485BPOS
|
|
|
|
|
November 1,
2021 |
FUND
PROSPECTUS
Impact
Shares MSCI Global Climate Select ETF
Ticker:
NTZO – NYSE ARCA
Although
these securities have been registered with the U.S. Securities and Exchange
Commission (“SEC”), the SEC has not approved or disapproved any shares offered
in this Prospectus or determined whether this Prospectus is truthful or
complete. Any representation to the contrary is a criminal offense.
Not
FDIC Insured
May
Lose Value
No
Bank Guarantee
TABLE
OF CONTENTS
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
10 |
|
|
|
|
|
|
12 |
|
|
|
|
|
|
13 |
|
|
|
|
|
|
13 |
|
|
|
|
|
|
23 |
|
|
|
|
|
|
25 |
|
|
|
|
|
|
25 |
|
|
|
|
|
|
26 |
|
|
|
|
|
|
26 |
|
|
|
|
|
|
27 |
|
|
|
|
|
|
27 |
|
|
|
|
|
|
28 |
|
|
|
|
|
|
29 |
|
|
|
|
|
|
29 |
|
|
|
|
|
|
29 |
|
|
|
|
|
|
30 |
|
|
|
|
|
|
30 |
|
|
|
|
|
|
31 |
|
|
|
|
|
|
31 |
|
|
|
|
|
|
31 |
|
|
|
|
|
|
32 |
|
|
|
|
|
|
35 |
|
-i-
Impact Shares MSCI
Global Climate Select ETF
FUND
SUMMARY
Investment
Objective
The
Impact Shares MSCI Global Climate Select ETF (the “Fund”) seeks investment
results that, before fees and expenses, track the performance of the MSCI ACWI
Climate Pathway Select Index (the “Underlying
Index”).
Fees
and Expenses
The
following tables describe the fees and expenses that you may pay if you buy,
hold and sell shares of the Fund. You may pay other fees, such as brokerage
commissions and other fees to financial intermediaries, which are not reflected
in the tables and examples below.
Annual Fund Operating Expenses (expenses that
you pay each year as a percentage of the value of your
investment)
|
|
|
|
|
Management
Fee |
|
|
0.30 |
% |
Distribution
and Service (12b‑1) Fees |
|
|
0.00 |
% |
Other
Expenses(1) |
|
|
0.32 |
% |
Total
Annual Fund Operating Expenses |
|
|
0.62 |
% |
Waivers
and Reimbursements(2) |
|
|
(0.32 |
)% |
Total
Annual Operating Expenses after Waivers and Reimbursements |
|
|
0.30 |
% |
(1) |
“Other Expenses” are based
on estimated amounts for the current fiscal
year. |
(2) |
Impact
Shares, Corp. (“Impact Shares” or the “Adviser”) has contractually agreed
to limit the total annual operating expenses (exclusive of fees paid by
the Fund pursuant to its distribution plan under Rule 12b-1 under the
Investment Company Act of 1940, as amended, taxes, brokerage commissions
and other transaction costs, interest payments, acquired fund fees and
expenses, extraordinary expenses and dividend expenses on short sales) of
the Fund to 0.30% through at least November 1,
2022. This contract may not be terminated without the
action or consent of the Fund’s Board of
Trustees. |
Expense
Example
This
Example helps you compare the cost of investing in the Fund to the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then sell or redeem all 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. Your
actual costs may be higher or lower. Investors in the Fund may pay brokerage
commissions on their purchases and sales of Fund shares, which are not included
in the examples below. The Example reflects expense limitation agreements and/or
waivers, if any, in effect for the one-year period and the first year of the
three-year period. Your actual costs may be higher or lower.
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 Fund
shares are held in a taxable account. Since the Fund had not commenced
operations as of the date of this Prospectus, no annual portfolio turnover rate
information is available.
1
Principal
Investment Strategies
The
Fund will, under normal circumstances, invest at least 80% of its total assets
plus any borrowings for investment purposes (the “80% basket”) in equity
securities that are component securities of the Underlying Index (“Component
Securities”). The Fund may invest the remaining 20% of its total assets (the
“20% basket”) in securities and instruments not included in the Underlying
Index, but which the Adviser believes will help the Fund track the Underlying
Index. For example, the Fund may invest in securities that are not components of
the Underlying Index to reflect various corporate actions (such as mergers) and
other actual or expected changes in the Underlying Index (such as
reconstitutions, additions and deletions). The Fund may invest in any country,
including the United States, other developed countries and emerging market
countries.
The
Fund may invest in securities of any type (including equity and debt securities)
and of companies of any market capitalization (including small-, mid‑ and
large-capitalization companies), market sector or
industry.
The
Fund may use the 20% basket to invest in securities issued by other investment
companies, including other exchange-traded funds. The Fund also may invest in
warrants and may also use derivatives, primarily swaps (including equity,
variance and volatility swaps), options and futures contracts on securities,
interest rates and/or currencies, within the 20% basket to help track the
Underlying Index and as substitutes for direct investments. The Fund may also
use derivatives such as swaps, options (including options on futures), futures,
and foreign currency transactions (e.g., foreign currency swaps, futures and
forwards) within the 20% basket to hedge various investments for risk management
and speculative purposes. In addition, the Fund’s 20% basket may be invested in
cash and cash equivalents.
Unlike
many investment companies, the Fund does not try to “beat” the index it tracks.
The Fund uses a passive management strategy designed to track the total return
performance of the Underlying
Index.
The
Adviser may use a representative sampling indexing strategy to manage the Fund.
“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. The securities selected are expected to have,
in the aggregate, investment characteristics (based on factors such as market
capitalization and industry weightings), fundamental characteristics (such as
return variability, leverage and price to earnings ratios) and liquidity
measures similar to those of the Underlying Index. The Fund may or may not hold
all of the securities in the Underlying Index. “Tracking error” is the
difference between the performance (return) of the Fund’s portfolio and that of
the Underlying Index. The Adviser expects that, over time, the Fund’s tracking
error will not exceed 5%. Funds that employ a representative sampling strategy
may incur tracking error risk to a greater extent than funds that seek to
replicate an index.
The
Fund concentrates its investments in a particular industry or group of
industries to approximately the same extent as the Underlying Index is so
concentrated.
The
Fund is a non‑diversified fund as defined in the Investment Company Act of 1940,
as amended (the “1940 Act”), but intends to adhere to the diversification
requirements applicable to regulated investment companies (“RICs”) under
Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). The
Fund is not intended to be a complete investment
program.
The
Underlying Index is designed to provide exposure to companies across developed
and emerging market countries that the Index Provider believes can potentially
benefit from the transition to a lower-carbon economy or are setting or have
committed to credible emission reduction targets and have a track record of
decarbonizing.
The
Underlying Index is constructed using a rules-based methodology to select
companies with specific characteristics (described below) from the MSCI ACWI
Index (the “Parent Index”). The Parent Index is a free-float
market-capitalization weighted index composed of large- and mid‑capitalization
securities of publicly-traded
2
companies
covering approximately 85% of the global investable equity opportunity across 23
developed market and 27 emerging market countries. To be eligible for inclusion
in the Parent Index, companies must meet specific requirements including size
and liquidity criteria.
MSCI,
Inc. (“MSCI” or the “Index Provider”) constructs the Underlying Index using
company ratings and research provided by MSCI ESG Research LLC (“MSCI ESG
Research”). In particular, the Index Provider uses MSCI ESG Research’s ESG
Controversies Scores, ESG Ratings, ESG Business Involvement Screening Research
and Climate Change Metrics to construct the Underlying
Index.
The
following is a summary of the methodology used in constructing the Underlying
Index, more detailed information about the methodology can be found at the Index
Provider’s website at www.msci.com (the contents of which
are not incorporated by reference in this
prospectus).
The
Underlying Index excludes companies from the Parent Index that either
(i) have an MSCI ESG Rating below BB, (ii) fail to comply with the
United Nations Global Compact Principles (iii) are involved in certain
controversial businesses, or (iv) are involved in severe environmental or
very severe environmental, social or governance
controversies.
After
screening, the Underlying Index is optimized to meet certain climate objectives
when selecting final index constituents and weights, including
(i) maximizing the overall low carbon transition score, (ii) lowering
the weighted average carbon intensity, (iii) increasing the weight of index
constituents with creditable emission reduction targets, and (iv) improving
the ESG score of the Underlying Index relative to the Parent Index. Additional
constraints and diversification objectives are set to maintain replicability and
investibility characteristics similar to the Parent Index while restricting the
number of index constituents to 400.
As
of September 30, 2021, the Underlying Index was comprised of 275 index
constituents with market capitalizations ranging from $254.9 million to $2,361.3
billion. The components of the Underlying Index are likely to change over time.
The Underlying Index is re‑constituted semi-annually to coincide with the MSCI
Semi-Annual Index Reviews of the Parent Index in May and November. In between
reviews, any security removed from the Parent Index will be simultaneously
removed from the Underlying
Index.
Charitable
Contribution to United Nations Capital Development
Fund
The
Adviser is a tax‑exempt organization under Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended (the “Code”). The Adviser intends to
make charitable contributions to the United Nations Capital Development Fund
(“UNCDF”) equal to the excess, if any, of the Adviser’s fees with respect to the
Fund over the Adviser’s operating expenses and a reserve for working capital.
The UNCDF, in its sole discretion, may use any portion of the Adviser’s
charitable contributions made directly to the UNCDF to support its own programs
or may make its own donations to identified charitable organizations that
support the UNCDF’s mission.
Principal
Risks
When you sell Fund shares, they may be worth less than
what you paid for them. Consequently, you can lose money by investing in the
Fund. No assurance can be given that the Fund will achieve its
objective, and investment results may vary substantially over time and from
period to period. An investment in the Fund is not appropriate for all
investors. An investment in the Fund involves risks, including, foreign
securities risk, emerging markets risk, equity investing risk and index
performance risk, among others. Descriptions of these and other principal risks
of investing in the Fund are provided below.
Asset Class Risk. Securities in the Underlying Index
or in the Fund’s portfolio may underperform in comparison to the general
securities markets or other asset classes.
3
Brexit. In June 2016, the United Kingdom
approved a referendum to leave the European Union (commonly known as “Brexit”).
On January 31, 2020, the United Kingdom left the European Union and during
a transition period that ended on December 31, 2020 negotiated an agreement
that governs the terms of the ongoing relationship between United Kingdom and
the European Union. At present the long term political and economic consequences
of Brexit are uncertain. Given the size and importance of the United Kingdom’s
economy, uncertainty about its legal, political, and economic relationship with
the remaining member states of the European Union may continue to be a source of
instability. Moreover, other countries may seek to withdraw from the European
Union and/or abandon the euro, the common currency of the European Union. The
ultimate effects of these events and other socio-political or geopolitical
issues are not known but could profoundly affect global economies and markets.
Whether or not the Fund invests in securities of issuers located in Europe or
with significant exposure to European issuers or countries, these events could
negatively affect the value and liquidity of the Fund’s
investments.
Derivatives Risk. Derivatives Risk is a
combination of several risks, including the risks that: (1) an investment
in a derivative instrument may not correlate well with the performance of the
securities or asset class to which the Fund seeks exposure, (2) derivative
contracts, including options, may expire worthless and the use of derivatives
may result in losses to the Fund, (3) a derivative instrument entailing
leverage may result in a loss greater than the principal amount invested,
(4) derivatives not traded on an exchange may be subject to credit risk,
for example, if the counterparty does not meet its obligations (see also
“Counterparty Risk”), and (5) derivatives not traded on an exchange may be
subject to liquidity risk and the related risk that the instrument is difficult
or impossible to value accurately. As a general matter, when the Fund
establishes certain derivative instrument positions, such as certain futures and
options contract positions, it will segregate liquid assets (such as cash, U.S.
Treasury bonds or commercial paper) equivalent to the Fund’s outstanding
obligations under the contract or in connection with the position. The U.S.
government has enacted legislation that provides for new regulation of the
derivatives market, including clearing, margin, reporting, and registration
requirements. The European Union and countries outside of the European Union
have implemented similar requirements that affect the Fund when it enters into a
derivatives transaction with a counterparty organized in that country or
otherwise subject to that country’s derivatives regulations. Because these
requirements are new and evolving (and some of the rules are not yet final),
their ultimate impact remains unclear. Central clearing is expected to reduce
counterparty risk and increase liquidity, however, there is no assurance that it
will achieve that result, and in the meantime, central clearing and related
requirements expose the Fund to new kinds of costs and
risks.
Derivatives Risk – Futures Contracts Risk. A
futures contract is an exchange-traded derivative transaction between two
parties in which a buyer (holding the “long” position) agrees to pay a fixed
price (or rate) at a specified future date for delivery of an underlying
reference from a seller (holding the “short” position). The seller hopes that
the market price on the delivery date is less than the agreed upon price, while
the buyer hopes for the contrary. Certain futures contract markets are highly
volatile, and futures contracts may be illiquid. Futures exchanges may limit
fluctuations in futures contract prices by imposing a maximum permissible daily
price movement. The Fund may be disadvantaged if it is prohibited from executing
a trade outside the daily permissible price movement. At or prior to maturity of
a futures contract, the Fund may enter into an offsetting contract and may incur
a loss to the extent there has been adverse movement in futures contract prices.
The liquidity of the futures markets depends on participants entering into
offsetting transactions rather than making or taking delivery. To the extent
participants make or take delivery, liquidity in the futures market could be
reduced. Because of the low margin deposits normally required in futures
trading, it is possible that the Fund may employ a high degree of leverage in
the portfolio. As a result, a relatively small price movement in a futures
contract may result in substantial losses to the Fund, exceeding the amount of
the margin paid. For certain types of futures contracts, losses are potentially
unlimited. Futures markets are highly volatile and the use of futures may
increase the volatility of the Fund’s NAV. Futures contracts executed (if any)
on foreign exchanges may not provide the same protection as U.S. exchanges.
Futures contracts can increase the Fund’s risk exposure to underlying references
and their attendant risks.
4
Derivatives Risk – Options Risk. Options are
derivatives that give the purchaser the option to buy (call) or sell (put)an
underlying reference from or to a counterparty at a specified price (the strike
price) on or before an expiration date. By investing in options, the Fund is
exposed to the risk that it may be required to buy or sell the underlying
reference at a disadvantageous price on or before the expiration date. Options
may involve economic leverage, which could result in greater volatility in price
movement. The Fund’s losses could be significant, and are potentially unlimited
for certain types of options. Options may be traded on a securities exchange or
in the over‑the‑counter market. At or prior to maturity of an options contract,
the Fund may enter into an offsetting contract and may incur a loss to the
extent there has been adverse movement in options prices. Options can increase
the Fund’s risk exposure to underlying references and their attendant
risks.
Emerging Markets Risk. Investing in issuers
located in or tied economically to emerging markets is subject to the same risks
as foreign market investments, generally to a greater extent. The Fund will be
subject to these risks to an even greater extent, to the extent the Fund invests
in issuers exposed to countries defined as “low income” or “lower middle income”
by the World Bank or as a “Least Developed Country” by the United Nations.
These countries typically confront severe structural impediments to sustainable
development and are highly vulnerable to economic and environmental shocks and
have low levels of human assets. Emerging markets may have additional risks
including greater fluctuations in market values and currency exchange rates;
increased risk of default; greater social, economic, and political uncertainty
and instability; increased risk of nationalization, expropriation, or other
confiscation of assets of issuers to which the Fund may be exposed; increased
risk of embargoes or economic sanctions on a country, sector, or issuer; greater
governmental involvement in the economy; less governmental supervision and
regulation of the securities markets and participants in those markets; controls
on non‑U.S. investment, capital controls and limitations on repatriation of
invested capital, dividends, interest, and other income, and on the Fund’s
ability to exchange local currencies for U.S. dollars; lower levels of
liquidity; inability to purchase and sell investments or otherwise settle
security or derivative transactions; greater risk of issues with share
registration and safe custody; unavailability of currency hedging techniques;
differences in, or lack of, auditing and financial reporting standards and
resulting unavailability of material information about issuers; slower clearance
and longer settlement; and difficulties in obtaining and/or enforcing legal
judgments. Additionally, a foreign issuer is not generally subject to uniform
accounting, auditing and financial reporting standards and practices comparable
to those in the United States. The Public Company Accounting Oversight Board,
which regulates auditors of U.S. public companies, is unable to inspect audit
work papers in certain foreign countries. Because the Index has exposure to
emerging markets, the risk of errors in index data, index computation and/or
index construction if information regarding emerging markets companies is
unreliable or outdated, or if less information about the non-U.S. companies is
publicly available due to differences in regulatory, accounting, auditing and
financial recordkeeping standards, is higher than the risk of such errors for
indexes consisting solely of U.S. companies. Such errors may have a negative
effect on the Fund’s performance. Investors in foreign countries often have
limited rights and few practical remedies to pursue shareholder claims,
including class actions or fraud claims, and the ability of the U.S. Securities
and Exchange Commission, the U.S. Department of Justice and other authorities to
bring and enforce actions against foreign issuers or foreign persons is limited.
Therefore, the rights and remedies indirectly available through a fund that
tracks an index comprised of foreign securities may be different than those
available indirectly through a fund that tracks an index of domestic
securities.
ESG Index Risk. The index provider uses
environmental, social and governance (ESG) related ratings and research to
construct the Index. These ESG related ratings and research may exclude
securities of certain companies from the Index for non-financial reasons and as
a result, the Fund may forgo market opportunities available to other index funds
that do not seek to track the performance of an ESG related index. In evaluating
a company, the index provider is often dependent upon information and data
obtained through voluntary or third-party reporting that, where available, may
be incomplete or inaccurate, which could cause the index provider to incorrectly
assess a company’s ESG risks and opportunities. In addition, there is a risk
that the companies included in the Index will not meet their climate
objectives.
5
Exchange-Traded Funds Risk. The price movement
of an exchange-traded fund may not exactly track the underlying index and may
result in a loss. In addition, shareholders bear both their proportionate share
of the Fund’s expenses and similar expenses of the underlying investment company
when the Fund invests in shares of another investment
company.
Equity Investing Risk. The market prices of
equity securities owned by the Fund may go up or down, sometimes rapidly or
unpredictably. The value of a security may decline for a number of reasons that
may directly relate to the issuer, such as management performance, financial
leverage, non‑compliance with regulatory requirements, and reduced demand for
the issuer’s goods or services and also may decline due to general industry or
market conditions that are not specifically related to a particular company,
such as real or perceived adverse economic conditions, changes in the general
outlook for corporate earnings, changes in interest or currency rates, or
adverse investor sentiment generally. In addition, equity markets tend to move
in cycles, which may cause stock prices to fall over short or extended periods
of time.
Fee Risk. Because the fees paid by the Fund to
Impact Shares are based on the average daily value of the total assets of the
Fund, less all accrued liabilities of the Fund (other than the amount of any
outstanding borrowings constituting financial leverage), Impact Shares has a
financial incentive to cause the Fund to utilize leverage, which creates a
conflict of interest between Impact Shares, on the one hand, and the
shareholders of the Fund, on the other
hand.
Futures Contracts Risk. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of an underlying asset at a price, date and time specified when
the contract is made. The Fund’s use of futures contracts, which are a type of
derivative, is subject to the risk of loss caused by unanticipated market
movements. In addition, there may at times be an imperfect correlation between
the movement in the prices of futures contracts and the value of their
underlying instruments or indexes and there may at times not be a liquid
secondary market for certain futures
contracts.
Foreign Securities Risk. Investments in
securities of non‑U.S. issuers involve certain risks not involved in domestic
investments (for example, fluctuations in foreign exchange rates (for non‑U.S.
securities not denominated in U.S. dollars); future foreign economic, financial,
political and social developments; nationalization; exploration or confiscatory
taxation; smaller markets; different trading and settlement practices; less
governmental supervision; and different accounting, auditing and financial
recordkeeping standards and requirements) that may result in the Fund
experiencing more rapid and extreme changes in value than the Fund that invests
exclusively in securities of U.S. companies. These risks are magnified for
investments in issuers tied economically to emerging markets, the economies of
which tend to be more volatile than the economies of developed markets. In
addition, investments by the Fund in non‑U.S. securities may be subject to
withholding and other taxes imposed by foreign countries on dividends, interest,
capital gains, or other income or proceeds. Those taxes will reduce the Fund’s
yield on any such securities.
Geographic Risk. To the extent the Fund’s
investments in a single country or a limited number of countries represent a
large percentage of the Fund’s assets, the Fund will be subject to the risk that
economic, political and social conditions in those countries will have a
significant impact on its investment performance and the Fund’s shares may be
subject to increased price volatility.
Index Performance Risk. The Fund seeks to track
an index maintained by a third-party provider unaffiliated with the Fund or the
Adviser. Therefore, the Adviser’s ability to oversee the index provider’s due
diligence process over index data prior to its use in index computation,
construction, and/or rebalancing, if any, will be limited. There can be no
guarantee or assurance that the methodology used by the third-party provider to
create the index will result in the Fund achieving high, or even positive,
returns. Further, there can be no guarantee that the methodology underlying the
index or the daily calculation of the index will be free from error. It is also
possible that the value of the index may be subject to intentional manipulation
by third-party market participants. The particular index used by the Fund may
underperform other asset classes and may underperform other similar indices.
Each of these factors could have a negative impact on the performance of the
Fund.
6
Industry Concentration Risk. Because the Fund
may invest 25% or more of the value of its assets in an industry or group of
industries to the extent that the Underlying Index concentrates in an industry
or group of industries, the Fund’s performance may depend to a large extent on
the overall condition of such industry or group of industries and the Fund may
be susceptible to economic, political and regulatory risks or other occurrences
associated with that industry or group of
industries.
Intellectual Property Risk. The Fund relies on
licenses that permit the Adviser to use the Underlying Index and associated
trade names, trademarks and service marks, as well as the UNCDF’s name and logo
(the “Intellectual Property”) in connection with the investment strategies of
the Fund and/or in marketing and other materials for the Fund. Such licenses may
be terminated, and, as a result, the Fund may lose its ability to use the
Intellectual Property. In the event a license is terminated or the license
provider does not have rights to license the Intellectual Property, the
operations of the Fund may be adversely
affected.
Limited Operating History Risk. The Fund has a
limited operating history for investors to evaluate as of the date of this
Prospectus. The Fund may not attract sufficient assets to achieve or maximize
investment and operational efficiencies and remain viable. If the Fund fails to
achieve sufficient scale, it may be
liquidated.
Management Risk. Management risk is the risk
associated with the fact that the Fund relies on the Adviser’s ability to
achieve its investment objective. The Adviser is a non‑profit organization with
limited personnel and financial resources. The relative lack of resources may
increase the Fund’s management
risk.
Market Price Variance Risk. Fund shares are
listed for trading on NYSE Arca, Inc. (the “Exchange”) and can be bought and
sold in the secondary market at prevailing market prices. The market prices of
shares will fluctuate in response to changes in the net asset value (“NAV”) and
supply and demand for shares. As a result, the trading prices of shares may
deviate significantly from NAV during periods of market volatility. The Adviser
cannot predict whether shares will trade above, below or at their NAV. Given the
fact that shares can be created and redeemed in Creation Units, the Adviser
believes that large discounts or premiums to the NAV of shares should not be
sustained in the long-term. In addition, the securities held by the Fund may be
traded in markets that close at a different time than the Exchange. Liquidity in
those securities may be reduced after the applicable closing times. Accordingly,
during the time when the Exchange is open but after the applicable market
closing, fixing or settlement times, bid‑ask spreads and the resulting premium
or discount to the Shares’ NAV may widen. Further, secondary markets may be
subject to irregular trading activity, wide bid/ask spreads and extended trade
settlement periods, which could cause a material decline in the Fund’s NAV. In
times of market stress, market makers and authorized participants may step away
from their respective roles in making a market in Fund shares or in executing
purchase and redemption orders, which could lead to variances between the market
price of Fund shares and the underlying value of those shares. Also, in stressed
market conditions, the market for Fund shares may become less liquid in response
to deteriorating liquidity of the Fund’s portfolio holdings, which could lead to
differences between the market price of the Fund’s shares and the underlying
value of those shares. During periods of high market volatility, the Fund share
may trade at a significant discount to its NAV, and in these circumstances
certain types of brokerage orders may expose an investor to an increased risk of
loss. A “stop order,” sometimes called a “stop-loss order,” may cause the Fund
share to be sold at the next prevailing market price once the “stop” level is
reached, which during a period of high volatility can be at a price that is
substantially below NAV. By including a “limit” criterion with your brokerage
order, you may be able to limit the size of the loss resulting from the
execution of an ill‑timed stop order. The Fund’s shares may be listed or traded
on U.S. and non‑U.S. stock exchanges other than the U.S. stock exchange where
the Fund’s primary listing is maintained and may otherwise be made available to
non‑U.S. investors through funds or structured investment vehicles similar to
depositary receipts. There can be no assurance that the Fund’s shares will
continue to trade on any such stock exchange or in any market or that the Fund’s
shares will continue to meet the requirements for listing or trading on any
exchange or in any market. The Fund’s shares may be less actively traded in
certain markets than in 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
7
who
trade Fund shares on a U.S. stock 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.
The
Fund’s investment results are measured based upon the daily NAV of the Fund.
Investors purchasing and selling shares in the secondary market may not
experience investment results consistent with those experienced by those
purchasing and redeeming directly with the
Fund.
Mid‑Cap Company Risk. Investing in securities
of mid‑cap companies may entail greater risks than investments in larger, more
established companies. Mid‑cap companies tend to have more narrow product lines,
more limited financial resources and a more limited trading market for their
stocks, as compared with larger companies. As a result, their stock prices may
decline significantly as market conditions
change.
Non‑Diversification Risk. As a non‑diversified
fund for purposes of the 1940 Act, the Fund may invest a larger portion of its
assets in the securities of fewer issuers than a diversified fund. The Fund’s
investment in fewer issuers may result in the Fund’s shares being more sensitive
to the economic results of those issuers. An investment in the Fund could
fluctuate in value more than an investment in a diversified fund. Although the
Fund is “non‑diversified” for purposes of the 1940 Act, the Fund intends to
comply with the diversification requirements under Subchapter M of the Code in
order to be eligible to qualify as a regulated investment
company.
Operational and Technology Risk. Cyber-attacks,
disruptions, or failures that affect the Fund’s service providers, index
providers, Authorized Participants (as defined below), market makers,
counterparties, market participants, or issuers of securities held by the Fund
may adversely affect the Fund and its shareholders, including by causing losses
for the Fund or impairing Fund
operations.
Options Risk. Options, such as covered calls
and covered puts, are subject to the risk that significant differences between
the securities and options markets that could result in an imperfect correlation
between these markets.
Passive Investment Risk. The Fund is not
actively managed and invests in securities included in, or representative of,
the Underlying Index regardless of such securities’ investment merits. The
Adviser does not attempt to take defensive positions under any market
conditions, including during declining
markets.
Securities Market Risk. Securities market risk
is the risk that the value of securities owned by a Fund may go up or down,
sometimes rapidly or unpredictably, due to factors affecting particular
companies or the securities markets generally. The profitability of a Fund
substantially depends upon the Adviser correctly assessing the future price
movements of stocks, bonds, loans, options on stocks, and other securities and
the movements of interest rates. The Adviser cannot guarantee that it will be
successful in accurately predicting price movements. The market prices of
equities may decline for reasons that directly relate to the issuing company
(such as poor management performance or reduced demand for its goods or
services), factors that affect a particular industry (such as a decline in
demand, labor or raw material shortages, or increased production costs) or
general market conditions not specifically related to a company or industry
(such as real or perceived adverse economic conditions, changes in the general
outlook for corporate earnings, changes in interest or currency rates, or
adverse investor sentiment generally, or natural and environmental disasters and
systemic market dislocations). The spread of infectious disease including
epidemics and pandemics such as the recent COVID‑19 outbreak, the novel
respiratory disease also known as “coronavirus,” also could affect the economies
of many nations in ways that cannot necessarily be foreseen. The coronavirus has
resulted in travel restrictions and disruptions, closed borders, enhanced health
screenings at ports of entry and elsewhere, disruption of and delays in
healthcare service preparation and delivery, quarantines, event cancellations
and restrictions, service cancellations or reductions, disruptions to business
operations, supply chains and customer activity, lower consumer demand for goods
and services, as well as general concern and uncertainty that has negatively
affected the economic environment. The impact of this outbreak and any other
epidemic or pandemic that may arise in the
8
future
could adversely affect the economies of many nations or the entire global
economy, the financial performance of individual issuers, borrowers and sectors
and the health of capital markets and other markets generally in potentially
significant and unforeseen ways. This crisis or other public health crises may
also exacerbate other pre‑existing political, social and economic risks in
certain countries or globally. The duration of the COVID‑19 outbreak and its
effects cannot be determined with certainty. The foregoing could lead to a
significant economic downturn or recession, increased market volatility, a
greater number of market closures, higher default rates and adverse effects on
the values and liquidity of securities or other assets. Such impacts, which may
vary across asset classes, may adversely affect the performance of the
Fund’s investments, the Fund and your investment in the
Fund.
In
addition, the increasing popularity of passive index-based investing may have
the potential to increase security price correlations and volatility. As passive
strategies generally buy or sell securities based simply on inclusion and
representation in an index, securities prices will have an increasing tendency
to rise or fall based on whether money is flowing into or out of passive
strategies rather than based on an analysis of the prospects and valuation of
individual securities. This may result in increased market volatility as more
money is invested through passive strategies. As a result of the nature of a
Fund’s investment activities, it is possible that such Fund’s financial
performance may fluctuate substantially from period to period. Additionally, at
any point in time an investment in a Fund may be worth less than the original
investment, even after taking into account the reinvestment of dividends and
distributions.
Small‑Cap Company Risk. Investing in the
securities of small‑cap companies either directly or indirectly through
investments in ETFs, closed‑end funds or mutual funds may pose greater market
and liquidity risks than larger, more established companies, because of limited
product lines and/or operating history, limited financial resources, limited
trading markets, and the potential lack of management depth. In addition, the
securities of such companies are typically more volatile than securities of
larger capitalization companies.
Swaps Risk. Investments in swaps involve both
the risks associated with an investment in the underlying investments or
instruments (including equity investments) and counterparty risk. In a standard
over‑the‑counter (“OTC”) swap transaction, two parties agree to exchange the
returns, differentials in rates of return or some other amount calculated based
on the “notional amount” of predetermined investments or instruments, which may
be adjusted for an interest factor. Swaps can involve greater risks than direct
investments in securities, because swaps may be leveraged and OTC swaps are
subject to counterparty risk (e.g., the risk of a counterparty’s defaulting on
the obligation or bankruptcy), credit risk and pricing risk (i.e., swaps may be
difficult to value). Swaps may also be considered illiquid. Certain swap
transactions, including interest rate swaps and index credit default swaps, may
be subject to mandatory clearing and exchange trading, although the swaps in
which the Fund will invest are not currently subject to mandatory clearing and
exchange trading. The use of swaps is a highly specialized activity that
involves investment techniques, risk analyses and tax planning different from
those associated with ordinary portfolio securities transactions. The value of
swaps, like many other derivatives, may move in unexpected ways and may result
in losses for the Fund.
Tracking Error Risk. The performance of the
Fund may diverge from that of the Underlying Index. Because the Fund employs a
representative sampling strategy, the Fund may experience tracking error to a
greater extent than a fund that seeks to replicate an index. The Adviser may not
be able to cause the Fund’s performance to correlate to that of the Fund’s
benchmark, either on a daily or aggregate basis. Because the Underlying Index
rebalances monthly, but the Fund is not obligated to do the same, the risk of
tracking error may increase following the rebalancing of the Underlying
Index.
An investment in the Fund is not a
bank deposit and is not insured or guaranteed by the FDIC or any other
government agency. As with any investment company, there is no
guarantee that the Fund will achieve its goal.
9
Performance
Because the Fund had not commenced operations
as of the calendar year ended December 31, 2020, there is no annual
performance information included. When available, updated
performance information may be obtained by calling 844‑448‑3383 (844-
GIVE‑ETF). or visiting the Fund’s website: https://www.impactshares.org.
Keep in mind that past
performance does not indicate future
results.
Portfolio
Management
Impact
Shares, Corp. serves as the investment adviser to the Fund. The portfolio
manager primarily responsible for the day-to-day management of the Fund is Ethan
Powell
|
|
|
|
|
Portfolio
Manager |
|
Managed
the Fund Since |
|
Title
with Adviser |
Ethan Powell |
|
Inception |
|
President |
Purchase
and Sale of Fund Shares
The
Fund is an exchange-traded fund. The Fund issues and redeems shares only to
authorized participants who have entered into agreements with the Fund’s
distributor (“Authorized Participants”) in exchange for the deposit or delivery
of a basket of assets (securities and/or cash) in large blocks, known as
creation units, each of which comprises 50,000 shares or such other amount as
may be changed from time to time in the future if determined to be in the best
interests of a Fund by the President of the Fund (“Creation Units”). Retail
investors may only purchase and sell shares on a national securities exchange
through a broker-dealer. 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).
Important
Additional Information
Tax
Information
The
Fund intends to make distributions that generally will be taxable to you as
ordinary income or capital gains, unless you are a tax‑exempt investor or
otherwise investing in the Fund through a tax‑advantaged arrangement, such as a
401(k) plan or an individual retirement account. If you are investing in the
Fund through a tax‑advantaged arrangement, you may be taxed later upon
withdrawals from that account.
Payments
to Broker-Dealers and Other Financial Intermediaries
If
you purchase shares of the Fund through a broker-dealer or other financial
intermediary (such as a bank), the Fund and its related companies may pay the
intermediary for the sale of Fund shares and related services. These payments
may create a conflict of interest by influencing the broker-dealer or other
intermediary and your salesperson to recommend the Fund over another investment.
Ask your salesperson or visit your financial intermediary’s website for more
information.
DESCRIPTION
OF UNDERLYING INDEX
Information
about the Fund’s Underlying Index construction is set forth below.
The MSCI ACWI Climate
Pathway Select Index (for purposes of this section, the “Underlying Index”)
The Underlying Index is constructed using a rules-based
methodology to select companies with specific characteristics (described below)
from the MSCI ACWI Index (the “Parent Index”). The Parent Index is a free-float
market-capitalization weighted index composed of large- and mid‑capitalization
securities of publicly-traded companies covering approximately 85% of the global
investable equity opportunity across 23 developed market and 27 emerging market
countries. To be eligible for inclusion in the Parent Index, companies must meet
specific requirements including size and liquidity criteria.
10
MSCI,
Inc. (“MSCI” or the “Index Provider”) constructs the Underlying Index using
company ratings and research provided by MSCI ESG Research LLC (“MSCI ESG
Research”). In particular, the Index Provider uses MSCI ESG Research’s ESG
Controversies Scores, ESG Ratings, ESG Business Involvement Screening Research
and Climate Change Metrics to construct the Underlying Index.
The
Underlying Index is constructed in the following steps:
Step
1: ESG Controversies Screen – The Underlying Index uses MSCI ESG Research ESG
Controversies Scores to identify companies that are involved in very serious
controversies involving the environmental, social, or governance impact of their
operations and/or products and services. Those companies with significant
controversies have a lower ESG Controversies Score than companies without any
identified controversies. Companies involved in environmental, social, and
governance controversies that are assessed by MSCI ESG Research as “very severe”
are not eligible for inclusion in the Underlying Index. Additionally, the
Underlying Index excludes companies involved in ongoing environmental
controversies assessed by MSCI ESG Research as “severe” and structural (i.e.,
indicative of underlying problems in the company). Additionally, companies
involved in ongoing, structural severe controversies as it relates to the
environmental impact of their operations and/or products and services are not
eligible for inclusion in the Underlying Index. Companies not assessed by MSCI
ESG Research’s ESG Controversy Scores are excluded from the Underlying
Index.
In
addition to the above, companies that fail to comply with the principles of the
United Nations Global Compact1 are also excluded from the
Underlying Index.
Step
2: ESG Ratings Screen – The Underlying Index uses MSCI ESG Research ESG Ratings
to identify companies that have demonstrated an ability to manage their ESG
risks and opportunities. Companies are required to have an MSCI ESG Rating of BB
or above to be eligible for inclusion in the Underlying Index. Companies that do
not have an ESG Rating by MSCI ESG Research are excluded from the Underlying
Index.
Step
3: Controversial Business Screen—The Underlying Index uses MSCI ESG Research ESG
Business Involvement Screening Research to identify companies that are
significantly involved in the following business activities. Such companies are
not eligible for inclusion in the Underlying Index:
|
• |
|
Controversial,
Nuclear, and Conventional Weapons |
Step
4: The Underlying Index selects and weights index constituents by following an
optimization process. The optimization process aims to select and weight stocks
in the Underlying Index so that the Low Carbon Transition Score (LCT) of the
index (the weighted average LCT of index constituents) is maximized. The LCT is
a combination of each index constituent’s current climate risk exposure and its
efforts to manage the risks and opportunities presented by the low carbon
transition as determined by the Index Provider.
1 |
The
UN Global Compact is an arrangement by which companies voluntarily and
publicly commit to a set of principles, known as the Ten Principles of the
UN Global Compact, all of which are drawn from key UN Conventions and
Declarations, in four areas: (i) human rights; (ii) labor; (iii)
environment; and (iv) anti-corruption. |
11
The
Underlying Index must also satisfy the following conditions:
|
• |
|
At
least 30% lower Weighted Average Carbon Intensity relative to the Parent
Index. Weighted Average Carbon Intensity indicates a portfolio’s exposure
to potential climate change-related risks relative to other portfolios or
a benchmark, such as the Parent Index. |
|
• |
|
At
least 7% year over year reduction in Weighted Average Carbon Intensity of
the Underlying Index. |
|
• |
|
At
least 25% improvement in the ESG Score of the Underlying Index (weighted
average ESG Score (as determined by MSCI ESG Research) of index
constituents) relative to the Parent Index. |
|
• |
|
At
least double the aggregate weight of all index constituents with credible
emission reduction targets relative to the Parent
Index. |
|
• |
|
Additionally,
the Underlying Index imposes additional constraints and diversification
objectives to maintain replicability and investability characteristics
similar to the Parent Index while restricting the number of index
constituents to 400. |
As
of September 30, 2021, the Underlying Index was comprised of 275 index
constituents with market capitalizations ranging from $254.9 million to $2,361.3
billion. The components of the Underlying Index are likely to change over time.
The Underlying Index is re‑constituted semi-annually to coincide with the MSCI
Semi-Annual Index Reviews of the Parent Index in May and November. In between
reviews, any security removed from the Parent Index will be simultaneously
removed from the Underlying Index.
DESCRIPTION
OF PRINCIPAL INVESTMENTS
The
following is a description of principal investment practices in which the Fund
may engage. Any references to investments made by the Fund include those that
may be made both directly by the Fund and indirectly by the Fund (e.g., through
its investments in derivatives or other pooled investment vehicles). Please see
“Principal Risks” below for the risks associated with each of the principal
investment practices.
Please
see the “Principal Investment Strategies” section under “Fund Summary” above for
a complete discussion of the Fund’s principal investment strategies. The Fund
may invest in various types of securities and engage in various investment
techniques which are not the principal focus of the Fund and therefore are not
described in this Prospectus. These securities, techniques and practices,
together with their risks, are described in the Statement of Additional
Information (the “SAI”), which you may obtain free of charge by contacting
shareholder services (see the back cover of this Prospectus for the address and
phone number). The Adviser seeks to track the performance of the Fund’s
Underlying Index as closely as possible (i.e., obtain a high degree of
correlation with the Underlying Index). A number of factors may affect the
Fund’s ability to achieve a high degree of correlation with its Underlying
Index, and there can be no guarantee that the Fund will achieve a high degree of
correlation with its Index. The Adviser will utilize a sampling strategy in
managing the Fund. Sampling means that the Adviser uses quantitative analysis to
select securities, including securities in each Underlying Index, outside of
each Underlying Index and derivatives that have a similar investment profile as
each Underlying Index in terms of key risk factors, performance attributes and
other economic characteristics. These include industry weightings, market
capitalization, and other financial characteristics of securities. The quantity
of holdings in the Fund will be based on a number of factors, including asset
size of the Fund. In addition, from time to time, securities are added to or
removed from each Underlying Index. The Adviser may sell securities that are
represented in an Index, or purchase securities that are not yet represented in
each Underlying Index, in anticipation of their removal from or addition to an
Index. Further, the Adviser may choose to overweight securities in each
Underlying Index, purchase or sell securities not in an Index, or utilize
various combinations of other available techniques, in seeking to track each
Underlying Index. The Board of Trustees of the Trust (the “Board”) may change
the Fund’s investment strategy, Underlying Index and other policies without
shareholder approval, except as otherwise indicated in this Prospectus or in the
SAI. The Board may also change the Fund’s investment objective without
shareholder approval.
12
NON‑PRINCIPAL
STRATEGIES
Additional Information. The foregoing
percentage limitations in the Fund’s investment strategies apply at the time of
purchase of securities. The Board may change any of the foregoing investment
policies, including the investment objective, the Underlying Index and the 80%
investment policy, without shareholder approval. The Fund will provide
shareholders with written notice at least 60 days prior to committing less than
80% of its total assets, plus any borrowings for investment purposes, under
normal circumstances, in component securities of the Fund’s Underlying Index.
For example, if the Fund’s Underlying Index is discontinued by its Index
Provider, the license agreement for the Underlying Index is terminated by the
Index Provider or the Board determines that it would not be beneficial to
shareholders for the Fund to continue operations using the Underlying Index, the
Board may change the Underlying Index as described in the “Investment
Restrictions” section of the Fund’s SAI.
If
the Fund’s shares are delisted, the Board may seek to list its shares on another
exchange, merge with another ETF or traditional mutual fund or redeem its shares
at NAV.
Borrowing Money. The Fund may borrow money from
a bank as permitted by the Investment Company Act of 1940, as amended (“1940
Act”), or other governing statute, by the Rules thereunder, or by the U.S.
Securities and Exchange Commission (“SEC”) or other regulatory agency with
authority over the Fund, but only for temporary or emergency purposes. The Fund
may also invest in reverse repurchase agreements, which are considered
borrowings under the 1940 Act. Although the 1940 Act presently allows the Fund
to borrow from any bank (including pledging, mortgaging or hypothecating assets)
in an amount up to 33 1/3% of its total assets (not including temporary
borrowings not in excess of 5% of its total assets), and there is no percentage
limit on Fund assets that can be used in connection with reverse repurchase
agreements, under normal circumstances any borrowings by the Fund will not
exceed 10% of the Fund’s total assets.
Certain Other Investments. The Fund may invest
in structured notes (notes on which the amount of principal repayment and
interest payments are based on the movement of one or more specified factors
such as the movement of a particular security or index), swaps, options and
futures contracts. Swaps, options and futures contracts and structured notes may
be used by the Fund in seeking performance that corresponds to its Index and in
managing cash flows.
Lending of Securities. The Fund may lend its
portfolio securities in an amount not to exceed one‑quarter (25%) of the value
of its total assets via a securities lending program through its securities
lending agent (“Lending Agent”), to brokers, dealers and other financial
institutions desiring to borrow securities to complete transactions and for
other purposes. A securities lending program allows the Fund to receive a
portion of the income generated by lending its securities and investing the
respective collateral. The Fund will receive collateral for each loaned security
which is at least equal to 102% of the market value of that security, marked to
market each trading day. In the securities lending program, the borrower
generally has the right to vote the loaned securities; however, the Fund may
call loans to vote proxies if a material issue affecting the Fund’s economic
interest in the investment is to be voted upon. Security loans may be terminated
at any time by the Fund.
DESCRIPTION
OF RISKS
Factors
that may affect the Fund’s portfolio as a whole are called “principal risks” and
are summarized in this section. This summary describes the nature of these
principal risks and certain related risks, but is not intended to include every
potential risk. An investment in the Fund involves risks, including, foreign
securities risk, emerging markets risk, equity investing risk and index
performance risk, among others. The Fund could be subject to additional risks
because the types of investments it makes may change over time. The SAI includes
more information about the Fund and it investments. The Fund is not intended to
be a complete investment program.
Asset Class Risk. The securities in an Underlying
Index or in the Fund’s portfolio may underperform the returns of other
securities or indices that track other countries, regions, industries, groups of
industries,
13
markets,
asset classes or sectors. Various types of securities or indices tend to
experience cycles of outperformance and underperformance in comparison to
general securities markets.
Brexit Risk. In June 2016, the United Kingdom
approved a referendum to leave the European Union (commonly known as “Brexit”).
On January 31, 2020, the United Kingdom left the European Union and during
a transition period that ended on December 31, 2020 negotiated an agreement
that governs the terms of the ongoing relationship between United Kingdom and
the European Union. At present the long term political and economic consequences
of Brexit are uncertain. Given the size and importance of the United Kingdom’s
economy, uncertainty about its legal, political, and economic relationship with
the remaining member states of the European Union may continue to be a source of
instability. Moreover, other countries may seek to withdraw from the European
Union and/or abandon the euro, the common currency of the European Union. The
ultimate effects of these events and other socio-political or geopolitical
issues are not known but could profoundly affect global economies and markets.
Whether or not the Fund invests in securities of issuers located in Europe or
with significant exposure to European issuers or countries, these events could
negatively affect the value and liquidity of the Fund’s investments.
Cash Transaction Risk. The Fund can effect
creations and redemptions principally for cash, rather than for in‑kind
securities. 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 Fund currently can effect redemptions for cash, rather than for in‑kind
securities, they may be required to sell portfolio securities in order to obtain
the cash needed to distribute redemption proceeds. The Fund may recognize a
capital gain on these sales that might not have been incurred if the Fund had
made a redemption in‑kind, and this may decrease the tax efficiency of the Fund
compared to ETFs that utilize an in‑kind redemption process.
Counterparty Risk. The Fund may engage in
transactions in securities and financial instruments that involve
counterparties. Counterparty risk is the risk that a counterparty (the other
party to a transaction or an agreement or the party with whom the Fund executes
transactions) to a transaction with the Fund may be unable or unwilling to make
timely principal, interest, settlement or margin payments, or otherwise honor
its obligations. If a counterparty becomes bankrupt or otherwise fails to
perform its obligations due to financial difficulties, the affected Fund’s
income or the value of its assets may decrease. The Fund may experience
significant delays in obtaining any recovery in a bankruptcy or other
reorganization proceeding and the Fund may obtain only limited recovery or may
obtain no recovery in such circumstances. In an attempt to limit the
counterparty risk associated with such transactions, the Fund conducts business
only with financial institutions judged by the Adviser to present acceptable
credit risk.
Derivatives Risk. Derivatives Risk is a
combination of several risks, including the risks that: (1) an investment
in a derivative instrument may not correlate well with the performance of the
securities or asset class to which the Fund seeks exposure, (2) derivative
contracts, including options, may expire worthless and the use of derivatives
may result in losses to the Fund, (3) a derivative instrument entailing
leverage may result in a loss greater than the principal amount invested,
(4) derivatives not traded on an exchange may be subject to credit risk,
for example, if the counterparty does not meet its obligations (see also
“Counterparty Risk”), and (5) derivatives not traded on an exchange may be
subject to liquidity risk and the related risk that the instrument is difficult
or impossible to value accurately. As a general matter, when the Fund
establishes certain derivative instrument positions, such as certain futures and
options contract positions, it will segregate liquid assets (such as cash, U.S.
Treasury bonds or commercial paper) equivalent to the Fund’s outstanding
obligations under the contract or in connection with the position. The U.S.
government has enacted legislation that provides for new regulation of the
derivatives market, including clearing, margin, reporting, and registration
requirements. The European Union and countries outside of the European Union
have implemented similar requirements that affect the Fund when it enters into a
derivatives transaction with a counterparty organized in that country or
otherwise subject to that country’s derivatives regulations. Because these
requirements are new and evolving (and some of the rules are not yet final),
their ultimate impact remains unclear. Central clearing is expected to reduce
counterparty risk and increase liquidity, however, there is no assurance that it
will achieve that result, and in the meantime, central clearing and related
requirements expose the Fund to new kinds of costs and risks.
14
Derivatives Risk – Futures Contracts Risk. A
futures contract is an exchange-traded derivative transaction between two
parties in which a buyer (holding the “long” position) agrees to pay a fixed
price (or rate) at a specified future date for delivery of an underlying
reference from a seller (holding the “short” position). The seller hopes that
the market price on the delivery date is less than the agreed upon price, while
the buyer hopes for the contrary. Certain futures contract markets are highly
volatile, and futures contracts may be illiquid. Futures exchanges may limit
fluctuations in futures contract prices by imposing a maximum permissible daily
price movement. The Fund may be disadvantaged if it is prohibited from executing
a trade outside the daily permissible price movement. At or prior to maturity of
a futures contract, the Fund may enter into an offsetting contract and may incur
a loss to the extent there has been adverse movement in futures contract prices.
The liquidity of the futures markets depends on participants entering into
offsetting transactions rather than making or taking delivery. To the extent
participants make or take delivery, liquidity in the futures market could be
reduced. Because of the low margin deposits normally required in futures
trading, it is possible that the Fund may employ a high degree of leverage in
the portfolio. As a result, a relatively small price movement in a futures
contract may result in substantial losses to the Fund, exceeding the amount of
the margin paid. For certain types of futures contracts, losses are potentially
unlimited. Futures markets are highly volatile and the use of futures may
increase the volatility of the Fund’s NAV. Futures contracts executed (if any)
on foreign exchanges may not provide the same protection as U.S. exchanges.
Futures contracts can increase the Fund’s risk exposure to underlying references
and their attendant risks.
Derivatives Risk – Options Risk. Options are
derivatives that give the purchaser the option to buy (call) or sell (put)an
underlying reference from or to a counterparty at a specified price (the strike
price) on or before an expiration date. By investing in options, the Fund is
exposed to the risk that it may be required to buy or sell the underlying
reference at a disadvantageous price on or before the expiration date. Options
may involve economic leverage, which could result in greater volatility in price
movement. The Fund’s losses could be significant, and are potentially unlimited
for certain types of options. Options may be traded on a securities exchange or
in the over‑the‑counter market. At or prior to maturity of an options contract,
the Fund may enter into an offsetting contract and may incur a loss to the
extent there has been adverse movement in options prices. Options can increase
the Fund’s risk exposure to underlying references and their attendant
risks.
Derivatives Risk – Swaps Risk. In a typical
swap transaction, two parties agree to exchange the return earned on a specified
underlying reference for a fixed return or the return from another underlying
reference during a specified period of time. Swaps may be difficult to value and
may be illiquid. Swaps could result in Fund losses if the underlying asset or
reference does not perform as anticipated. Swaps create significant investment
leverage such that a relatively small price movement in a swap may result in
immediate and substantial losses to the Fund. The Fund may only close out a swap
with its particular counterparty, and may only transfer a position with the
consent of that counterparty. Certain swaps, such as short swap transactions and
total return swaps, have the potential for unlimited losses, regardless of the
size of the initial investment. Swaps can increase the Fund’s risk exposure to
underlying references and their attendant risks.
Emerging Markets Risk. Investing in issuers
located in or tied economically to emerging markets is subject to the same risks
as foreign market investments, generally to a greater extent. The Fund will be
subject to these risks to an even greater extent, to the extent the Fund invests
in issuers exposed to countries defined as “low income” or “lower middle income”
by the World Bank or as a “Least Developed Country” by the United Nations. These
countries typically confront severe structural impediments to sustainable
development and are highly vulnerable to economic and environmental shocks and
have low levels of human assets. Emerging markets may have additional risks
including greater fluctuations in market values and currency exchange rates;
increased risk of default; greater social, economic, and political uncertainty
and instability; increased risk of nationalization, expropriation, or other
confiscation of assets of issuers to which the Fund may be exposed; increased
risk of embargoes or economic sanctions on a country, sector, or issuer; greater
governmental involvement in the economy; less governmental supervision and
regulation of the securities markets and participants in those markets; controls
on non‑U.S. investment, capital controls and limitations on repatriation of
invested capital, dividends, interest, and other income, and on the Fund’s
ability to exchange local currencies for
15
U.S.
dollars; lower levels of liquidity; inability to purchase and sell investments
or otherwise settle security or derivative transactions; greater risk of issues
with share registration and safe custody; unavailability of currency hedging
techniques; differences in, or lack of, auditing and financial reporting
standards and resulting unavailability of material information about issuers;
slower clearance and longer settlement; and difficulties in obtaining and/or
enforcing legal judgments. Additionally, a foreign issuer is not generally
subject to uniform accounting, auditing and financial reporting standards and
practices comparable to those in the United States. The Public Company
Accounting Oversight Board, which regulates auditors of U.S. public companies,
is unable to inspect audit work papers in certain foreign countries. Because the
Index has exposure to emerging markets, the risk of errors in index data, index
computation and/or index construction if information regarding emerging markets
companies is unreliable or outdated, or if less information about the non-U.S.
companies is publicly available due to differences in regulatory, accounting,
auditing and financial recordkeeping standards, is higher than the risk of such
errors for indexes consisting solely of U.S. companies. Such errors may have a
negative effect on the Fund’s performance. Investors in foreign countries often
have limited rights and few practical remedies to pursue shareholder claims,
including class actions or fraud claims, and the ability of the U.S. Securities
and Exchange Commission, the U.S. Department of Justice and other authorities to
bring and enforce actions against foreign issuers or foreign persons is limited.
Therefore, the rights and remedies indirectly available through a fund that
tracks an index comprised of foreign securities may be different than those
available indirectly through a fund that tracks an index of domestic
securities.
ESG Index Risk. The index provider uses
environmental, social and governance (ESG) related ratings and research to
construct the Index. These ESG related ratings and research may exclude
securities of certain companies from the Index for non-financial reasons and as
a result, the Fund may forgo market opportunities available to other index funds
that do not seek to track the performance of an ESG related index. In evaluating
a company, the index provider is often dependent upon information and data
obtained through voluntary or third-party reporting that, where available, may
be incomplete or inaccurate, which could cause the index provider to incorrectly
assess a company’s ESG risks and opportunities. In addition, there is a risk
that the companies included in the Index will not meet their climate
objectives.
Exchange-Traded Funds Risk. The value of ETFs
can be expected to increase and decrease in value in proportion to increases and
decreases in the indices that they are designed to track. The volatility of
different index tracking stocks can be expected to vary in proportion to the
volatility of the particular index they track. ETFs are traded similarly to
stocks of individual companies. Although an ETF is designed to provide
investment performance corresponding to its index, it may not be able to exactly
replicate the performance of its index because of its operating expenses and
other factors. An investment in an ETF generally presents the same primary risks
as an investment in a conventional fund (i.e., one that is not exchange-traded)
that has the same investment objective, strategies, and policies. The price of
an ETF can fluctuate within a wide range, and the Fund could lose money
investing in an ETF if the prices of the securities owned by the ETF go down. In
addition, ETFs are subject to the following risks that do not apply to
conventional funds: (1) the market price of the ETF’s shares may trade at a
discount or a premium to their net asset value; (2) an active trading
market for an ETF’s shares may not develop or be maintained; and
(3) trading of an ETF’s shares may be halted by the activation of
individual or market wide “circuit breakers” (which halt trading for a specific
period of time when the price of a particular security or overall market prices
decline by a specified percentage), if the shares are delisted from the Exchange
without first being listed on another exchange, or if the listing exchange’s
officials deem such action appropriate in the interest of a fair and orderly
market or to protect investors. In addition, shareholders bear both their
proportionate share of the Fund’s expenses and similar expenses of the
underlying investment company when the Fund invests in shares of another
investment company. Most ETFs are investment companies. Therefore, the Fund’s
purchases of ETF shares generally are subject to the limitations on, and the
risks of, the Fund’s investments in other investment companies.
Equity Investing Risk. The market prices of
equity securities owned by the Fund may go up or down, sometimes rapidly or
unpredictably. The value of a security may decline for a number of reasons that
may directly relate to the issuer, such as management performance, financial
leverage, non‑compliance with
16
regulatory
requirements, and reduced demand for the issuer’s goods or services. The values
of equity securities also may decline due to general industry or market
conditions that are not specifically related to a particular company, such as
real or perceived adverse economic conditions, changes in the general outlook
for corporate earnings, changes in interest or currency rates, or adverse
investor sentiment generally. In addition, equity markets tend to move in
cycles, which may cause stock prices to fall over short or extended periods of
time.
Fee Risk. Because the fees paid by the Fund to
Impact Shares are based on the average daily value of the total assets of the
Fund, less all accrued liabilities of the Fund (other than the amount of any
outstanding borrowings constituting financial leverage), Impact Shares has a
financial incentive to cause the Fund to utilize leverage, which creates a
conflict of interest between Impact Shares, on the one hand, and the
shareholders of the Fund, on the other hand.
Foreign Securities Risk. Investments in
securities of non‑U.S. issuers involve certain risks not involved in domestic
investments (for example, fluctuations in foreign exchange rates (for non‑U.S.
securities not denominated in U.S. dollars); future foreign economic, financial,
political and social developments; nationalization; exploration or confiscatory
taxation; smaller markets; different trading and settlement practices; less
governmental supervision; and different accounting, auditing and financial
recordkeeping standards and requirements) that may result in the Fund
experiencing more rapid and extreme changes in value than a fund that invests
exclusively in securities of U.S. companies. These risks are magnified for
investments in issuers tied economically to emerging markets, the economies of
which tend to be more volatile than the economies of developed markets. In
addition, investments by the Fund in non‑U.S. securities may be subject to
withholding and other taxes imposed by foreign countries on dividends, interest,
capital gains, or other income or proceeds. Those taxes will reduce the Fund’s
yield on any such securities.
Futures Contracts Risk. Futures contracts
provide for the future sale by one party and purchase by another party of a
specified amount of an underlying asset at a price, date and time specified when
the contract is made. Funds, such as the Fund, that use futures contracts, which
are a type of derivative, are subject to the risk of loss caused by
unanticipated market movements. In addition, there may at times be an imperfect
correlation between the movement in the prices of futures contracts and the
value of their underlying instruments or indexes and there may at times not be a
liquid secondary market for certain futures contracts.
Geographic Risk. To the extent the Fund’s
investments in a single country or a limited number of countries represent a
large percentage of the Fund’s assets, the Fund will be subject to the risk that
economic, political and social conditions in those countries will have a
significant impact on its investment performance and the Fund’s shares may be
subject to increased price volatility.
Illiquid Securities Risk. Illiquid investments
may be difficult to resell at approximately the price they are valued in the
ordinary course of business within seven days. When investments cannot be sold
readily at the desired time or price, the Fund may have to accept a much lower
price, may not be able to sell the investment at all or may be forced to forego
other investment opportunities, all of which may adversely impact the Fund’s
returns. Illiquid investments also may be subject to valuation risk.
Index Performance Risk. The Fund seeks to track
an index maintained by a third-party provider unaffiliated with the Fund or the
Adviser. Therefore, the Adviser’s ability to oversee the index provider’s due
diligence process over index data prior to its use in index computation,
construction, and/or rebalancing, if any, will be limited. There can be no
guarantee or assurance that the methodology used by the third-party provider to
create the index will result in the Fund achieving high, or even positive,
returns. Further, there can be no guarantee that the methodology underlying the
index, or the daily calculation of the index will be free from error. It is also
possible that the value of the index may be subject to intentional manipulation
by third-party market participants. The particular indices used by the Fund may
underperform other asset classes and may underperform other similar indices.
Each of these factors could have a negative impact on the performance of the
Fund.
17
Industry Concentration Risk. Because the Fund
may invest 25% or more of the value of its assets in an industry or group of
industries to the extent that the Underlying Index concentrates in an industry
or group of industries, the Fund’s performance may depend to a large extent on
the overall condition of such industry or group of industries and the Fund may
be susceptible to economic, political and regulatory risks or other occurrences
associated with that industry or group of industries. The performance of the
Fund if it invests a significant portion of its assets in a particular sector or
industry may be closely tied to the performance of companies in a limited number
of sectors or industries. Companies in a single sector often share common
characteristics, are faced with the same obstacles, issues and regulatory
burdens and their securities may react similarly to adverse market conditions.
The price movements of investments in a particular sector or industry may be
more volatile than the price movements of more broadly diversified
investments.
Intellectual Property Risk. The Fund relies on
licenses that permit the Adviser to use the Underlying Indices and associated
trade names, trademarks and service marks, as well as the UNCDF’s name and logos
(the “Intellectual Property”) in connection with the investment strategy of the
Fund and/or in marketing and other materials for the Fund. Such licenses may be
terminated, and, as a result, the Fund may lose its ability to use the
Intellectual Property. In the event a license is terminated, or the license
provider does not have rights to license the Intellectual Property, the
operations of the Fund may be adversely affected.
Limited Fund Size Risk. The Fund may not
attract sufficient assets to achieve or maximize investment and operational
efficiencies and remain viable. If the Fund fails to achieve sufficient scale,
it may be liquidated.
Management Risk. Management risk is the risk
associated with the fact that the Fund relies on the Adviser’s ability to
achieve its investment objective. The Adviser is a non‑profit organization with
limited personnel and financial resources. The relative lack of resources may
increase the Fund’s management risk.
Market Price Variance Risk. The Fund’s shares
are listed for trading on NYSE Arca, Inc. (the “Exchange”) and are bought and
sold in the secondary market at prevailing market prices. The market prices of
shares will fluctuate in response to changes in the NAV of the Fund and supply
and demand for shares. As a result, the trading prices of shares may deviate
significantly from NAV of the Fund during periods of market volatility.
Differences between secondary market prices and the net asset value (“ NAV”) of
the Fund may be due largely to supply and demand forces in the secondary market,
which may not be the same forces as those influencing prices for securities held
by the Fund at a particular time. The Adviser cannot predict whether shares will
trade above, below or at their NAV. Given the fact that shares can be created
and redeemed in creation units, the Adviser believes that large discounts or
premiums to the NAV of shares should not be sustained in the long-term. There
may be times when the market price of the Fund’s shares and the Fund’s NAV vary
significantly and you may pay more than the Fund’s NAV when buying shares on the
secondary market, and you may receive less than the Fund’s NAV when you sell
those shares. While the creation/redemption feature is designed to make it
likely that shares normally will trade close to the Fund’s NAV, disruptions to
creations and redemptions may result in trading prices that differ significantly
from the Fund’s NAV. The market price of shares, like the price of any
exchange-traded security, includes a “bid‑ask spread” charged by the exchange
specialist, market makers or other participants that trade the particular
security. In addition, the securities held by the Fund may be traded in markets
that close at a different time than the Exchange. Liquidity in those securities
may be reduced after the applicable closing times. Accordingly, during the time
when the Exchange is open but after the applicable market closing, fixing or
settlement times, bid‑ask spreads and the resulting premium or discount to
shares’ NAV may widen. Further, secondary markets may be subject to irregular
trading activity, wide bid/ask spreads and extended trade settlement periods,
which could cause a material decline in the Fund’s NAV. In times of market
stress, market makers and authorized participants may step away from their
respective roles in making a market in the Fund’s shares or in executing
purchase and redemption orders, which could lead to variances between the market
price of the Fund’s shares and the underlying value of those shares. Also, in
stressed market conditions, the market for the Fund’s shares may become less
liquid in response to deteriorating liquidity of the Fund’s portfolio holdings,
which could lead to differences between the market price of the Fund’s shares
and the
18
underlying
value of those shares. During periods of high market volatility, the Fund share
may trade at a significant discount to its NAV, and in these circumstances
certain types of brokerage orders may expose an investor to an increased risk of
loss. A “stop order,” sometimes called a “stop-loss order,” may cause the Fund
share to be sold at the next prevailing market price once the “stop” level is
reached, which during a period of high volatility can be at a price that is
substantially below NAV. By including a “limit” criterion with your brokerage
order, you may be able to limit the size of the loss resulting from the
execution of an ill‑timed stop order. The Fund’s shares may be listed or traded
on U.S. and non‑U.S. stock exchanges other than the U.S. stock exchange where
the Fund’s primary listing is maintained and may otherwise be made available to
non‑U.S. investors through funds or structured investment vehicles similar to
depositary receipts. There can be no assurance that the Fund’s shares will
continue to trade on any such stock exchange or in any market or that the Fund’s
shares will continue to meet the requirements for listing or trading on any
exchange or in any market. The Fund’s shares may be less actively traded in
certain markets than in 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 the Fund’s shares on a U.S. stock 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.
The
Fund’s investment results are measured based upon the daily NAV of the Fund.
Investors purchasing and selling shares in the secondary market may not
experience investment results consistent with those experienced by those
purchasing and redeeming directly with the Fund.
Mid‑Cap Company Risk. Investing in securities
of mid‑cap companies may entail greater risks than investments in larger, more
established companies. Mid‑cap companies tend to have more narrow product lines,
more limited financial resources and a more limited trading market for their
stocks, as compared with larger companies. As a result, their stock prices may
decline significantly as market conditions change.
Non‑Diversification Risk. Due to the nature of
the Fund’s investment strategies and their non‑diversified status (for purposes
of the 1940 Act), the Fund may invest a greater percentage of their respective
assets in the securities of fewer issuers than a “diversified” fund, and
accordingly may be more vulnerable to changes in the value of those issuers’
securities. Since the Fund invests in the securities of a limited number of
issuers, the Fund are particularly exposed to adverse developments affecting
those issuers, and a decline in the market value of a particular security held
by the Fund is likely to affect the Fund’s performance more than if the Fund
invested in the securities of a larger number of issuers. Although the Fund will
be “non‑diversified” for purposes of the 1940 Act, the Fund intends to comply
with the diversification requirements under Subchapter M of the Code in order to
be eligible to qualify as a regulated investment company.
Operational and Technology Risk. The Fund, its
service providers, index providers, Authorized Participants, market makers and
other market participants increasingly depend on complex information technology
and communications systems to conduct business functions. These systems are
subject to a number of different threats or risks that could adversely affect
the Fundas and its shareholders, despite the efforts of the Adviser, the Fund
and its service providers to adopt technologies, processes, and practices
intended to mitigate these risks. For example, unauthorized third parties may
attempt to improperly access, modify, disrupt the operations of, or prevent
access to these systems of the Fund, the Fund’s service providers,
counterparties, or other market participants or data within them (a
“cyber-attack”). Power or communications outages, acts of God, information
technology equipment malfunctions, operational errors, and inaccuracies within
software or data processing systems may also disrupt business operations or
impact critical data. Market events also may trigger a volume of transactions
that overloads current information technology and communication systems and
processes, impacting the ability to conduct the Fund’s operations.
Cyber-attacks, disruptions, or failures that affect the Fund’s service providers
or counterparties may adversely affect the Fund and its shareholders, including
by causing losses for the Fund or impairing the Fund’s operations. For example,
the Fund or its service providers’ assets or sensitive or confidential
information may be misappropriated, data may be corrupted, and operations may be
disrupted (e.g., cyber-attacks or operational failures may cause the release of
private shareholder
19
information
or confidential Fund information, interfere with the processing of shareholder
transactions, impact the ability to calculate the Fund’s NAV, and impede
trading). In addition, cyber-attacks, disruptions, or failures may cause
reputational damage and subject the Fund or its service providers to regulatory
fines, litigation costs, penalties or financial losses, reimbursement or other
compensation costs, and/or additional compliance costs. While the Fund and its
service providers may establish business continuity and other plans and
processes to address the possibility of cyberattacks, disruptions, or failures,
there are inherent limitations in such plans and systems, including that they do
not apply to third parties, such as other market participants, as well as the
possibility that certain risks have not been identified or that unknown threats
may emerge in the future. Similar types of operational and technology risks are
also present for issuers of the Fund’s investments, which could have material
adverse consequences for such issuers, and may cause the Fund’s investments to
lose value. In addition, cyber-attacks involving the Fund’s counterparties could
affect such counterparty’s ability to meet its obligations to the Fund, which
may result in losses to the Fund and its shareholders. Furthermore, as a result
of cyber-attacks, disruptions or failures, an exchange or market may close or
issue trading halts on specific securities or the entire market, which may
result in the Fund being, among other things, unable to buy or sell certain
securities or financial instruments or unable to accurately price its
investments. The Fund cannot directly control any cybersecurity plans and
systems put in place by their service providers, counterparties, issuers in
which the Fund invests, or securities markets and exchanges, and such third
parties may have limited indemnification obligations to the Adviser or the Fund,
each of whom could be negatively impacted as a result.
Options Risk. The use of options is a highly
specialized activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. For
example, there are significant differences between the securities and options
markets that could result in an imperfect correlation between these markets,
causing a given transaction not to achieve its objectives. A transaction in
options or securities may be unsuccessful to some degree because of market
behavior or unexpected events. When the Fund writes a covered call option, the
Fund forgoes, during the option’s life, the opportunity to profit from increases
in the market value of the security covering the call option above the sum of
the premium and the strike price of the call but retains the risk of loss should
the price of the underlying security decline. The writer of an option has no
control over the time when it may be required to fulfill its obligation and once
an option writer has received an exercise notice, it must deliver the underlying
security at the exercise price. When the Fund writes a covered put option, the
Fund bears the risk of loss if the value of the underlying stock declines below
the exercise price minus the put premium. If the option is exercised, the Fund
could incur a loss if it is required to purchase the stock underlying the put
option at a price greater than the market price of the stock at the time of
exercise plus the put premium the Fund received when it wrote the option. While
the Fund’s potential gain in writing a covered put option is limited to
distributions earned on the liquid assets securing the put option plus the
premium received from the purchaser of the put option, the Fund risks a loss
equal to the entire exercise price of the option minus the put premium.
Passive Investment Risk. The Fund is not
actively managed and may be affected by a general decline in market segments
included in the applicable Underlying Indices. The Funds invests in securities
included in, or representative of, the Fund’s respective Underlying Index
regardless of such securities’ investment merits. The Fund will likely lose
value to the extent that the applicable Underlying Index loses value. The
Adviser does not attempt to take defensive positions under any market
conditions, including during declining markets.
Securities Market Risk. The value of securities
owned by the Fund may go up or down, sometimes rapidly or unpredictably, due to
factors affecting particular companies or the securities markets generally. A
general downturn in the securities market may cause multiple asset classes to
decline in value simultaneously. Many factors, including terrorism, war, natural
disasters and the spread of infectious disease including epidemics or pandemics
such as the recent COVID‑19 outbreak can affect this value and you may lose
money by investing in the Fund. These conditions (and their aftermath) have
led, and in the future may lead, to increased short-term market volatility and
may have adverse long-term effects on U.S. and world economies and markets
generally. Likewise, natural and environmental disasters, including earthquakes,
fires, floods, hurricanes, tsunamis and weather-related phenomena generally, as
well as the spread of infectious disease including epidemics or
20
pandemics
such as the recent COVID‑19 outbreak, can be highly disruptive to economies and
markets, adversely affecting individual companies, sectors, industries, markets,
currencies, interest and inflation rates, credit ratings, investor sentiment,
and other factors affecting the value of the Fund’s investments. To the extent
the Fund takes significant positions in one or more specific sectors, countries
or regions, the Fund will be subject to the risks associated with such
sector(s), country(is) or region(s) to a greater extent than would be a more
broadly diversified fund.
Small‑Cap Company Risk. Investing in the
securities of small‑cap companies either directly or indirectly through
investments in ETFs, closed‑end funds or mutual funds may pose greater market
and liquidity risks than larger, more established companies, because of limited
product lines and/or operating history, limited financial resources, limited
trading markets, and the potential lack of management depth. In addition, the
securities of such companies are typically more volatile than securities of
larger capitalization companies.
Swaps Risk. The use of swaps is a highly
specialized activity which involves investment techniques, risk analyses and tax
planning different from those associated with ordinary portfolio securities
transactions. These transactions can result in sizeable realized and unrealized
capital gains and losses relative to the gains and losses from the Fund’s direct
investments in securities. Transactions in swaps can involve greater risks than
if the Fund had invested in the reference assets directly since, in addition to
general market risks, swaps may be leveraged and are also subject to illiquidity
risk, counterparty risk, credit risk and pricing risk. However, certain risks
may be reduced (but not eliminated) if the Fund invests in cleared swaps.
Regulators also may impose limits on an entity’s or group of entities’ positions
in certain swaps. Because bilateral swap agreements are two‑party contracts and
because they may have terms of greater than seven days, these swaps may be
considered to be illiquid. Moreover, the Fund bears the risk of loss of the
amount expected to be received under a swap in the event of the default or
bankruptcy of a swap counterparty. Many swaps are complex and valued
subjectively. Swaps and other derivatives may also be subject to pricing or
“basis” risk, which exists when the price of a particular derivative diverges
from the price of corresponding cash market instruments. Under certain market
conditions it may not be economically feasible to initiate a transaction or
liquidate a position in time to avoid a loss or take advantage of an
opportunity. If a swap transaction is particularly large or if the relevant
market is illiquid, it may not be possible to initiate a transaction or
liquidate a position at an advantageous time or price, which may result
insignificant losses. The value of swaps can be very volatile, and a variance in
the degree of volatility or in the direction of securities prices from the
Adviser’s expectations may produce significant losses in the Fund’s investments
in swaps. In addition, a perfect correlation between a swap and a reference
asset may be impossible to achieve. As a result, the Adviser’s use of swaps may
not be effective in fulfilling the investment adviser’s investment strategies
and may contribute to losses that would not have been incurred otherwise.
Certain separately managed accounts (“SMAs”) that are designed to track the
performance of an index may serve as the underlying reference asset for total
return swaps used by the Fund (“SMA Total Return Swaps”). This investment
technique provides the Fund with synthetic long investment exposure to the
performance of the index the SMAs seek to track, and thus, any underlying SMAs,
through payments made by a swap counterparty to the Fund that reflect the
positive total return, net of fees of the SMA, which may be netted against the
payment of transaction fees. In exchange, the Fund makes periodic payments to
the counterparty under the swap based on certain upfront and/or monthly
transaction fees as well as payments reflecting any negative total return on the
SMA. The swap generally provides the Fund with the economic equivalent of
ownership of the portfolio of the SMA through an entitlement to receive any
gains realized by the SMA and an obligation to pay any losses realized by the
SMA, which may be netted against the financing expenses of the swap. This
investment technique is intended to provide the Fund with exposure to the
performance of the SMA and, indirectly, the performance of the index the SMA is
designed to track. The performance of an SMA Total Return Swap is subject to the
performance and the risks of the index the SMA seeks to track, and ultimately,
of the underlying SMA and its investment portfolio. If the performance of the
SMA underlying the SMA Total Return Swap is negative or is not sufficiently
positive to offset the periodic payment due to the counterparty, then the
performance of the relevant Fund will be negatively impacted. Additionally, the
performance of the underlying SMA may deviate from the performance of the index
it is designed to track. To the extent that the SMA’s performance deviates from
that of the relevant index, the performance of the SMA Total Return Swap, and
in, turn, the performance of the relevant Fund, will deviate
21
from
the performance of the relevant index as well. The expenses paid by the
underlying SMA holder (including fees paid on the basis of the performance of
the underlying account manager) reduce the performance returns of the SMA’s
investments and those expenses are embedded in the returns of the SMA Total
Return Swap are based on the net returns of the SMA. The Fund’s use of SMA Total
Return Swaps may also subject the Fund to the risks of leverage, to the extent
utilized by the SMAs.
Tracking Error Risk. Imperfect correlation
between the Fund’s portfolio securities and those in the applicable Underlying
Indices, rounding of prices, changes to the Underlying Indices and regulatory
requirements may cause tracking error, which is the divergence of the Fund’s
performance from that of its Underlying Index. This risk may be heightened
during times of increased market volatility or other unusual market conditions.
Tracking error also may result because the Fund incurs fees and expenses, while
its Underlying Index does not. For example, the Fund incurs a number of
operating expenses not applicable to its Underlying Index and incurs costs
associated with buying and selling securities, especially when rebalancing the
Fund’s securities holdings to reflect changes in the composition of its
Underlying Index and raising cash to meet redemptions or deploying cash in
connection with newly created creation units. Because the Fund bears the costs
and risks associated with buying and selling securities while such costs are not
factored into the return of its Underlying Index, the Fund’s returns may deviate
significantly from the return of its Underlying Index. Because the Fund employs
a representative sampling strategy, the Fund may experience tracking error to a
greater extent than funds that seek to replicate an index. The Adviser may not
be able to cause the Fund’s performance to correlate to that of the Fund’s
benchmark, either on a daily or aggregate basis. Because the Underlying Index
rebalances quarterly but the Fund is not obligated to do the same, the risk of
tracking error may increase following the rebalancing of the Fund’s Underlying
Index.
Valuation Risk. The Fund is subject to the risk
of mispricing or improper valuation of its investments, in particular to the
extent that its securities are fair valued.
An investment in the Fund is not a bank deposit and
is not insured or guaranteed by the FDIC or any other government agency. As with
any investment company, there is no guarantee that the Fund will achieve its
goal.
CHARITABLE
CONTRIBUITION TO UNCDF
The
Adviser is a tax‑exempt organization under Section 501(c)(3) of the
Internal Revenue Code of 1986, as amended (the “Code”). The Adviser intends to
make charitable contributions to the United Nations Capital Development Fund
(“UNCDF” ) equal to the excess, if any, of Impact Shares’ fees with respect to
the Fund over Impact Shares’ operating expenses and a reserve for working
capital. The UNCDF, in its sole discretion, may use any portion of the Adviser’s
charitable contributions made directly to the UNCDF to support its own programs
or may make its own donations to identified charitable organizations that
support the UNCDF’s mission. Because the Fund had not commenced operations as of
the date of this prospectus, no amounts have been donated to the
UNCDF.
About the United Nations Capital Development Fund
The
UNCDF is a subsidiary organ of the United Nations, an intergovernmental
organization established by its member states, with its headquarters in New
York, New York. With its capital mandate and instruments, UNCDF offers “last
mile” finance models that unlock public and private resources, especially at the
domestic level, to reduce poverty and support local economic development. By
identifying those market segments where innovative financing models can have
transformational impact in helping to reach the last mile and address exclusion
and inequalities of access, UNCDF contributes to a number of different
Sustainable Development Goals.
The UNCDF has no power to determine that any security
or other investment shall be purchased or sold by the Fund.
22
UNCDF does not endorse and/or recommend any
commercial or other products including financial products, goods, or services.
UNCDF does not endorse Impact Shares or any other commercial entity. UNCDF makes
no representations and gives no warranties of whatever nature in respect of
these documents, including but not limited to the accuracy or completeness of
any information, facts and/or opinions contained therein. UNCDF does not make
any claim, prediction, warranty or representation whatsoever, expressly or
impliedly, either as to the result to be obtained from the use of information in
the present documents or the fitness or suitability of the referred information
for any particular purpose for which they may be put. UNCDF cannot be held
financially or legally liable for the use of and reliance of the opinions,
estimates, forecasts and findings in these documents. No reference to UNCDF
should be considered as an advice or recommendation by UNCDF to investors or
potential investors in relation to holding, purchasing or selling securities or
financial products or instruments. The UNCDF name and emblem are the exclusive
property of UNCDF. They are protected under international law. Unauthorized use
is prohibited. They may not be copied or reproduced in any way without the prior
written permission of UNCDF. Nothing herein shall constitute or be considered to
be a limitation upon or a waiver of, express or implied, the privileges and
immunities of the United Nations, including UNCDF, which are specifically
reserved.
MANAGEMENT
OF THE FUND
Board of Trustees
The
Board of Trustees (the “Board” or “Trustees”) has overall management
responsibility for the Fund. See “Management” in the SAI for the names of and
other information about the Trustees and officers of the Fund.
Investment Adviser
Impact
Shares, Corp. (“Impact Shares” or the “Adviser”) serves as the investment
adviser to the Fund. The address of the Adviser is 2189 Broken Bend, Frisco,
Texas 75034. Impact Shares provides the day‑to‑day management of the Fund’s
portfolio of securities, which includes buying and selling securities for the
Fund and conducting investment research. Additionally, Impact Shares furnishes
offices, necessary facilities, equipment and personnel. Organized in February
2014, Impact Shares is registered as an investment adviser under the Investment
Advisers Act of 1940, as amended. Impact Shares is an ETF sponsor and investment
manager that is creating a platform for clients seeking maximum social impact
with market returns. Impact Shares has managed ESG-related funds since July 2018
and as of October 1, 2021 managed approximately $165 million in
assets.
Impact
Shares’ goal is to build a capital markets bridge between leading nonprofits,
investors and corporate America to direct capital and social engagement on
societal priorities.
The
Adviser is a tax‑exempt organization under Section 501(c)(3) of the Code.
The Adviser intends to make charitable contributions to the UNCDF equal to the
excess, if any, of the Adviser’s fees with respect to the Fund over the
Adviser’s operating expenses and a reserve for working capital. The Adviser’s
intent with respect to the Fund is to provide financial support to further the
causes championed by the UNCDF. The UNCDF, in its sole discretion, may use any
portion of the Adviser’s charitable contributions made directly to the UNCDF to
support its own programs or may make its own donations to identified charitable
organizations that support the UNCDF’s mission. Because the Fund had not
commenced operations as of the date of this prospectus, no amounts have been
donated to the UNCDF.
Investment Advisory Agreement
The
Fund has entered into an investment advisory agreement with Impact Shares (the
“Investment Advisory Agreements”), pursuant to which Impact Shares either
provides the day‑to‑day management of the Fund’s portfolio of securities, which
includes buying and selling securities for the Fund and conducting investment
research, or hires a sub‑adviser to do so, subject to Impact Shares’ general
oversight.
For
the services provided to the Fund under its Investment Advisory Agreement, the
Fund pays the Adviser an annual fee, payable monthly, at the rate of 0.30% of
the Fund’s Average Daily Managed Assets (as defined
23
below).
“Average Daily Managed Assets” of the Fund means the average daily value of the
total assets of the Fund, less all accrued liabilities of the Fund (other than
the aggregate amount of any outstanding borrowings constituting financial
leverage). From time to time, the Adviser may waive all or a portion of its fee,
although it does not currently intend to do so. The Adviser will pay all
expenses incurred by it in connection with its activities under the Investment
Advisory Agreement, except such expenses as are assumed by the Fund and such
expenses as are assumed by a sub‑adviser under its sub‑advisory agreement.
The
Adviser has agreed to assume the Fund’s organization and offering costs. The
Fund does not have an obligation to reimburse the Adviser for organization and
offering costs paid on its behalf.
A
discussion regarding the Board’s approval of the Investment Advisory Agreements
for the Fund will be available in the Fund’s initial semi-annual report report
to shareholders dated December 31, 2021. The Investment Advisory Agreements may
be terminated by each respective Fund or by vote of a majority of the
outstanding voting securities of each respective Fund, without the payment of
any penalty, on not more than 60 days’ nor less than 30 days written notice. In
addition, the Investment Advisory Agreements automatically terminate in the
event of their “assignment” (as defined in the 1940 Act).
The
Fund is a party to contractual arrangements with various parties, including,
among others, the Fund’s investment adviser, administrator, distributor, and
shareholder servicing agent, who provide services to the Fund. Shareholders are
not parties to, or intended (“third-party”) beneficiaries of, any such
contractual arrangements, and such contractual arrangements are not intended to
create in any individual shareholder or group of shareholders any right to
enforce them against the service providers or to seek any remedy under them
against the service providers, either directly or on behalf of the Fund.
Neither
this prospectus, nor the related SAI, is intended, or should be read, to be or
to give rise to an agreement or contract between the Trust or the Fund and any
investor, or to give rise to any rights in any shareholder or other person other
than any rights under federal or state law.
Portfolio Manager
The
portfolio of the Fund is managed by Ethan Powell. Mr. Powell has managed
the Fund since its inception.
Ethan Powell. Mr. Powell has spent over
two decades in financial services, primarily in hedge funds and private equity.
Most recently Mr. Powell founded Impact Shares. Impact Shares is a
collaboration of leading financial service and nonprofit organizations providing
single social issue ETFs. Additionally, Mr. Powell serves as the Chairman
of the board for a $5 billion mutual fund complex.
Previously,
Mr. Powell was the Chief of Product and Strategy at Highland Capital
Management Fund Advisors, L.P. In this role he was responsible for evaluating
and optimizing the registered product lineup offered by Highland Mr. Powell
also served as the portfolio manager of the Highland ETFs and worked with other
portfolio managers and wholesalers on the appropriate positioning of strategies
in the marketplace. Prior to joining Highland in April 2007, Mr. Powell
spent most of his career with Ernst and Young providing audit and merger and
acquisition services. Mr. Powell received an MS in Management Information
Systems and a BS in Accounting from Texas A&M University. Mr. Powell
has earned the right to use the Chartered Financial Analyst designation and is a
licensed Certified Public Accountant.
The
SAI provides additional information about the portfolio manager’s compensation,
other accounts managed by the portfolio manager and the portfolio manager’s
ownership of securities issued by the Fund.
24
Distributor of the Fund
The
Fund’s shares are offered for sale through SEI Investments Distribution Co. (the
“Distributor”), One Freedom Valley Drive, Oaks, PA 19456. The Distributor does
not maintain a secondary market in shares of the Fund. The Distributor has no
role in determining the policies of the Fund or the securities that are
purchased or sold by the Fund.
Distribution (12b‑1) Plan
Under
a Rule 12b‑1 Distribution Plan (the “Plan”) adopted by the Board, the Fund may
pay the Distributor and financial intermediaries, such as broker-dealers and
investment advisors, up to 0.25% on an annualized basis of the average daily net
assets of the Fund as reimbursement or compensation for distribution related
activities and other services with respect to the applicable Fund. Because these
fees are paid out of the applicable Fund’s assets on an on‑going basis, over
time these fees will increase the cost of your investment and may cost you more
than paying other types of sales charges. No payments have yet been authorized
by the Board, nor are any such expected to be made by the Fund under the Plan
during the current fiscal year.
Distribution
fees paid to the Distributor in the future may be spent on any activities or
expenses primarily intended to result in the sale of the Fund’s shares including
(but not limited to) to compensate the Distributor, the Fund’s investment
adviser or any of their affiliates, as well as any banks, broker/dealers or
other financial institutions for distribution or sales support services
rendered, and related expenses incurred, for or on behalf of the Fund. The
Distributor may also use any distribution fees paid in the future for the
provision of personal services to investors in the shares and/or the maintenance
of shareholder accounts. The Plan is considered a compensation type plan, which
means that the Fund pays the Distributor the entire fee, if authorized by the
Board in the future, regardless of the Distributor’s expenditures. Even if the
Distributor’s actual expenditures exceed the fee payable under the Plan, if
authorized by the Board in the future, at any given time, the Fund will not be
obligated to pay more than that fee under the Plan. If the Distributor’s actual
expenditures are less than the fee payable under the Plan, if authorized by the
Board in the future, at any given time, the Distributor may realize a profit
from the arrangement.
Disclosure
of Portfolio Holdings
A
description of the Fund’s policies and procedures with respect to the disclosure
of the Fund’s portfolio securities is available (i) in the SAI and
(ii) on the Fund’s website at www.impactetfs.org.
How
to Buy and Sell Shares
The
Fund issue and redeem shares of the Fund only in aggregations of Creation Units.
A Creation Unit is comprised of 50,000 shares or such other amount as may be
changed from time to time in the future if determined to be in the best
interests of a Fund by the President of the Fund. The value of such Creation
Unit was $1,000,000 at the Fund’s inception.
See
the section of this Prospectus entitled “Creation and Redemption of Shares” for
more information.
Shares
of the Fund are exchange traded and available for purchase on the Exchange by
any investors.
Shares
of the Fund are listed on the Exchange for trading on any day that the Exchange
is open for business. Shares can be bought and sold throughout the trading day
like shares of other publicly-traded companies. The Fund do not impose any
minimum investment for shares of the Fund purchased on an exchange. Buying or
selling Fund’s shares on an exchange involves two types of costs that may apply
to all securities transactions. When buying or selling shares of the Fund
through a broker, you will likely incur a brokerage commission or other charges
determined by your broker. In addition, you may incur the cost of the “spread” –
that is, any
25
difference
between the bid price and 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 varies over time for shares of the
Fund based on the Fund’s trading volume and market liquidity and is generally
lower if the applicable Fund has a lot of trading volume and market liquidity
and higher if the applicable Fund has little trading volume and market
liquidity. Shares of the Fund trade on NYSE Arca, Inc. The Board has adopted a
policy of not monitoring for frequent purchases and redemptions of Fund shares
(“frequent trading”) that appear to attempt to take advantage of a potential
arbitrage opportunity presented by a lag between a change in the value of the
Fund’s portfolio securities after the close of the primary markets for the
Fund’s portfolio securities and the reflection of that change in the Fund’s NAV
(“market timing”), because the Fund’s shares are listed for trading on a
national securities exchange.
Because
secondary market trades do not involve the Fund directly, it is unlikely those
trades would cause many of the harmful effects of market timing, including
dilution, disruption of portfolio management, increases in the Fund’s trading
costs and the realization of capital gains.
Section 12(d)(1)
of the 1940 Act restricts investments by investment companies in the securities
of other investment companies. Registered investment companies are permitted to
invest in the Fund beyond the limits set forth in Section 12(d)(1), subject
to certain terms and conditions set forth in SEC rules or in an SEC exemptive
order issued to the Trust. In order for a registered investment company to
invest in shares of the Fund pursuant to the exemptive relief obtained by the
Trust from the limitations of Section 12(d)(1), the company must enter into
an agreement with the Trust.
Book
Entry
Shares
of the Fund 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 or
registered owner of all outstanding shares of the Fund.
Investors
owning shares of the Fund are beneficial owners as shown on the records of DTC
or its participants. DTC serves as the securities depository for shares of the
Fund. DTC participants include securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. Beneficial owners of
shares are not entitled to receive physical delivery of stock certificates or to
have shares registered in their names, and they are not considered a registered
owner of shares. Therefore, to exercise any right as an owner of shares, a
beneficial owner must rely upon the procedures of DTC and its participants.
These procedures are the same as those that apply to any other securities that a
beneficial owner holds in book-entry or “street name” form.
Creation
and Redemption of Shares
The
Fund issues and sell Creation Units on a continuous basis through the
Distributor, without a sales load, at NAV plus a transaction fee next determined
after receipt of a purchase order, on any day that the Exchange is open for
business. Creation units of shares may be purchased only by or through a DTC
participant that has entered into an Authorized Participant agreement with the
Distributor. Investors who are not Authorized Participants must make appropriate
arrangements with an Authorized Participant. The Fund may direct portfolio
transactions to certain Authorized Participants or their affiliates in certain
circumstances, such as to achieve best execution, but do not direct transactions
based on the purchase/sale of Fund’s shares. Due to the nature of the Fund’s
investments, Authorized Participants may deposit cash, a portfolio of securities
constituting a representative sample of the applicable Underlying Index or a
combination of cash and a portfolio of securities constituting a representative
sample of the applicable Underlying Index in exchange for a specified amount of
Creation Units.
26
Redemptions
of Creation Units for securities will be subject to compliance with applicable
federal and state securities laws, and the Fund reserves the right to redeem
Creation Units for cash if the Fund could not lawfully deliver specific Fund
securities upon redemptions or could not do so without first registering the
securities under such laws. An Authorized Participant or an investor for which
it is acting subject to a legal restriction with respect to a particular
security included in the Fund securities applicable to the redemption of a
Creation Unit may be paid an equivalent amount of cash. This would specifically
prohibit delivery of Fund securities that are not registered in reliance upon
Rule 144A under the Securities Act to a redeeming investor that is not a
“qualified institutional buyer,” as such term is defined under Rule 144A of the
Securities Act. The Authorized Participant may request the redeeming beneficial
owner of the shares to complete an order form or to enter into agreements with
respect to such matters as compensating cash payments.
Investors
should be aware that their particular broker may not be a DTC participant or may
not have executed an Authorized Participant agreement, in which case orders to
purchase creation units of shares may have to be placed by the investor’s broker
through an Authorized Participant. As a result, purchase orders placed through
an Authorized Participant may result in additional charges to such investor. The
Fund expects to enter into Authorized Participant agreements with only a small
number of DTC participants.
Purchases
through and outside the Clearing Process
An
Authorized Participant may place an order to purchase (or redeem) creation units
(i) through the Continuous Net Settlement clearing processes of the
National Securities Clearing Corporation (“NSCC”) as such processes have been
enhanced to effect purchases (and redemptions) of creation units, such processes
being referred to herein as the “Clearing Process,” or (ii) outside the
Clearing Process. To purchase or redeem through the Clearing Process, an
Authorized Participant must be a member of NSCC that is eligible to use the
Continuous Net Settlement system. For purchase orders placed through the
Clearing Process, the Authorized Participant agreement authorizes the
Distributor to transmit through the Fund’s transfer agent (the “Transfer Agent”)
to NSCC, on behalf of an Authorized Participant, such trade instructions as are
necessary to effect the Authorized Participant’s purchase order.
Pursuant
to such trade instructions to NSCC, the Authorized Participant agrees to deliver
the requisite deposit securities and the balancing amount to the applicable
Fund, together with the Transaction Fee and such additional information as may
be required by the Distributor.
An
Authorized Participant that wishes to place an order to purchase Creation Units
outside the Clearing Process must state that it is not using the Clearing
Process and that the purchase instead will be effected through a transfer of
securities and cash directly through DTC. Purchases (and redemptions) of
Creation Units settled outside the Clearing Process will be subject to a higher
Transaction Fee (as defined below) than those settled through the Clearing
Process.
Whether
placed through the Clearing Process or outside the Clearing Process, a purchase
order must be received by the Distributor by 4:00 p.m. Eastern Time if
transmitted by telephone, facsimile or other electronic means permitted under
the Participant Agreement in order to receive that day’s closing NAV per
share.
Rejection
of Purchase Orders
The
Fund reserves the absolute right to reject a purchase order transmitted to it by
the Distributor in respect of the Fund if (a) the order is not in proper
form; (b) the purchaser or group of purchasers, upon obtaining the shares
ordered, would own 80% or more of the currently outstanding shares of the
applicable Fund; (c) the deposit securities delivered are not as specified
by the Adviser and the Adviser has not consented to acceptance of an in‑kind
deposit that varies from the designated deposit securities; (d) acceptance
of the purchase transaction order would have certain adverse tax consequences to
the applicable Fund; (e) the acceptance of the purchase transaction order
would, in the opinion of counsel, be unlawful; (f) the acceptance of the
purchase order
27
transaction
would otherwise, in the discretion of the applicable Fund or the Adviser, have
an adverse effect on the applicable Fund or the rights of beneficial owners;
(g) the value of a cash purchase amount, or the value of the balancing
amount to accompany an in‑kind deposit, exceeds a purchase authorization limit
extended to an Authorized Participant by the custodian and the Authorized
Participant has not deposited an amount in excess of such purchase authorization
with the custodian prior to the relevant cut‑off time for the applicable Fund on
the Transmittal Date; or (h) in the event that circumstances outside the
control of the Fund, the Distributor and the Adviser make it impractical to
process purchase orders. The Fund shall notify a prospective purchaser of its
rejection of the order of such person. The Fund and the Distributor are under no
duty, however, to give notification of any defects or irregularities in the
delivery of purchase transaction orders nor shall either of them incur any
liability for the failure to give any such notification.
Redemptions
Similarly,
shares may be redeemed only in Creation Units at their NAV next determined after
receipt of a redemption request in good order by the Distributor on any day on
that the Exchange is open for business. All redemption requests, whether placed
through or outside the Clearing Process, must be received by the Distributor by
4:00 p.m. Eastern Time in order to receive that day’s Closing NAV per Share. The
Fund reserves the right to reject any redemption request that is not in good
order. Contact Impact Shares you have any questions about your particular
circumstances. In general, a purchase order is in “good order” if: (i) a
request in form satisfactory to the applicable Fund is received by the
Distributor or its agent from the Authorized Participant on behalf of itself or
another redeeming investor within the time periods specified herein; and
(ii) all other procedures set forth in the Authorized Participant Agreement
are properly followed. The Fund reserves the right to require additional
information at any time for a purchase order to be in “good order.”
The
Fund will not redeem shares in amounts less than Creation Units.
Beneficial
owners also may sell shares in the secondary market, but must accumulate enough
shares to constitute a Creation Unit in order to have such shares redeemed by
the Fund. There can be no assurance, however, that there will be sufficient
liquidity in the public trading market at any time to permit assembly of a
Creation Unit of shares. Investors should expect to incur brokerage and other
costs in connection with assembling a sufficient number of shares to constitute
a redeemable Creation Unit.
The
Fund may suspend the right of redemption and postpone payment for more than
seven days: (i) during periods when trading on the Exchange is closed on
days other than weekdays or holidays; (ii) during periods when trading on
the Exchange is restricted; (iii) during any emergency which makes it
impractical for the Fund to dispose of its securities or fairly determine the
NAV of the Fund; and (iv) during any other period permitted by the SEC for
your protection.
Because
new shares may be created and issued on an ongoing basis, at any point during
the life of the Fund, a “distribution,” as such term is used in the Securities
Act, may be occurring. 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 that could render them
statutory underwriters and subject to the prospectus delivery and liability
provisions of the Securities Act. Any determination of whether one is an
underwriter must take into account all the relevant facts and circumstances of
each particular case.
Broker-dealers
should also note that dealers who are not “underwriters” but are participating
in a distribution (as contrasted to ordinary secondary 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. For delivery of prospectuses to exchange members, the prospectus
delivery mechanism of Rule 153 under the Securities Act is available only with
respect to transactions on a national securities exchange.
28
Redemption
Proceeds
A
redemption request received by the Fund will be effected at the NAV per share
next determined after the Fund receives the request in good order. While the
Fund will generally pay redemptions proceeds wholly or partially in portfolio
securities, the Fund may pay your redemption proceeds in cash. In this event,
the portfolio of securities the Fund will deliver upon redemption of Fund shares
may differ from the portfolio of securities required for purchase of a Creation
Unit. You will be exposed to market risk until you convert these portfolio
securities into cash, you will likely pay commissions upon any such conversion,
and you may recognize taxable gain or loss resulting from fluctuations in value
of the portfolio securities between the conversion date and the redemption date.
If you receive illiquid securities, you could find it more difficult to sell
such securities and may not be able to sell such securities at prices that
reflect the Adviser’s or your assessment of their fair value or the
amount
paid for them by the Fund. Illiquidity may result from the absence of an
established market for such securities as well as legal, contractual or other
restrictions on their resale and other factors.
Transaction
Fees
Authorized
Participants are charged standard creation and redemption transaction fees
(“Transaction Fees”) to offset transfer and other transaction costs associated
with the issuance and redemption of Creation Units. There is a fixed and a
variable component to the total Transaction Fee. A fixed Transaction Fee of
$3,000 is applicable to each creation or redemption transaction, regardless of
the number of Creation Units purchased or redeemed. Creations and redemptions
are also subject to an additional variable charge of up to 1% of the net asset
value per Creation Unit, inclusive of the standard transaction fee, for (i)
in‑kind creations or redemptions effected outside the normal Clearing Process,
(ii) in whole or partial cash creations, (iii) in whole or partial cash
redemptions or (iv) non‑standard orders. The variable component is primarily
designed to cover non‑standard charges, e.g., brokerage, taxes, foreign
exchange, execution, market impact and other costs and expenses related to the
execution of trades resulting from such transaction. In all cases, the
Transaction Fee will be limited in accordance with the requirements of the SEC
applicable to management investment companies offering redeemable securities.
The Fund may determine not to charge the variable portion of a Transaction Fee
on certain orders when Impact Shares has determined that doing so is in the best
interests of Fund shareholders, e.g., for redemption orders that facilitate the
rebalance of the Fund’s portfolio in a more tax efficient manner than could be
achieved without such order. The variable portion of a Transaction Fee may be
higher or lower than the trading expenses incurred by the Fund with respect to
the transaction.
No
redemption fee will exceed 2% of the value of the Creation Unit redeemed.
Net
Asset Value
The
NAV per share of the Fund is calculated as of 4:00 p.m., Eastern Time, on each
day that the Exchange is open for business, except on days on which regular
trading on the Exchange is scheduled to close before 4:00, when the Fund
calculates NAV as of the scheduled close of regular trading. The Exchange is
open Monday through Friday, but currently is scheduled to be closed on New
Year’s Day, Dr. Martin Luther King, Jr. Day, Presidents’ Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day or
on the preceding Friday or subsequent Monday when a holiday falls on a Saturday
or Sunday, respectively. In addition, certain portfolio investments may not be
traded on days or at times the Fund is open for business. In particular,
calculation of the NAV of the Fund may not take place contemporaneously with the
determination of the prices of foreign securities used in NAV
calculations.
The
NAV per share is computed by dividing the value of the Fund’s net assets (i.e.,
the value of its securities and other assets less its liabilities, including
expenses payable or accrued but excluding capital stock and surplus)
attributable to the Fund by the total number of shares of the Fund outstanding
at the time the determination is made.
29
The
Fund’s portfolio securities are valued in accordance with the Fund’s valuation
policies approved by the Board. The value of the Fund’s investments is generally
determined as follows:
|
• |
|
Portfolio
securities for which market quotations are readily available are valued at
their current market value. |
|
• |
|
Foreign
securities listed on foreign exchanges are valued based on quotations from
the primary market in which they are traded and are translated from the
local currency into U.S. dollars using current exchange rates. Foreign
securities may trade on weekends or other days when the Fund does not
calculate NAV. As a result, the market value of these investments may
change on days when you cannot buy or redeem shares of the
Fund. |
|
• |
|
Investments
by the Fund in any mutual fund are valued at their respective NAVs as
determined by those mutual funds each business day. The prospectuses for
those mutual funds explain the circumstances under which those funds will
use fair value pricing and the effects of using fair value
pricing. |
|
• |
|
All
other portfolio securities, including derivatives and cases where market
quotations are not readily available or when the market price is
determined to be unreliable, are valued at fair value as determined in
good faith pursuant to procedures established by the Board subject to
approval or ratification by the Board at its next regularly scheduled
quarterly meeting. Pursuant to the Fund’s pricing procedures, securities
for which market quotations are not readily available or for which the
market price is determined to be unreliable, may include but are not
limited to securities that are subject to legal or contractual
restrictions on resale, securities for which no or limited trading
activity has occurred for a period of time, or securities that are
otherwise deemed to be illiquid (i.e., securities that cannot be disposed
of within seven days at approximately the price at which the security is
currently priced by the Fund which holds the security). Market quotations
may also be not “readily available” if a significant event occurs after
the close of the principal exchange on which a portfolio security trades
(but before the time for calculation of the Fund’s NAV) if that event
affects or is likely to affect (more than minimally) the NAV per share of
the Fund. In determining the fair value price of a security, Impact Shares
use a number of other methodologies, including those based on discounted
cash flows, multiples, recovery rates, yield to maturity or discounts to
public comparables. Fair value pricing involves judgments that are
inherently subjective and inexact; as a result, there can be no assurance
that fair value pricing will reflect actual market value, and it is
possible that the fair value determined for a security will be materially
different from the value that actually could be or is realized upon the
sale of that asset. |
Valuing
the 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 the Fund’s NAV and the prices used by each
applicable Underlying Index, which, in turn, could result in a difference
between the Fund’s performance and the performance of its Underlying
Index.
Share
Prices
The
trading prices of the Fund’s shares in the secondary market generally differ
from the Fund’s daily NAV and are affected by market forces such as supply and
demand, economic conditions and other factors.
Premium/Discount
Information
The
NAV of the Fund will fluctuate with changes in the market value of the Fund’s
portfolio holdings. The market price of the Fund will fluctuate in accordance
with changes in its NAV, as well as market supply and demand. Shareholders may
pay more than NAV when they buy the Fund’s shares and receive less than NAV when
they sell those shares, because shares are bought and sold at current Market
Prices.
30
Premiums
or discounts are the differences (expressed as a percentage) between the NAV and
market price of the Fund on a given day, generally at the time the NAV is
calculated. A premium is the amount that the Fund is trading above the reported
NAV, expressed as a percentage of the NAV. A discount is the amount that the
Fund is trading below the reported NAV, expressed as a percentage of the NAV.
Further information about the premium and discounts for the Fund is available at
www.impactetfs.org.
Dividends
and Other Distributions
The
Fund intends to declare and pay dividends of net investment income quarterly and
to pay any capital gain distributions on an annual basis. There is no fixed
dividend rate, and there can be no assurance that the Fund will pay any
dividends or make any capital gain distributions.
No
dividend reinvestment service is provided by the Fund. Broker-dealers may make
available the DTC book-entry Dividend Reinvestment Service for use by beneficial
owners of the Fund for reinvestment of its 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 of
the Fund purchased in the secondary market. Dividends and other taxable
distributions are taxable to you, whether received in cash or reinvested in
additional shares of the Fund pursuant to DTC’s Dividend Reinvestment Service.
Shareholders using the Dividend Reinvestment Service should consult their
broker-dealer for more information about the specific terms of the service,
including potential tax consequences to such shareholders in light of their
particular circumstances.
Capitalization
Criteria
The
Fund is subject to market capitalization criteria, such as policies adopted
pursuant to Rule 35d‑1 under the 1940 Act (the so‑called “names rule”), that are
tied to specific securities indices (“reference indices”). When the Fund’s
reference index is periodically rebalanced or reconstituted, the applicable Fund
may require a reasonable time period to align its investment portfolio with any
new market capitalization criteria that result from changes to the reference
index.
Index
Provider
MSCI,
Inc. (“MSCI”) is the Index Provider to the Fund. Strictly in accordance with its
guidelines and mandated procedures, MSCI compiles, maintains and calculates the
Underlying Index. MSCI is not affiliated with the Fund, Adviser, or the
Distributor.
THE
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 LICENSEE. NONE
OF THE MSCI PARTIES MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO
THE ISSUER OR OWNERS OF THESE FUNDS OR ANY OTHER PERSON OR ENTITY REGARDING THE
ADVISABILITY OF INVESTING IN FUNDS GENERALLY OR IN THE 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 THE FUND OR THE ISSUER OR OWNERS OF THESE
FUNDS OR ANY OTHER PERSON OR ENTITY. NONE OF THE MSCI PARTIES HAS ANY
OBLIGATION
31
TO
TAKE THE NEEDS OF THE ISSUER OR OWNERS OF THE 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 THESE FUNDS TO BE
ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION BY OR THE
CONSIDERATION INTO WHICH THESE FUNDS ARE REDEEMABLE. FURTHER, NONE OF THE MSCI
PARTIES HAS ANY OBLIGATION OR LIABILITY TO THE ISSUER OR OWNERS OF THE FUND OR
ANY OTHER PERSON OR ENTITY IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR
OFFERING OF THE 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
THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL ANY OF THE
MSCI PARTIES HAVE ANY LIABILITY 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 security, product or 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 security 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.
Taxation
The
following discussion is a summary of some of the important U.S. federal income
tax considerations generally applicable to an investment in the Fund. Your
investment may have other tax implications. The discussion reflects provisions
of the Code, existing Treasury regulations, rulings published by the Internal
Revenue Service (“IRS”), and other applicable authorities, as of the date of
this Prospectus. These authorities may be changed, possibly with retroactive
effect, or subject to new legislative, administrative or judicial
interpretations. No attempt is made to present a detailed explanation of all
U.S. federal, state, local and foreign tax law concerns affecting the Fund and
its shareholders (including shareholders owning large positions in the Fund) or
to address all aspects of taxation that may apply to Authorized Participants,
individual shareholders or to specific types of shareholders, such as foreign
persons, that may qualify for special treatment under U.S. federal income tax
laws. The discussion set forth herein does not constitute tax advice. Please
consult your tax advisor about foreign, federal, state, local or other tax laws
applicable to you. For more information, please see “Income Tax Considerations”
in the SAI.
The
Fund intends to elect to be treated and intend to qualify annually as a
regulated investment company (“RIC”) under Subchapter M of the Code including by
complying with the applicable qualifying income and diversification
requirements. If the Fund so qualifies and satisfy certain distribution
requirements, the Fund generally will not be subject to U.S. federal income tax
on income and gains that the Fund distributes to its shareholders in a timely
manner in the form of dividends or capital gain dividends (as defined below).
As
32
described
in “Dividends and Other Distributions” above, the Fund intends to distribute at
least annually all or substantially all of its net investment income and net
realized capital gains. The Fund will be subject to the Fund-level income tax at
regular corporate income tax rates on any taxable income or gains that they do
not timely distribute to its shareholders.
If
the Fund were to fail to distribute in a calendar year at least an amount equal
to the sum of (i) 98% of its ordinary income for such year, (ii) 98.2% of its
capital gains in excess of its capital losses (adjusted for certain ordinary
losses) for the one‑year period ending on October 31 of such year (or
November 30 or December 31 of that year if the Fund is permitted to
elect and so elects), and (iii) any such amounts retained from the prior
year, the Fund would be subject to a nondeductible 4% excise tax on the
undistributed amounts. For these purposes, the Fund will be treated as having
distributed any amount on which it is subject to corporate income tax for the
taxable year ending within the calendar year .While the Fund intends to
distribute any income and capital gain in the manner necessary to minimize
imposition of the 4% U.S. federal excise tax, there can be no assurance that
sufficient amounts of the Fund’s taxable income and capital gain will be
distributed to avoid entirely the imposition of the tax. In that event, the Fund
will be liable for the excise tax only on the amount by which it does not meet
the foregoing distribution requirement.
Additionally,
if for any taxable year the Fund was not to qualify as a RIC and was ineligible
to or otherwise did not cure such failure, all of its taxable income and gain
would be subject to the Fund-level tax at regular corporate income tax rates
without any deduction for distributions to shareholders. This treatment would
reduce the Fund’s net income available for investment or distribution to its
shareholders. In addition, all distributions from earnings and profits,
including any net long-term capital gains, would be taxable to shareholders as
ordinary income. Some portions of such distributions may be eligible for the
dividends-received deduction in the case of corporate shareholders or to be
treated as “qualified dividend income” in the case of individual
shareholders.
The
Fund also could be required to recognize unrealized gains, pay substantial taxes
and interest and make substantial distributions before requalifying as a RIC
that is accorded special tax treatment.
The
tax rules applicable to certain derivative instruments in which the Fund may
invest are uncertain under current law, including the provisions applicable to
RICs under Subchapter M of the Code. For instance, the timing and character of
income or gains arising from certain derivatives can be uncertain, including for
Subchapter M purposes. Accordingly, while the Fund intends to account for such
transactions in a manner they deem to be appropriate, an adverse determination
or future guidance by the IRS with respect to one or more of these rules (which
determination or guidance could be retroactive) may adversely affect the Fund’s
ability to meet one or more of the relevant requirements to maintain their
qualification as RICs, as well as to avoid Fund-level taxes. See the “Statement
of Additional Information” for additional detail regarding the Fund’s
investments in derivatives.
The
Fund’s investments in foreign securities, if any, may be subject to foreign
withholding or other taxes. Tax treaties between the U.S. and other countries
may reduce or eliminate such taxes. Foreign taxes paid by the Fund will reduce
the return from the Fund’s investments. Shareholders generally will not be
entitled to a claim or deductions for such taxes on their own returns.
Distributions
paid to you by the Fund from net capital gain (that is, the excess of any net
long-term capital gain over net short-term capital loss, in each case with
reference to any loss carryforwards) that the Fund properly reports to you as a
capital gain dividend (“capital gain dividends”) generally are taxable to you as
long-term capital gain includible in net capital gain and taxed to individuals
at reduced rates, regardless of how long you have held your shares. All other
dividends paid to you by the Fund (including dividends from short-term capital
gain (that is, the excess of any net short-term capital gain over any net
long-term capital loss)) from its current or accumulated earnings and profits
generally are taxable to you as ordinary income. Distributions of investment
income reported by the Fund as derived from “qualified dividend income” will be
taxed in the hands of individuals at the rates applicable to long-term capital
gains, provided holding periods and other requirements are met at both the
shareholder and Fund level.
33
A
Medicare contribution tax of 3.8% is imposed on the “net investment income” of
certain individuals, estates and trusts to the extent their income exceeds
certain threshold amounts. Net investment income generally includes for this
purpose dividends paid by the Fund, including any capital gain dividends, and
capital gains recognized on the taxable sale, redemption or exchange of shares
of the Fund. Shareholders are advised to consult their tax advisors regarding
the possible implications of this additional tax on their investment in the
Fund.
If,
for any taxable year, the Fund’s total distributions exceed both current
earnings and profits and accumulated earnings and profits, the excess will
generally be treated as a tax‑free return of capital up to the amount of your
tax basis in the shares. The amount treated as a tax‑free return of capital will
reduce your tax basis in the shares, thereby increasing your potential gain or
reducing your potential loss on the subsequent sale of the shares. Any amounts
distributed to you in excess of your tax basis in the shares will be taxable to
you as capital gain (assuming the shares are held as a capital asset).
Dividends
and other taxable distributions are taxable to you, whether received in cash or
reinvested in additional shares of the Fund pursuant to DTC’s Dividend
Reinvestment Service (see “Dividends and Other Distributions”). Dividends and
other distributions paid by the Fund generally are treated as received by you at
the time the dividend or distribution is made. If, however, the Fund pays you a
dividend in January that was declared in the previous October, November or
December and you were a shareholder of record on a specified record date in one
of those months, then such dividend will be treated for tax purposes as being
paid by the Fund and received by you on December 31 of the year in which
the dividend was declared.
The
price of shares purchased at any time may reflect the amount of a forthcoming
distribution. If you purchase shares just prior to the ex‑dividend date for a
distribution, you generally will receive a distribution that will be taxable to
you even though it represents in part a return of your invested capital.
The
Fund (or your broker or other financial intermediary through which you own your
shares) will send information after the end of each calendar year setting forth
the amount and tax status of any dividends or other distributions paid to you by
the Fund. Dividends and other distributions may also be subject to state, local
and other taxes.
If
you sell or otherwise dispose of any of your shares of the Fund, you will
generally recognize a gain or loss in an amount equal to the difference between
your tax basis in such shares of the Fund and the amount you receive upon
disposition of such shares. If you hold your shares as capital assets, any such
gain or loss will generally be long-term capital gain or loss if you have held
(or are treated as having held) such shares for more than one year at the time
of sale. All or a portion of any loss you realize on a taxable sale or exchange
of your shares of the Fund will be disallowed if you acquire other shares of the
Fund (whether through the reinvestment of dividends or otherwise) within a
61‑day period beginning 30 days before and ending 30 days after your sale or
exchange of the shares. In such case, the basis of the shares acquired will be
adjusted to reflect the disallowed loss. In addition, any loss realized upon a
taxable sale or exchange of Fund shares held (or deemed held) by you for six
months or less will be treated as long-term, rather than short-term, to the
extent of any capital gain dividends received (or deemed received) by you with
respect to those shares. Present law taxes both long-term and short-term capital
gains of corporations at the rates applicable to ordinary income.
The
Fund (or your broker or other financial intermediary through which you own your
shares) may be required to withhold, for U.S. federal backup withholding tax
purposes, a portion of the dividends, distributions and redemption proceeds
payable to you if: (i) you fail to provide the Fund (or the intermediary)
with your correct taxpayer identification number (in the case of an individual,
generally, such individual’s social security number) or to make the required
certification; or (ii) the Fund (or the intermediary) has been notified by
the IRS that you are subject to backup withholding. Certain shareholders are
exempt from backup withholding. Backup withholding is not an additional tax and
any amount withheld may be refunded or credited against your U.S. federal income
tax liability, if any, provided that you furnish the required information to the
IRS.
34
Authorized Participant Taxes Purchase and Redemption
of Creation Units
Authorized
Participants should consult their tax advisors about the federal, state, local
or foreign tax consequences of purchasing and redeeming Creation Units in the
Fund.
THE
FOREGOING IS A GENERAL AND ABBREVIATED SUMMARY OF THE PROVISIONS OF THE CODE AND
THE TREASURY REGULATIONS IN EFFECT AS THEY DIRECTLY GOVERN THE TAXATION OF THE
FUND AND ITS SHAREHOLDERS. THESE PROVISIONS ARE SUBJECT TO CHANGE BY LEGISLATIVE
OR ADMINISTRATIVE ACTION, AND ANY SUCH CHANGE MAY BE RETROACTIVE. A MORE
COMPLETE DISCUSSION OF THE TAX RULES APPLICABLE TO THE FUND AND ITS
SHAREHOLDERS, INCLUDING FOREIGN SHAREHOLDERS, CAN BE FOUND IN THE STATEMENT OF
ADDITIONAL INFORMATION, WHICH IS INCORPORATED BY REFERENCE INTO THIS PROSPECTUS.
SHAREHOLDERS ARE URGED TO CONSULT THEIR TAX ADVISERS REGARDING SPECIFIC
QUESTIONS AS TO U.S. FEDERAL, STATE, LOCAL AND FOREIGN INCOME OR OTHER
TAXES.
FINANCIAL
HIGHLIGHTS
Because
the Fund had not commenced operations as of the date of this prospectus,
financial highlights are not presented.
35
www.impactetfs.org
More
information about the Fund is available without charge upon request through the
following:
Statement of Additional Information (SAI): The
SAI, as it may be amended or supplemented from time to time, includes more
detailed information about the Fund and is available, free of charge, on the
Fund’s website at www.impactetfs.org. The SAI is on file with the SEC and is
incorporated by reference into this Prospectus. This means that the SAI, for
legal purposes, is a part of this Prospectus.
Annual and Semi-Annual Reports: Additional
information about the Fund’s investments is available in the Fund’s annual and
semi-annual reports to shareholders, which will be available, free of charge, on
the Fund’s website at www.impactetfs.org.
To
Obtain More Information:
By
Internet:
www.impactetfs.org
By
Telephone:
Call
844‑448‑3383 (844‑GIVE‑ETF)
By
Mail:
Impact
Shares Trust I
2189
Broken Bend
Frisco,
Texas 75034
From
the SEC:
You
can also obtain the SAI or the annual and semi-annual reports, as well as other
information about the Fund, from the EDGAR Database on the SEC’s website
(http://www.sec.gov). You may request documents from the SEC, upon payment of a
duplicating fee, by e‑mailing the SEC at
[email protected].
The
Trust’s Investment Company Act
Registration
Number: 811‑23312