. The index is
maintained by Solactive AG. Solactive Brazil Industrials Index The Solactive
Brazil Industrials Index is designed to reflect the equity performance of the
industrials sector in Brazil. It is comprised of securities of companies which
have their main business operations in the industrial sector and are domiciled,
principally traded or have their main business operations in Brazil. The stocks
are screened for liquidity and weighted according to modified free- float market
capitalization. A specific capping methodology is applied at the semi-annual
index review to facilitate compliance with the rules governing the listing of
financial products on exchanges in the United States. The index is maintained by
Solactive AG. Solactive Brazil Materials Index The Solactive Brazil Materials
Index is designed to reflect the equity performance of the materials sector in
Brazil. It is comprised of securities of companies which have their main
business operations in the materials sector and are domiciled, principally
traded in or have their main business operations in Brazil. The stocks are
screened for liquidity and weighted according to modified free- float market
capitalization. A specific capping methodology is applied at the semi-annual
index review to facilitate compliance with the rules governing the listing of
financial products on exchanges in the United States. The index is maintained by
Solactive AG.
191 Solactive Brazil Mid
Cap Index The Solactive Brazil Mid Cap Index is designed to reflect the equity
performance of Brazilian mid-market capitalization companies. It is comprised of
the 40 highest ranked companies whose market capitalization is less than 10
billion as of the date of its inclusion in the index. The index is comprised of
companies that are domiciled, principally traded in or have their main business
operations in Brazil. The stocks are screened for liquidity and weighted
according to modified free-float market capitalization. The index is maintained
by Solactive AG. Solactive Brazil Utilities Index The Solactive Brazil Utilities
Index is designed to reflect the equity performance of the utilities sector in
Brazil. It is comprised of securities of companies which have their main
business operations in the utilities sector and are domiciled, principally
traded in or have their main business operations in Brazil. The stocks are
screened for liquidity and weighted according to modified free- float market
capitalization. A specific capping methodology is applied at the semi-annual
index review to facilitate compliance with the rules governing the listing of
financial products on exchanges in the United States. The index is maintained by
Solactive AG. FTSE Andean 40 Index The FTSE Andean 40 Index tracks the equity
performance of the 40 largest companies in Chile, Colombia, and Peru. The index
is free-float adjusted and weighted by modified market capitalization. Stocks
are liquidity screened to ensure that the index is tradable, and a unique
capping methodology makes it suitable for the use as the basis for investment
products such as derivatives and ETFs. The index is maintained by FTSE. MSCI All
Argentina 25/50 Index The MSCI All Argentina 25/50 Index is designed to
represent the performance of the broad Argentina equity universe, while
including a minimum number of constituents. The broad Argentina equity universe
includes securities that are classified in Argentina according to the MSCI
Global Investable Market Index Methodology, together with companies that are
headquartered or listed in Argentina and carry out the majority of their
operations in Argentina. The index targets a minimum of 25 securities and 20
issuers at construction. The index is designed to take into account the 25% and
50% concentration constraints required for a funds to qualify as a RIC in the
United States under the Code. At each quarterly rebalance, no single index
constituent may exceed 25% of the index weight, and the sum of all constituents
with index weights greater than 5% may not exceed 50%. FTSE/ASEAN 40 Index The
FTSE/ASEAN 40 Index tracks the equity performance of the 40 largest companies in
the five ASEAN regions: Singapore, Malaysia, Indonesia, Thailand and
Philippines. The index is free-float adjusted and weighted by modified market
capitalization and designed using eligible stocks within the FTSE All-World
universe. Stocks are liquidity screened to ensure that the index is tradable.
The index is maintained by FTSE. FTSE Bangladesh Index The FTSE Bangladesh Index
is designed to reflect broad based equity market performance in Bangladesh. The
stocks are screened for liquidity and weighted according to modified free-float
market capitalization. The index is comprised of companies that are domiciled
in, principally traded in or whose revenues are primarily from Bangladesh. A
specific capping methodology is applied to facilitate compliance with the rules
governing the listing of financial products on exchanges in the United States.
The index is maintained by FTSE. MSCI All Colombia Capped Index The MSCI All
Colombia Capped Index is designed to represent the performance of the broad
Colombia equity universe, while including a minimum number of constituents. The
broad Colombia equity universe includes securities that are classified in
Colombia according to the MSCI Global Investable Market Index Methodology,
together with companies that are headquartered or listed in Colombia and carry
out the majority of their operations in Colombia. The index targets a minimum of
25 securities and 20 issuers at construction. The index is designed to take into
account the 25% and 50% concentration constraints required for a funds to
qualify as a RIC in the United States under the Code. At each quarterly
rebalance, no single index constituent may exceed 25% of the index weight, and
the sum of all constituents with index weights greater than 5% may not exceed
50%.
192 Solactive Next
Emerging & Frontier Index The Solactive Next Emerging & Frontier Index
is designed to reflect equity performance of the Next Emerging markets and
Frontier markets companies, as defined by Solactive AG. Next Emerging markets
are defined as emerging market countries beyond the BRICs (Brazil, Russia, India
and China are excluded) and beyond the most developed tier of emerging markets
(currently South Korea and Taiwan are also excluded). The Underlying Index is
comprised of common stocks, ADRs and GDRs of selected companies globally that
are domiciled, principally traded in or have their main business operations in
these markets or that generate at least 50% of their revenues from these
markets. The index screens the largest stocks according to free-float market
capitalization and weights them by modified liquidity. FTSE/ATHEX Custom Capped
Index The FTSE/ATHEX Custom Capped Index is designed to reflect broad-based
equity market performance in Greece. The stocks are screened for liquidity and
weighted according to modified free-float market capitalization. The index is
comprised of the top 20 companies that are domiciled in, principally traded in
or whose revenues are primarily from Greece. A specific capping methodology is
applied to facilitate compliance with the rules governing the listing of
financial products on exchanges in the United States. The index is maintained by
FTSE. FTSE Nordic 30 Index The FTSE Nordic 30 Index is designed to reflect
broad-based equity market performance in Sweden, Denmark, Norway and Finland.
The stocks are screened for liquidity and weighted according to modified
free-float market capitalization. The index is comprised of the top 30 companies
domiciled in, principally traded in or whose revenues are primarily from Sweden,
Denmark, Norway and Finland. The index is maintained by FTSE. MSCI Norway IMI
25/50 Index The MSCI Norway IMI 25/50 Index is designed to measure the
performance of the large, mid and small cap segments of the Norwegian market. It
applies certain investment limits that are imposed on RICs, under the Code. With
54 constituents, the index covers approximately 99% of the free float-adjusted
market capitalization in Norway. FTSE Portugal 20 Index The FTSE Portugal 20
Index is designed to reflect broad-based equity market performance in Portugal.
The stocks are screened for liquidity and weighted according to modified
free-float market capitalization. The index is comprised of the top 20 companies
that are domiciled in, principally traded in or whose revenues are primarily
from Portugal. A specific capping methodology is applied to facilitate
compliance with the rules governing the listing of financial products on
exchanges in the United States. The index is maintained by FTSE. Solactive Czech
Republic Index The Solactive Czech Republic Index is designed to reflect
broad-based equity market performance in the Czech Republic. The index is
comprised of companies that are domiciled in, principally traded in or whose
revenues are primarily from Czech Republic. The stocks are screened for
liquidity and weighted according to modified free-float market capitalization.
The index is maintained by Solactive AG. MSCI All Nigeria Select 25/50 Index The
MSCI All Nigeria Select 25/50 Index is designed to represent the performance of
the broad Nigeria equity universe, while including a minimum number of
constituents. The broad Nigeria equity universe includes securities that are
classified in Nigeria according to the MSCI Global Investable Market Index
Methodology, together with companies that are headquartered or listed in Nigeria
and carry out the majority of their operations in Nigeria. Further, the Index
only includes securities with a minimum liquidity threshold of USD$100,000
average daily traded value, subject to 20 constituents being included in the
Index. If not, securities are added in the decreasing order of average daily
traded value until 20 securities are selected. The index targets a minimum of 20
securities at construction.
193 MSCI All Pakistan
25/50 Index The MSCI All Pakistan 25/50 Index is designed to represent the
performance of the broad Pakistan equity universe, while including a minimum
number of constituents. The broad Pakistan equity universe includes securities
that are classified in Pakistan according to the MSCI Global Investable Market
Index Methodology, together with companies that are headquartered or listed in
Pakistan and carry out the majority of their operations in Pakistan. The index
targets a minimum of 25 securities and 20 issuers at construction. The index is
designed to take into account the 25% and 50% concentration constraints required
for a funds to qualify as a RIC in the United States under the Code. At each
quarterly rebalance, no single index constituent may exceed 25% of the index
weight, and the sum of all constituents with index weights greater than 5% may
not exceed 50%. Solactive Central Asia & Mongolia Index The Solactive
Central Asia & Mongolia Index is designed to reflect the broad-based equity
performance of Central Asia. The index is comprised of companies that are
domiciled in, principally traded in or whose revenues are primarily from
Mongolia, Kazakhstan, Kyrgyzstan, Tajikistan, Turkmenistan, and Uzbekistan. The
stocks are screened for liquidity and weighted according to modified free-float
market capitalization. The index is maintained by Solactive AG. Each Index
Provider is described separately below: Solactive AG is a leading company in the
structuring and indexing business for institutional clients. Solactive AG runs
the Solactive index platform (formerly S-BOX platform). Solactive AG indices are
used by issuers worldwide as underlying indices for financial products.
Solactive AG does not sponsor, endorse or promote any of the Funds and is not in
any way connected to them and does not accept any liability in relation to their
issue, operation or trading. FTSE is a world-leader in the creation and
management of over 100,000 equity, bond and hedge fund indices. With offices in
Beijing, London, Frankfurt, Hong Kong, Boston, Shanghai, Madrid, Paris, New
York, San Francisco, Sydney and Tokyo, FTSE Group services clients in 77
countries worldwide. FTSE is an independent company owned by The Financial Times
and the London Stock Exchange. FTSE does not give financial advice to clients,
which allows for the provision of truly objective market information. FTSE
indices are used extensively by investors world-wide such as consultants, asset
owners, asset managers, investment banks, stock exchanges and brokers. FTSE does
not sponsor, endorse or promote any of the Funds and is not in any way connected
to them and does not accept any liability in relation to their issue, operation
and trading. The NASDAQ OMX Group, Inc. delivers trading, exchange technology
and public company services across six continents, with more than 3,500 listed
companies. NASDAQ OMX offers multiple capital raising solutions to companies
around the globe, including its U.S. listings market, NASDAQ OMX Nordic, NASDAQ
OMX Baltic, NASDAQ OMX First North, and the U.S. 144A sector. The company offers
trading across multiple asset classes including equities, derivatives, debt,
commodities, structured products and exchange-traded funds. NASDAQ OMX
technology supports the operations of over 70 exchanges, clearing organizations
and central securities depositories in more than 50 countries. NASDAQ OMX Nordic
and NASDAQ OMX Baltic are not legal entities but describe the common offering
from NASDAQ OMX exchanges in Helsinki, Copenhagen, Stockholm, Iceland, Tallinn,
Riga, and Vilnius. NASDAQ OMX is a leading, global provider of index services
including design, development, calculation, dissemination, licensing and
marketing across six continents. As a premier full-service provider, NASDAQ OMX
is dedicated to designing powerful, relevant index and benchmark families that
are in sync with the continually changing market environment. Utilizing the
expanded coverage of our global footprint with four distinct index brands -
NASDAQ, OMX, NASDAQ OMX, and PHLX - NASDAQ OMX has more than 2,500 diverse
indexes that provide coverage across asset classes, countries and sectors. The
Product(s) is not sponsored, endorsed, sold or promoted by The NASDAQ OMX Group,
Inc. or its affiliates (NASDAQ OMX, with its affiliates, are referred to as the
“Corporations”). The Corporations have not passed on the legality or suitability
of, or the accuracy or adequacy of descriptions and disclosures relating to, the
Product(s). The Corporations make no representation or warranty, express or
implied to the owners of the Product(s) or any member of the public regarding
the advisability of investing in securities generally or in the Product(s)
particularly, or the ability of the NASDAQ 500 Index, NASDAQ 400 Index and
NASDAQ OMX Global Technology Index to track general stock market performance.
The Corporations' only relationship to Global X Management Company, LLC
(“Licensee”) is in the licensing of the NASDAQ®, OMX®, NASDAQ OMX®, NASDAQ 500
IndexSM, NASDAQ 400 IndexSM and NASDAQ OMX Global Technology IndexSM registered
trademarks, and certain trade names and service marks of the Corporations and
the use of the NASDAQ 500 Index, NASDAQ 400 Index and NASDAQ OMX Global
Technology Index which is determined, composed and calculated by NASDAQ OMX
without regard to Licensee or the Product(s). NASDAQ OMX has no obligation to
take the needs of the Licensee or the owners of the Product(s) into
consideration in determining, composing or calculating the NASDAQ 500 Index,
NASDAQ 400 Index and NASDAQ OMX Global Technology
194 Index. The
Corporations are not responsible for and have not participated in the
determination of the timing of, prices at, or quantities of the Product(s) to be
issued or in the determination or calculation of the equation by which the
Product(s) is to be converted into cash. The Corporations have no liability in
connection with the administration, marketing or trading of the Product (s). The
corporations do not guarantee the accuracy and/or uninterrupted calculation of
the NASDAQ 500 Index, NASDAQ 400 Index, NASDAQ OMX Global Technology Index or
any data included therein. The corporations make no warranty, express or
implied, as to results to be obtained by licensee, owners of the product(s), or
any other person or entity from the use of the NASDAQ 500 Index, NASDAQ 400
Index, NASDAQ OMX Global Technology Index or any data included therein. The
corporations make no express or implied warranties, and expressly disclaim all
warranties of merchantability or fitness for a particular purpose or use with
respect to the NASDAQ 500 Index, NASDAQ 400 Index, NASDAQ OMX Global Technology
Index or any data included therein. Without limiting any of the foregoing, in no
event shall the corporations have any liability for any lost profits or special,
incidental, punitive, indirect, or consequential damages, even if notified of
the possibility of such damages. THIS FUND IS NOT SPONSORED, ENDORSED, SOLD OR
PROMOTED BY MSCI INC. ("MSCI"), ANY OF ITS AFFILIATES, ANY OF ITS INFORMATION
PROVIDERS OR ANY OTHER THIRD PARTY INVOLVED IN, OR RELATED TO, COMPILING,
COMPUTING OR CREATING ANY MSCI INDEX (COLLECTIVELY, THE ''MSCI PARTIES"). THE
MSCI INDEXES ARE THE EXCLUSIVE PROPERTY OF MSCI. MSCI AND THE MSCI INDEX NAMES
ARE SERVICE MARK (S) OF MSCI OR ITS AFFILIATES AND HAVE BEEN LICENSED FOR USE
FOR CERTAIN PURPOSES BY THE ADVISER. NONE OF THE MSCI PARTIES MAKES ANY
REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE ISSUER OR OWNERS OF THIS
FUND OR ANY OTHER PERSON OR ENTITY REGARDING THE ADVISABILITY OF INVESTING IN
FUNDS GENERALLY OR IN THIS FUND PARTICULARLY OR THE ABILITY OF ANY MSCI INDEX TO
TRACK CORRESPONDING STOCK MARKET PERFORMANCE. MSCI OR ITS AFFILIATES ARE THE
LICENSORS OF CERTAIN TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND OF THE MSCI
INDEXES WHICH ARE DETERMINED, COMPOSED AND CALCULATED BY MSCI WITHOUT REGARD TO
THIS FUND OR THE ISSUER OR OWNERS OF THIS FUND OR ANY OTHER PERSON OR ENTITY.
NONE OF THE MSCI PARTIES HAS ANY OBLIGATION TO TAKE THE NEEDS OF THE ISSUER OR
OWNERS OF THIS FUND OR ANY OTHER PERSON OR ENTITY INTO CONSIDERATION IN
DETERMINING, COMPOSING OR CALCULATING THE MSCI INDEXES. NONE OF THE MSCI PARTIES
IS RESPONSIBLE FOR OR HAS PARTICIPATED IN THE DETERMINATION OF THE TIMING OF,
PRICES AT, OR QUANTITIES OF THIS FUND TO BE ISSUED OR IN THE DETERMINATION OR
CALCULATION OF THE EQUATION BY OR THE CONSIDERATION INTO WHICH THIS FUND IS
REDEEMABLE. FURTHER, NONE OF THE MSCI PARTIES HAS ANY OBLIGATION OR LIABILITY TO
THE ISSUER OR OWNERS OF THIS FUND OR ANY OTHER PERSON OR ENTITY IN CONNECTION
WITH THE ADMINISTRATION, MARKETING OR OFFERING OF THIS FUND. ALTHOUGH MSCI SHALL
OBTAIN INFORMATION FOR INCLUSION IN OR FOR USE IN THE CALCULATION OF THE MSCI
INDEXES FROM SOURCES THAT MSCI CONSIDERS RELIABLE, NONE OF THE MSCI PARTIES
WARRANTS OR GUARANTEES THE ORIGINALITY, ACCURACY AND/OR THE COMPLETENESS OF ANY
MSCI INDEX OR ANY DATA INCLUDED THEREIN. NONE OF THE MSCI PARTIES MAKES ANY
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ISSUER OF THE
FUND. OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY, FROM THE USE OF ANY
MSCI INDEX OR ANY DATA INCLUDED THEREIN. NONE OF THE MSCI PARTIES SHALL HAVE ANY
LIABILITY FOR ANY ERRORS, OMISSIONS OR INTERRUPTIONS OF OR IN CONNECTION WITH
ANY MSCI INDEX OR ANY DATA INCLUDED THEREIN. FURTHER, NONE OF THE MSCI PARTIES
MAKES ANY EXPRESS OR IMPLIED WARRANTIES OF ANY KIND. AND THE MSCI PARTIES HEREBY
EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A
PARTICULAR PURPOSE, WITH RESPECT TO EACH MSCI INDEX AND ANY DATA INCLUDED THERE
IN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL ANY OF THE MSCI
PARTIES HAVE ANY LIAB I LITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE,
CONSEQUENTIAL OR ANY OTHER DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF
THE POSSIBILITY OF SUCH DAMAGES. No purchaser, seller or holder of this Fund, or
any other person or entity, should use or refer to any MSCI trade name,
trademark or service mark to sponsor, endorse, market or promote this Fund
without first contacting MSCI to determine whether MSCI's permission is
required. Under no circumstances may any person or entity claim any affiliation
with MSCI without the prior written permission of MSCI. OTHER SERVICE PROVIDERS
SEI Investments Global Funds Services is the sub-administrator for each Fund.
Brown Brothers Harriman & Co. is the custodian and transfer agent for each
Fund.
195 K&L Gates LLP
serves as legal counsel to Global X Funds ® ("Trust") and the Trust's
Independent Trustees. Ernst & Young LLP serves as the Funds’ independent
registered public accounting firm. The independent registered public accounting
firm is responsible for auditing the annual financial statements of each Fund.
FINANCIAL HIGHLIGHTS The following Funds had commenced operations and have
financial highlights for the fiscal year ended October 31, 2014: Global X China
Consumer ETF, Global X China Energy ETF, Global X China Financials ETF, Global X
China Materials ETF, Global X China Industrials ETF, Global X NASDAQ China
Technology ETF, Global X Brazil Consumers ETF, Global X Brazil Financials ETF,
Global X Brazil Mid Cap ETF, Global X FTSE Andean 40 ETF, Global X MSCI
Argentina ETF, Global X Southeast Asia ETF, Global X MSCI Colombia ETF, Global X
FTSE Greece 20 ETF, Global X FTSE Nordic Region ETF, Global X MSCI Norway ETF,
Global X MSCI Nigeria ETF, Global X Next Emerging & Frontier ETF, Global X
FTSE Portugal 20 ETF and Global X Central Asia & Mongolia Index ETF. The
other Funds had not commenced operations as of the October 31, 2014 fiscal year
end, thus financial highlights are not yet available. The financial highlights
tables are intended to help investors understand a Fund’s financial performance
since the Fund's inception. Certain information reflects financial results for a
single share of a Fund. The total returns in the tables represent the rate that
an investor would have earned (or lost) on an investment in a Fund, assuming
reinvestment of all dividends and distributions. Ernst & Young LLP serves as
the Funds’ independent registered public accounting firm and has audited the
financial statements of the Funds for the fiscal years ended October 31, 2011,
2012, 2013 and 2014. Their report appears in the Trust’s annual report, which,
along with the Funds' financial statements, is available without charge upon
request. Information reported for fiscal periods before 2011 were audited by the
Funds’ former independent registered public accounting firm.
196 FINANCIAL HIGHLIGHTS
Selected Per Share Data & Ratios For a Share Outstanding Throughout the
Period Net Asset Value, Beginning of Period ($) Net Investment Income ($)* Net
Realized and Unrealized Gain (Loss) on Investments ($) Total from Operations ($)
Distribution from Net Investment Income ($) Distribution from Capital Gains ($)
Total from Distributions ($) Net Asset Value, End of Period ($) Total Return
(%)** Net Assets End of Period ($)(000) Ratio of Expenses to Average Net Assets
(%) Ratio of Net Investment Income to Average Net Assets (%) Portfolio Turnover
(%) Global X China Consumer ETF 2014 15.87 0.17 (2.07) (1.90) (0.15) — (0.15)
13.82 (12.09) 134,014 0.65 1.18 18.89 2013 14.00 0.16 1.88 2.04 (0.17) — (0.17)
15.87 14.66 170,554 0.65 1.11 27.76 2012 15.29 0.24 (1.47) (1.23) (0.06) —
(0.06) 14.00 (8.06) 126,715 0.65 1.73 17.32 2011 20.33 0.17 (5.02) (4.85) (0.19)
— (0.19) 15.29 (23.99) 136,858 0.65 0.98 12.37 2010(1) 15.65 0.17 4.51 4.68 — —
— 20.33 29.90 174,875 0.65† 1.03† 3.91†† Global X China Energy ETF 2014 15.11
0.29 (0.09) 0.20 (0.28) — (0.28) 15.03 1.34 4,509 0.65 1.90 12.65 2013 13.76
0.26 1.34 1.60 (0.25) — (0.25) 15.11 11.72 4,534 0.65 1.82 24.41 2012 13.78 0.25
(0.01) 0.24 (0.26) — (0.26) 13.76 1.87 4,816 0.65 1.85 17.22 2011 15.72 0.27
(2.07) (1.80) (0.14) — (0.14) 13.78 (11.57) 4,822 0.65 1.70 11.39 2010(2) 15.02
0.23 0.47 0.70 — — — 15.72 4.66 4,717 0.65† 1.80† 20.55†† Global X China
Financials ETF 2014 13.29 0.23 0.05^ 0.28 (0.07) — (0.07) 13.50 2.08 48,585 0.65
1.76 6.90 2013 12.03 0.27 1.36 1.63 (0.37) — (0.37) 13.29 13.61 42,518 0.65 2.09
33.49 2012 10.92 0.20 0.92 1.12 (0.01) — (0.01) 12.03 10.28 6,013 0.65 1.76
14.02 2011 14.77 0.03 (3.56) (3.53) (0.32) — (0.32) 10.92 (24.29) 10,924 0.65
0.25 41.54 2010(3) 14.90 0.27 (0.40) (0.13) — — — 14.77 (0.87) 70,158 0.65†
2.26† 14.42†† Global X China Industrials ETF 2014 12.14 0.15 0.83 0.98 (0.19) —
(0.19) 12.93 8.13 5,821 0.65 1.24 10.61 2013 11.40 0.15 0.75 0.90 (0.16) —
(0.16) 12.14 7.89 4,248 0.65 1.28 19.01 2012 11.39 0.16 (0.13) 0.03 (0.02) —
(0.02) 11.40 0.30 4,561 0.65 1.48 23.00 2011 17.13 0.13 (5.64) (5.51) (0.23) —
(0.23) 11.39 (32.56) 4,558 0.65 0.88 20.13 2010(1) 15.50 0.08 1.55 1.63 — — —
17.13 10.52 12,850 0.65† 0.61† 12.74†† Global X China Materials ETF 2014 15.13
0.19 (0.27) (0.08) (0.25) — (0.25) 14.80 (0.57) 2,959 0.65 1.26 13.51 2013(4)
16.28 0.17 (1.05) (0.88) (0.27) — (0.27) 15.13 (5.63) 2,269 0.65 1.65 31.07
2012(4) 19.16 0.25 (3.13) (2.88) — — — 16.28 (15.03) 2,441 0.65 1.50 50.30
2011(4) 29.18 0.01 (9.74) (9.73) (0.29) — (0.29) 19.16 (33.69) 2,875 0.65 0.05
36.82 2010(4)(5) 29.90 0.05 (0.77) (0.72) — — — 29.18 (2.41) 57,642 0.65† 0.23†
6.13†† Global X NASDAQ China Technology ETF 2014 20.63 0.06 2.80 2.86 (0.01) —
(0.01) 23.48 13.85 22,307 0.65 0.29 64.79 2013 13.77 0.02 6.92 6.94 (0.08) —
(0.08) 20.63 50.68 10,317 0.65 0.14 57.24 2012 15.38 0.05 (1.47) (1.42) (0.19) —
(0.19) 13.77 (9.17) 2,754 0.65 0.35 53.45 2011 17.21 0.38 (2.05) (1.67) (0.03)
(0.13) (0.16) 15.38 (9.81) 4,614 0.65 2.26 16.79 2010(6) 14.90 0.03 2.28 2.31 —
— — 17.21 15.50 4,301 0.65† 0.24† 5.15†† Global X Southeast Asia ETF 2014 17.12
0.39 (0.16) 0.23 (0.59) — (0.59) 16.76 1.68 29,336 0.65 2.36 8.36 2013 16.75
0.47 0.28^ 0.75 (0.38) — (0.38) 17.12 4.50 49,634 0.65 2.73 24.07 2012 15.51
0.51 1.10 1.61 (0.37) — (0.37) 16.75 10.77 32,656 0.65 3.23 9.69 2011(7) 15.08
0.38 0.05 0.43 — — — 15.51 2.85 23,262 0.62† 3.46† 2.68††
197 (1) The Fund
commenced operations on November 30, 2009. (2) The Fund commenced operations on
December 15, 2009. (3) The Fund commenced operations on December 10, 2009. (4)
Per share amounts have been restated for a 1 for 2 reverse share split. See Note
8 in the Notes to Financial Statements for additional information. (5) The Fund
commenced operations on January 12, 2010. (6) The Fund commenced operations on
December 8, 2009. (7) The Fund commenced operations on February 16, 2011. ^ The
amount shown for a share outstanding throughout the period does not accord with
the aggregate net gains on investments for the period because of the sales and
repurchases of fund shares in relation to fluctuating market value of the
investments of the Fund. * Per share data calculated using average shares
method. ** Total Return is for the period indicated and has not been annualized.
The return shown does not reflect the deduction of taxes that a shareholder
would pay on Fund distributions or the redemption of Fund shares. † Annualized.
†† Portfolio turnover rate is for the period indicated and has not been
annualized. Excludes effect of in-kind transfers. Amounts designated as “—” are
either $0 or have been rounded to $0.
198 FINANCIAL HIGHLIGHTS
Selected Per Share Data & Ratios For a Share Outstanding Throughout the
Period Net Asset Value, Beginning of Period ($) Net Investment Income ($)* Net
Realized and Unrealized Gain (Loss) on Investments ($) Total from Operations ($)
Distribution from Net Investment Income ($) Distribution from Capital Gains ($)
Total from Distributions ($) Net Asset Value, End of Period ($) Total Return
(%)** Net Assets End of Period ($)(000) Ratio of Expenses to Average Net Assets
(%) Ratio of Net Investment Income to Average Net Assets (%) Portfolio Turnover
(%) Global X FTSE Andean 40 ETF 2014 12.21 0.19 (1.63) (1.44) (0.17) — (0.17)
10.60 (11.84) 9,010 0.72 1.71 19.94 2013 14.37 0.23 (2.13) (1.90) (0.26) —
(0.26) 12.21 (13.52) 10,382 0.72 1.71 22.05 2012 13.61 0.23 0.77 1.00 (0.24) —
(0.24) 14.37 7.63 8,620 0.72 1.65 25.80 2011(1) 14.88 0.19 (1.46) (1.27) — — —
13.61 (8.53) 6,806 0.72† 1.81† 15.83†† Global X MSCI Colombia ETF 2014 20.55
0.40 (2.78) (2.38) (0.75) — (0.75) 17.42 (11.73) 100,688 0.66@ 2.12 47.57 2013
21.89 0.42 (1.31) (0.89) (0.45) — (0.45) 20.55 (4.21) 149,625 0.75@ 2.05 52.06
2012 19.19 0.39 2.52 2.91 (0.21) — (0.21) 21.89 15.41 182,379 0.78@ 1.92 61.70
2011 22.99 0.29 (3.88) (3.59) (0.13) (0.08) (0.21) 19.19 (15.69) 141,613 0.81@
1.39 63.11 2010 13.92 0.16 9.44 9.60 (0.53) — (0.53) 22.99 71.28 196,355 0.86@
0.77 40.95 Global X Brazil Mid Cap ETF 2014 14.58 0.39 (2.04) (1.65) (0.71) —
(0.71) 12.22 (11.59) 7,942 0.69 2.99 17.72 2013 15.55 0.50 (1.02) (0.52) (0.45)
— (0.45) 14.58 (3.52) 12,390 0.69 3.32 16.38 2012 15.55 0.47 (0.13) 0.34 (0.34)
— (0.34) 15.55 2.42 20,994 0.69 2.98 34.81 2011 18.28 0.46 (2.94) (2.48) (0.23)
(0.02) (0.25) 15.55 (13.73) 23,329 0.69 2.68 16.90 2010(2) 15.16 0.08 3.04 3.12
— — — 18.28 20.58 29,242 0.69† 1.24† 2.69†† Global X Brazil Consumer ETF 2014
17.89 0.33 (1.44) (1.11) (0.21) — (0.21) 16.57 (6.20) 9,943 0.78‡ 1.98 18.59
2013 19.43 0.15 (1.45) (1.30) (0.24) — (0.24) 17.89 (6.80) 18,787 0.77 0.80
15.01 2012 16.78 0.14 2.73 2.87 (0.22) — (0.22) 19.43 17.49 25,257 0.77 0.83
49.88 2011 19.95 0.28 (3.42) (3.14) (0.02) (0.01) (0.03) 16.78 (15.74) 29,361
0.77 1.53 37.28 2010(3) 15.48 — 4.47 4.47 — — — 19.95 28.88 24,934 0.77† 0.07†
4.72†† Global X Brazil Financials ETF 2014 12.12 0.52 (1.65) (1.13) (0.11) —
(0.11) 10.88 (9.25) 2,719 0.77‡ 4.56 17.31 2013 12.82 0.30 (0.50) (0.20) (0.50)
— (0.50) 12.12 (1.87) 2,425 0.77 2.36 14.87 2012 14.92 0.34 (1.80) (1.46) (0.64)
— (0.64) 12.82 (9.79) 3,845 0.77 2.47 24.79 2011 17.40 0.46 (2.85) (2.39) (0.09)
— (0.09) 14.92 (13.80) 7,461 0.77 2.85 37.24 2010(4) 15.08 0.05 2.27 2.32 — — —
17.40 15.38 7,829 0.77† 1.15† — †† Global X MSCI Argentina ETF 2014 20.29 0.10
0.91^ 1.01 (0.12) — (0.12) 21.18 5.03 20,652 0.74 0.49 95.29 2013(5) 16.84 0.10
3.53 3.63 (0.18) — (0.18) 20.29 21.73 6,595 0.74 0.57 26.52 2012(5) 22.04 0.24
(4.85) (4.61) (0.59) — (0.59) 16.84 (21.44) 2,946 0.74 1.25 29.51 2011(5)(6)
29.86 0.45 (8.27) (7.82) — — — 22.04 (26.19) 3,857 0.75† 2.53† 40.86††
199 (1) The Fund
commenced operations on February 2, 2011. (2) The Fund commenced operations on
June 21, 2010. (3) The Fund commenced operations on July 7, 2010. (4) The Fund
commenced operations on July 28, 2010. (5) Per share amounts have been restated
for a 1 for 2 reverse share split. See Note 8 in the Notes to Financial
Statements for additional information. (6) The Fund commenced operations on
March 2, 2011. ^ The amount shown for a share outstanding throughout the period
does not accord with the aggregate net gains on investments for the period
because of the sales and repurchases of fund shares in relation to fluctuating
market value of the investments of the Fund. * Per share data calculated using
average shares method. ** Total Return is for the period indicated and has not
been annualized. The return shown does not reflect the deduction of taxes that a
shareholder would pay on Fund distributions or the redemption of Fund shares. †
Annualized. †† Portfolio turnover rate is for the period indicated and has not
been annualized. Excludes effect of in-kind transfers. @ The Ratio of Expenses
to Average Net Assets includes the effect of a waiver. If these expense offsets
were excluded, the ratio would have been 0.78%, 0.80%,0.83%, 0.83%, and 0.86%
for the years ended October 31, 2014, 2013, 2012, 2011, and 2010, respectively.
‡ The ratio of Expenses to Average Net Assets includes the effect of income
taxes. If these expenses were excluded, the ratio would have been 0.77%, and
0.77% for the Global X Brazil Consumer ETF and Global X Brazil Financials ETF,
respectively. Amounts designated as “—” are either $0 or have been rounded to
$0.
200 FINANCIAL HIGHLIGHTS
Selected Per Share Data & Ratios For a Share Outstanding Throughout the
Period Net Asset Value, Beginning of Period ($) Net Investment Income (Loss)
($)* Net Realized and Unrealized Gain (Loss) on Investments ($) Total from
Operations ($) Distribution from Net Investment Income ($) Distribution from
Capital Gains ($) Total from Distributions ($) Net Asset Value, End of Period
($) Total Return (%)** Net Assets End of Period ($)(000) Ratio of Expenses to
Average Net Assets (%) Ratio of Net Investment Income (Loss) to Average Net
Assets (%) Portfolio Turnover (%) Global X FTSE Greece 20 ETF 2014 22.60 0.08
(6.83) (6.75) (0.01) — (0.01) 15.84 (29.83) 140,201 0.62 0.38 64.19 2013 16.16
0.15 6.32 6.47 (0.02) (0.01) (0.03) 22.60 40.14 94,938 0.61 0.84 77.29 2012(1)
15.18 0.25 0.76 1.01 (0.03) — (0.03) 16.16 6.70 25,863 0.62† 1.93† 23.99††
Global X MSCI Norway ETF 2014 16.76 0.63 (2.18) (1.55) (0.39) — (0.39) 14.82
(9.46) 183,038 0.50 3.76 26.50 2013 15.09 0.50 1.60 2.10 (0.43) — (0.43) 16.76
14.21 80,465 0.50 3.23 11.01 2012 13.96 0.49 1.00 1.49 (0.36) — (0.36) 15.09
11.24 61,129 0.50 3.52 23.39 2011(2) 14.80 0.44 (1.27) (0.83) (0.01) — (0.01)
13.96 (5.62) 74,707 0.50† 3.03† 24.26†† Global X FTSE Nordic Region ETF 2014
23.74 0.79 0.46 1.25 (0.63) — (0.63) 24.36 5.30 59,927 0.50 3.16 6.05 2013 18.65
0.62 4.97 5.59 (0.50) — (0.50) 23.74 30.54 56,015 0.50 2.92 8.95 2012 17.47 0.50
1.27 1.77 (0.53) (0.06) (0.59) 18.65 10.84 26,293 0.50 2.88 10.15 2011 19.22
0.53 (2.11) (1.58) (0.17) — (0.17) 17.47 (8.34) 29,005 0.50 2.74 3.59 2010 16.07
0.32 2.84 3.16 (0.01) — (0.01) 19.22 19.68 12,683 0.50 1.91 4.07 Global X
Central Asia & Mongolia Index ETF 2014 13.74 0.38 (1.48) (1.10) (0.35) —
(0.35) 12.29 (8.23) 2,457 0.69 2.84 55.76 2013(3) 14.84 0.41 (1.51) (1.10) — — —
13.74 (7.41) 1,374 0.69† 5.01† 11.01†† Global X MSCI Nigeria ETF 2014 14.92 0.47
(2.16) (1.69) (0.17) (0.04) (0.21) 13.02 (11.55) 16,924 0.68@ 3.14 54.75 2013(3)
15.31 0.30 (0.69) (0.39) — — — 14.92 (2.55) 5,970 0.68†@ 3.54† 5.44†† Global X
Next Emerging & Frontier ETF 2014(4) 25.08 0.51 0.01^ 0.52 (0.05) — (0.05)
25.55 2.07 152,027 0.58†‡ 2.00† 24.14†† Global X FTSE Portugal 20 ETF 2014(5)
15.04 0.38 (2.77) (2.39) — — — 12.65 (15.89) 36,692 0.61† 2.58† 53.58†† (1) The
Fund commenced operations on December 7, 2011. (2) The Fund commenced operations
on November 9, 2010. (3) The Fund commenced operations on August 2, 2013. (4)
The Fund commenced operations on November 6, 2013. (5) The Fund commenced
operations on November 12, 2013. ^ The amount shown for a share outstanding
throughout the period does not accord with the aggregate net gains on
investments for the period because of the sales and repurchases of fund shares
in relation to fluctuating market value of the investments of the Fund. * Per
share data calculated using average shares method. ** Total Return is for the
period indicated and has not been annualized. The return shown does not reflect
the deduction of taxes that a shareholder would pay on Fund distributions or the
redemption of Fund shares. † Annualized. †† Portfolio turnover rate is for the
period indicated and has not been annualized. Excludes effect of in-kind
transfers. @ The ratio of Expenses to Average Net Assets includes the effect of
a waiver. If these expenses offsets were excluded, the ratio would have been
0.92% and 0.92% for the year and period ended October 31, 2014, and 2013,
respectively. ‡ The ratio of Expenses to Average Net Assets includes the effect
of income taxes. If these expenses were excluded, the ratio would have been
0.58% for the Global X Next Emerging & Frontier ETF. Amounts designated as
“—” are either $0 or have been rounded to $0.
201 OTHER INFORMATION The
Funds are not sponsored, endorsed, sold or promoted by the Exchange. The listing
exchange makes no representation or warranty, express or implied, to the owners
of Shares or any member of the public regarding the advisability of investing in
securities generally or in the Funds particularly or the ability of the Funds to
achieve their objectives. The listing exchange has no obligation or liability in
connection with the administration, marketing or trading of the Funds. For
purposes of the 1940 Act, shares that are issued by a registered investment
company and purchases of such shares by investment companies and companies
relying on Sections 3(c)(1) or 3(c)(7) of the 1940 Act are subject to the
restrictions set forth in Section 12(d)(1) of the 1940 Act, except as permitted
by an exemptive order that permits registered investment companies to invest in
shares beyond the limits in Section 12(d)(1)(A), subject to certain terms and
conditions. The Trust has obtained an SEC order permitting registered investment
companies to invest in Shares as described above. One such condition stated in
the order is that investment companies relying on the order must enter into a
written agreement with the Trust. The method by which Creation Units are created
and traded may raise certain issues under applicable securities laws. Because
new Creation Units are issued and sold by the Funds on an ongoing basis, a
“distribution,” as such term is used in the Securities Act, may occur at any
point. Broker-dealers and other persons are cautioned that some activities on
their part may, depending on the circumstances, result in their being deemed
participants in a distribution in a manner which could render them statutory
underwriters and subject them to the prospectus delivery and liability
provisions of the Securities Act. For example, a broker-dealer firm or its
client may be deemed a statutory underwriter if it takes Creation Units after
placing an order with the Distributor, breaks them down into constituent Shares,
and sells such Shares directly to customers, or if it chooses to couple the
creation of a supply of new Shares with an active selling effort involving
solicitation of secondary market demand for Shares. A determination of whether
one is an underwriter for purposes of the Securities Act must take into account
all the facts and circumstances pertaining to the activities of the
broker-dealer or its client in the particular case, and the examples mentioned
above should not be considered a complete description of all the activities that
could lead to a categorization as an underwriter. Broker-dealers who are not
“underwriters” but are participating in a distribution (as contrasted with
ordinary secondary trading transactions), and thus dealing with Shares that are
part of an “unsold allotment” within the meaning of Section 4(3)(C) of the
Securities Act, would be unable to take advantage of the prospectus delivery
exemption provided by Section 4(3) of the Securities Act. This is because the
prospectus delivery exemption in Section 4(3) of the Securities Act is not
available in respect of such transactions as a result of Section 24(d) of the
1940 Act. As a result, broker-dealer firms should note that dealers who are not
underwriters but are participating in a distribution (as contrasted with
ordinary secondary market transactions) and thus dealing with the Shares that
are part of an overallotment within the meaning of Section 4(3)(A) of the
Securities Act would be unable to take advantage of the prospectus delivery
exemption provided by Section 4(3) of the Securities Act. Firms that incur a
prospectus delivery obligation with respect to Shares are reminded that, under
Rule 153 of the Securities Act, a prospectus delivery obligation under Section
5(b)(2) of the Securities Act owed to an exchange member in connection with a
sale on NYSE Arca is satisfied by the fact that the prospectus is available at
NYSE Arca upon request. The prospectus delivery mechanism provided in Rule 153
is only available with respect to transactions on an exchange.
202 For more information
visit our website at www.globalxfunds.com or call 1-888-GXFund-1
(1-888-493-8631) Investment Adviser and Administrator Global X Management
Company LLC 623 Fifth Avenue, 15th Floor New York, NY 10022 Distributor SEI
Investments Distribution Co. One Freedom Valley Drive Oaks, PA 19456 Custodian
and Transfer Agent Brown Brothers Harriman & Co. 40 Water Street Boston, MA
02109 Sub-Administrator SEI Investments Global Funds Services One Freedom Valley
Drive Oaks, PA 19456 Legal Counsel to the Global X Funds® and Independent
Trustees K&L Gates LLP 1601 K Street, NW Washington, DC 20006-1600
Independent Registered Public Accounting Firm Ernst & Young LLP 2005 Market
Street, Suite 700 Philadelphia, PA 19103
203 A Statement of
Additional Information dated March 1, 2015, which contains more details about
the Funds, is incorporated by reference in its entirety into this Prospectus,
which means that it is legally part of this Prospectus. Additional information
about each Fund and its investments is available in its annual and semi-annual
reports to shareholders. The annual report explains the market conditions and
investment strategies affecting each Fund’s performance during its last fiscal
year. You can ask questions or obtain a free copy of each such Fund’s
semi-annual and annual report or the Statement of Additional Information by
calling 1-888-GXFund-1 (1-888-493-8631). Free copies of a Fund’s semi-annual and
annual report and the Statement of Additional Information are available from our
website at www.globalxfunds.com. Information about each Fund, including its
semi-annual and annual reports and the Statement of Additional Information, has
been filed with the SEC. It can be reviewed and copied at the SEC’s Public
Reference Room in Washington, DC or on the EDGAR database on the SEC’s internet
site (http://www.sec.gov). Information on the operation of the SEC’s Public
Reference Room may be obtained by calling the SEC at 1-202-551-8090. You can
also request copies of these materials, upon payment of a duplicating fee, by
electronic request at the SEC’s e-mail address ([email protected]) or by
writing the Public Reference section of the SEC, 100 F Street N.E., Room 1580,
Washington, DC 20549-1520. PROSPECTUS Distributor SEI Investments Distribution
Co. One Freedom Valley Drive Oaks, PA 19456 March 1, 2015 Investment Company Act
File No.: 811-22209