ck0001432353-20221031
497Oct.
31, 2022Global X 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Global
X MSCI China Communication Services ETF
NYSE
Arca: CHIC |
Global
X MSCI Greece ETF
NYSE
Arca: GREK |
Global
X MSCI China Consumer Discretionary ETF NYSE
Arca: CHIQ |
Global
X MSCI Norway ETF
NYSE
Arca: NORW |
Global
X MSCI China Consumer Staples ETF
NYSE
Arca: CHIS |
Global
X DAX Germany ETF
NASDAQ:
DAX |
Global
X MSCI China Energy ETF NYSE
Arca: CHIE |
Global
X MSCI Portugal ETF
NYSE
Arca: PGAL |
Global
X MSCI China Financials ETF
NYSE
Arca: CHIX |
Global
X MSCI Colombia ETF
NYSE Arca: GXG |
Global
X MSCI China Health Care ETF
NYSE
Arca: CHIH |
Global
X MSCI Argentina ETF
NYSE
Arca: ARGT |
Global
X MSCI China Industrials ETF
NYSE
Arca: CHII |
Global
X MSCI Pakistan ETF
NYSE Arca: PAK |
Global
X MSCI China Information Technology ETF
NYSE
Arca: CHIK |
Global
X MSCI Nigeria ETF
NYSE
Arca: NGE |
Global
X MSCI China Materials ETF
NYSE
Arca: CHIM |
Global
X MSCI Vietnam ETF
NYSE
Arca: VNAM |
Global
X MSCI China Real Estate ETF
NYSE
Arca: CHIR |
Global
X MSCI Next Emerging & Frontier ETF
NYSE
Arca: EMFM |
Global
X MSCI China Utilities ETF
NYSE
Arca: CHIU |
Global
X FTSE Southeast Asia ETF
NYSE Arca: ASEA |
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Prospectus
March 1,
2023
The
Securities and Exchange Commission ("SEC") has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
Shares
in a Fund (defined below) are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other agency of the U.S. Government, nor are shares
deposits or obligations of any bank. Such shares in a Fund involve investment
risks, including the loss of principal.
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As
permitted by regulations adopted by the SEC, paper copies of the Funds’
shareholder reports will no longer be sent by mail, unless you
specifically request paper copies of the reports from your financial
intermediary (such as a broker-dealer or bank). Instead, shareholder
reports will be available on the Funds’ website
(www.globalxetfs.com/explore), and you will be notified by mail each time
a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you
will not be affected by this change and you need not take any action. You
may elect to receive shareholder reports and other communications from the
Funds electronically anytime by contacting your financial intermediary.
You may elect to receive all future Fund shareholder reports in paper free
of charge. Please contact your financial intermediary to inform them that
you wish to continue receiving paper copies of Fund shareholder reports
and for details about whether your election to receive reports in paper
will apply to all funds held with your financial
intermediary. |
TABLE
OF CONTENTS
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FUND
SUMMARIES |
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ADDITIONAL
INFORMATION ABOUT THE FUNDS |
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A
FURTHER DISCUSSION OF PRINCIPAL RISKS |
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A
FURTHER DISCUSSION OF OTHER RISKS |
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PORTFOLIO
HOLDINGS INFORMATION |
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FUND
MANAGEMENT |
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DISTRIBUTOR |
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BUYING
AND SELLING FUND SHARES |
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FREQUENT
TRADING |
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DISTRIBUTION
AND SERVICE PLAN |
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DIVIDENDS
AND DISTRIBUTIONS |
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TAXES |
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DETERMINATION
OF NET ASSET VALUE |
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PREMIUM/DISCOUNT
AND SHARE INFORMATION |
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TOTAL
RETURN INFORMATION |
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INFORMATION
REGARDING THE INDICES AND THE INDEX PROVIDERS |
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OTHER
SERVICE PROVIDERS |
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ADDITIONAL
INFORMATION |
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FINANCIAL
HIGHLIGHTS |
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OTHER
INFORMATION |
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FUND
SUMMARIES
Global X MSCI China Communication Services
ETF
Ticker:
CHIC Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI China
Communication Services ETF ("Fund") seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the MSCI China Communication Services 10/50 Index ("Underlying
Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
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Management
Fees: |
0.65% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.65% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
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One
Year |
Three
Years |
Five
Years |
Ten
Years |
$66 |
$208 |
$362 |
$810 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 30.28% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI
China Communication Services 10/50 Index ("Underlying Index") and in American
Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on
the securities in the Underlying Index. The Fund will invest at least 80% of its
total assets in securities of communication services companies that are
economically tied to China. For purposes of this 80% investment policy,
communication services companies include those companies that are classified in
the communications services sector under the Global Industry Classification
System ("GICS"). The Fund's 80% investment policies are non-fundamental and
require 60 days prior written notice to shareholders before they can be changed.
The Fund may lend securities representing up to one-third of the value of the
Fund’s total assets (including the value of the collateral received).
The
Underlying Index tracks the performance of companies in the MSCI China Index
(the "Parent Index") that are classified in the communication services sector,
as defined by MSCI, Inc. ("MSCI") the provider of the Underlying Index ("Index
Provider"). The Parent Index is a free float-adjusted market
capitalization-weighted index designed to measure the performance of securities
that are classified as operating in China according to the MSCI Global
Investable Markets Index Methodology, and
that
satisfy minimum market capitalization and liquidity thresholds. The securities
eligible for inclusion in the Underlying Index include H-Shares (securities of
companies incorporated in China that are denominated in Hong Kong Dollars and
listed on the Hong Kong Stock Exchange (the "HKSE")), B-Shares (securities of
companies denominated in U.S. dollars or Hong Kong dollars and listed on
Shanghai Stock Exchange (the "SSE") or Shenzen Stock Exchange (the "SZSE")), Red
Chips (securities of companies with a majority of their business operations in
mainland China and that are controlled by the national government or local
governments of China, traded on the HKSE in Hong Kong dollars), P-Chips
(securities of companies with the majority of their business operations in
mainland China and controlled by individuals in China, but that are incorporated
outside of China), A-Shares (securities of companies incorporated in mainland
China that trade on Chinese exchanges in renminbi) that are accessible through
the Shanghai-Hong Kong Stock Connect program ("Shanghai Connect") or the
Shenzhen-Hong Kong Stock Connect program ("Shenzhen Connect", and together with
Shanghai Connect, "Stock Connect Programs"), and foreign listings such as
American Depository Receipts ("ADRs"). The Stock Connect Programs are securities
trading and clearing programs that aim to achieve mutual stock market access
between China and Hong Kong. Under Stock Connect, the Fund's trading of eligible
A-shares listed on the SSE or the SZSE, as applicable, would be effectuated
through its Hong Kong brokers. Trading through the Stock Connect Programs is
subject to a daily quota, which limits the maximum net purchases under Stock
Connect Programs each day, and as such, buy orders for A-shares would be
rejected once the daily quota is exceeded (although the Fund will be permitted
to sell A-shares regardless of the daily quota balance). The daily quota is not
specific to the Fund. From time to time, other stock exchanges in China may
participate in Stock Connect, and A-shares listed and traded on such other stock
exchanges and accessible through Stock Connect may be added to the Underlying
Index, as determined by MSCI.
The
Underlying Index then follows a rules-based methodology that is designed to
select all constituents of the Parent Index that are classified in the
communication services sector under the GICS. The Underlying Index is weighted
according to each component's free-float adjusted market capitalization, but is
modified so that, as of the rebalance date, no group entity (defined by the
Index Provider as companies with a controlling stake owned by one entity)
constitutes more than 10% of the Underlying Index and so that, in the aggregate,
the individual group entities that would represent more than 5% of the
Underlying Index represent no more than 50% of the Underlying Index ("10/50
Cap"). The Underlying Index is reconstituted and re-weighted quarterly. The
Underlying Index may include large- and mid-capitalization companies. As of
December 31, 2022, the Underlying Index had 23 constituents. The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the entertainment and interactive media and services industries
and had significant exposure to the communication services
sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has
significant
exposure to one or more sectors, the Fund’s investments will likely have
significant exposure to such sectors. In such event, the Fund’s performance will
be particularly susceptible to adverse events impacting such industry or sector,
which may include, but are not limited to, the following: general economic
conditions or cyclical market patterns that could negatively affect supply and
demand; competition for resources; adverse labor relations; political or world
events; obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular industry or sector. As a result, the value of the Fund’s investments
may rise and fall more than the value of shares of a fund that invests in
securities of companies in a broader range of industries or sectors.
Risks
Related to Investing in the Communication Services Sector: Companies
in the communication services sector may be affected by industry competition,
substantial capital requirements, government regulation, cyclicality of revenues
and earnings, obsolescence of communications products and services due to
technological advancement, a potential decrease in the discretionary income of
targeted individuals and changing consumer tastes and interests.
Risks
Related to Investing in the Entertainment Industry:
Entertainment companies may be impacted by high costs of research and
development of new content and services in an effort to stay relevant in a
highly competitive industry, and entertainment products may face a risk of rapid
obsolescence. Entertainment companies are subject to risks that include
cyclicality of revenues and earnings, changing tastes and topical interests, and
decreases in the discretionary income of their targeted consumers. Sales of
content through physical formats and traditional content delivery services may
be displaced by new content delivery mechanisms, such as streaming technology,
and it is possible that such new content delivery mechanisms may themselves
become obsolete over time. The entertainment industry is regulated, and
changes to rules regarding advertising and the content produced by entertainment
companies can increase overall production and distribution costs. Companies in
the entertainment industry have at times faced increased regulatory pressure
which has delayed or prohibited the release of entertainment content.
Risks
Related to Investing in the Interactive Media and Services Industry:
The
success of the interactive media and services industry may be tied closely to
the performance of the overall domestic and global economy, interest rates,
competition and consumer confidence. Success depends heavily on disposable
household income and consumer spending. Also, companies in the interactive media
and services industry may be subject to severe competition, which may have an
adverse impact on their respective profitability. Changes in demographics and
consumer tastes can also affect the demand for, and success of, interactive
media and services in the marketplace.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China.
However,
Chinese markets generally continue to experience inefficiency, volatility and
pricing anomalies resulting from governmental influence, a lack of publicly
available information and/or political and social instability. Chinese companies
are also subject to the risk that Chinese authorities can intervene in their
operations and structure. Internal social unrest or confrontations with other
neighboring countries, including military conflicts in response to such events,
may also disrupt economic development in China and result in a greater risk of
currency fluctuations, currency convertibility, interest rate fluctuations and
higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the
activities
at the Chinese-based operating company are limited and the operating company may
engage in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access. As of December 31, 2022, the Fund had significant exposure to
VIEs, as defined above.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, China is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Hong Kong: Investments
in Hong Kong issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risk specific to Hong Kong. China is Hong
Kong’s largest trading partner, both in terms of exports and imports. Any
changes in the Chinese economy, trade regulations or currency exchange rates, or
a tightening of China’s control over Hong Kong, including in connection with
recent protests and unrest, may have an adverse impact on Hong Kong’s
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying Index does not. ETFs that track indices with significant
weight in emerging markets issuers may experience higher tracking error than
other ETFs that do not track such indices.
Reliance
on Trading Partners Risk:
The Fund invests in the Chinese economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the Chinese economy in which the Fund invests. Through its portfolio
companies' trading partners, the Fund is specifically exposed to Asian
Economic Risk,
European
Economic Risk,
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value
of
the loaned securities increases and the collateral is not increased accordingly.
Additionally, the Fund will bear any loss on the investment of cash collateral
it receives. These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a risk that
the Fund may not be able to recall the securities in sufficient time to vote on
material proxy matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance. On
December 6, 2018, the name of the Fund changed from the Global X NASDAQ China
Technology ETF to the Global X MSCI China Communication Services ETF to reflect
a change to the Fund's Index Provider from NASDAQ OMX Group, Inc. to MSCI, Inc.
and a change in the Fund's underlying index from the NASDAQ OMX China Technology
Index to the MSCI China Communication Services 10/50 Index. The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
9/30/2013 |
26.64% |
Worst
Quarter: |
9/30/2022 |
-27.47% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Ten
Years Ended December 31, 2022 |
Global
X MSCI China Communication Services ETF: |
|
|
|
·Return before
taxes |
-25.78% |
-13.31% |
1.46% |
·Return
after taxes on distributions1 |
-26.03% |
-13.47% |
1.08% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-15.09% |
-9.34% |
1.12% |
Hybrid
MSCI
China Communication Services 10/50 Index (net)2
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-25.23% |
-12.86% |
2.31% |
MSCI
Emerging Markets Index (net) (Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
-1.40% |
1.44% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
2
Hybrid Index performance
reflects the performance of the Solactive China Technology Index through
December 13, 2011, the NASDAQ OMX China Technology Index through December 5,
2018, and the MSCI China Communication Services 10/50 Index thereafter.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI China Consumer Discretionary
ETF
Ticker:
CHIQ Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI China
Consumer Discretionary ETF ("Fund") seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the MSCI China Consumer Discretionary 10/50 Index ("Underlying
Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.65% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.65% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$66 |
$208 |
$362 |
$810 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 22.64% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI
China Consumer Discretionary 10/50 Index ("Underlying Index") and in American
Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on
the securities in the Underlying Index. The Fund also invests at least 80% of
its total assets in securities of consumer discretionary companies that are
economically tied to China. For purposes of this policy, consumer discretionary
companies include those companies that are classified in the consumer
discretionary sector under the Global Industry Classification System ("GICS").
The Fund's 80% investment policies are non-fundamental and require 60 days prior
written notice to shareholders before they can be changed. The Fund may lend
securities representing up to one-third of the value of the Fund’s total assets
(including the value of the collateral received).
The
Underlying Index tracks the performance of companies in the MSCI China Index
(the "Parent Index") that are classified in the consumer discretionary sector,
as defined by MSCI, Inc. ("MSCI") the provider of the Underlying Index ("Index
Provider"). The Parent Index is a free float-adjusted market
capitalization-weighted index designed to measure the performance of securities
that are classified as operating in China according to the MSCI Global
Investable Markets Index Methodology, and that satisfy minimum market
capitalization and liquidity thresholds. The securities eligible for inclusion
in the Underlying Index
include
H-Shares (securities of companies incorporated in China that are denominated in
Hong Kong Dollars and listed on the Hong Kong Stock Exchange (the "HKSE")),
B-Shares (securities of companies denominated in U.S. dollars or Hong Kong
dollars and listed on Shanghai Stock Exchange (the "SSE") or Shenzen Stock
Exchange (the "SZSE")), Red Chips (securities of companies with a majority of
their business operations in mainland China and that are controlled by the
national government or local governments of China, traded on the HKSE in Hong
Kong dollars), P-Chips (securities of companies with the majority of their
business operations in mainland China and controlled by individuals in China,
but that are incorporated outside of China), A-Shares (securities of companies
incorporated in mainland China that trade on Chinese exchanges in renminbi) that
are accessible through the Shanghai-Hong Kong Stock Connect program ("Shanghai
Connect") or the Shenzhen-Hong Kong Stock Connect program ("Shenzhen Connect",
and together with Shanghai Connect, "Stock Connect Programs"), and foreign
listings such as American Depository Receipts ("ADRs"). The Stock Connect
Programs are securities trading and clearing programs that aim to achieve mutual
stock market access between China and Hong Kong. Under Stock Connect, the Fund's
trading of eligible A-shares listed on the SSE or the SZSE, as applicable, would
be effectuated through its Hong Kong brokers. Trading through the Stock Connect
Programs is subject to a daily quota, which limits the maximum net purchases
under Stock Connect Programs each day, and as such, buy orders for A-shares
would be rejected once the daily quota is exceeded (although the Fund will be
permitted to sell A-shares regardless of the daily quota balance). The daily
quota is not specific to the Fund. From time to time, other stock exchanges in
China may participate in Stock Connect, and A-shares listed and traded on such
other stock exchanges and accessible through Stock Connect may be added to the
Underlying Index, as determined by MSCI.
The
Underlying Index then follows a rules-based methodology that is designed to
select all constituents of the Parent Index that are classified in the consumer
discretionary sector under the GICS. The Underlying Index is weighted according
to each component's free-float adjusted market capitalization, but is modified
so that, as of the rebalance date, no group entity (defined by the Index
Provider as companies with a controlling stake owned by one entity) constitutes
more than 10% of the Underlying Index and so that, in the aggregate, the
individual group entities that would represent more than 5% of the Underlying
Index represent no more than 50% of the Underlying Index ("10/50 Cap"). The
Underlying Index is reconstituted and re-weighted quarterly. The Underlying
Index may include large- and mid-capitalization companies. As of
December 31, 2022, the Underlying Index had 73 constituents. The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index. The Fund will
not invest in investment companies or other pooled investment vehicles, except
for limited investment in money market funds utilized for cash management
purposes in the ordinary course of business, which money market funds will not
exceed 10% of Fund assets.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the internet and direct marketing retail industry and had
significant exposure to the consumer discretionary
sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies
in
a particular industry or sector. As a result, the value of the Fund’s
investments may rise and fall more than the value of shares of a fund that
invests in securities of companies in a broader range of industries or sectors.
Risks
Related to Investing in the Consumer Discretionary Sector: The
consumer discretionary sector may be affected by changes in domestic and
international economies, exchange and interest rates, competition, consumers’
disposable income and consumer preferences, social trends and marketing
campaigns.
Risks
Related to Investing in the Internet and Direct Marketing Retail Industry:
Companies
in the internet and direct marketing retail industry are dependent on internal
infrastructure and on the availability, reliability and security of the internet
and related systems. Critical systems and operations may be vulnerable to damage
or interruption from fire, flood, power loss, telecommunications failure,
terrorist attacks, cyber-attacks, acts of war, break-ins, earthquake and similar
events. Any system interruption that results in the unavailability of a
company’s website or mobile app or reduced performance of transaction systems
could interrupt or substantially reduce a company’s ability to conduct its
business. Companies in the internet and direct marketing retail industry are
dependent on paid and unpaid natural search engines and are therefore dependent
on business decisions made by companies that offer natural search engines. Any
business changes by dominant providers of natural search engines can be
detrimental to an internet and direct marketing retail company’s business while
being totally outside of the control of such company.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property
protections,
may have a substantial impact on the Chinese economy. Reduction in spending on
Chinese products and services, institution of additional tariffs or other trade
barriers (including as a result of heightened trade tensions between China and
the U.S. or in response to actual or alleged Chinese cyber activity), or a
downturn in any of the economies of China’s key trading partners may have an
adverse impact on the Chinese economy. The continuation or worsening of the
current political climate between China and the U.S. could result in additional
regulatory restrictions being contemplated or imposed in the U.S. or in China
that could impact the Fund’s ability to invest in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based
operating
company, which may cause the value of the Fund’s investment in the listed shell
company to suffer a significant loss. For example, in 2021, the Chinese
government prohibited use of the VIE structure for investment in after-school
tutoring companies. There is no guarantee that the Chinese government will not
place similar restrictions on other industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access. As of December 31, 2022, the Fund had significant exposure to
VIEs, as defined above.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, China is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Hong Kong: Investments
in Hong Kong issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risk specific to Hong Kong. China is Hong
Kong’s largest trading partner, both in terms of exports and imports. Any
changes in the Chinese economy, trade regulations or currency exchange rates, or
a tightening of China’s control over Hong Kong, including in connection with
recent protests and unrest, may have an adverse impact on Hong Kong’s
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
The Fund invests in the Chinese economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the Chinese economy in which the Fund invests. Through its portfolio
companies' trading partners, the Fund is specifically exposed to Asian
Economic Risk,
European
Economic Risk,
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance. On
December 6, 2018, the name of the Fund changed from the Global X China Consumer
ETF to the Global X MSCI China Consumer Discretionary ETF to reflect a change to
the Fund's Index Provider from Solactive AG to MSCI, Inc. and a change in the
Fund's underlying index from the Solactive China Consumer Total Return Index to
the MSCI China Consumer Discretionary 10/50 Index. The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2020 |
31.30% |
Worst
Quarter: |
9/30/2022 |
-23.20% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Ten
Years Ended December 31, 2022 |
Global
X MSCI China Consumer Discretionary ETF: |
|
|
|
·Return before
taxes |
-22.07% |
2.55% |
4.77% |
·Return
after taxes on distributions1 |
-22.13% |
2.28% |
4.29% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-13.01% |
1.86% |
3.57% |
Hybrid
MSCI China Consumer Discretionary 10/50 Index (net)2
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-21.50% |
3.09% |
5.41% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
-1.40% |
1.44% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
2
Hybrid index performance
reflects the performance of the Solactive China Consumer Total Return Index
through December 5, 2018, and the MSCI China Consumer Discretionary 10/50 Index
thereafter.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI China Consumer Staples
ETF
Ticker:
CHIS Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI China
Consumer Staples ETF ("Fund") seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the MSCI China Consumer Staples 10/50 Index ("Underlying
Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.65% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.65% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$66 |
$208 |
$362 |
$810 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 65.46% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI
China Consumer Staples 10/50 Index ("Underlying Index") and in American
Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on
the securities in the Underlying Index. The Fund's 80% investment policy is
non-fundamental and requires 60 days prior written notice to shareholders before
it can be changed.
The
Underlying Index tracks the performance of companies in the MSCI China Index
(the "Parent Index") that are classified in the consumer staples sector, as
defined by MSCI, Inc. ("MSCI") the provider of the Underlying Index ("Index
Provider"). The Parent Index is a free float-adjusted market
capitalization-weighted index designed to measure the performance of securities
that are classified as operating in China according to the MSCI Global
Investable Markets Index Methodology, and that satisfy minimum market
capitalization and liquidity thresholds. The securities eligible for inclusion
in the Underlying Index include H-Shares (securities of companies incorporated
in China that are denominated in Hong Kong Dollars and listed on the Hong Kong
Stock Exchange (the "HKSE")), B-Shares (securities of companies denominated in
U.S. dollars or Hong Kong dollars and listed on Shanghai Stock Exchange (the
"SSE") or Shenzen Stock Exchange (the "SZSE")), Red Chips (securities of
companies with a majority of their business operations in mainland China and
that are controlled by the national government or local governments of China,
traded on the HKSE in Hong Kong dollars), P-Chips (securities of companies with
the majority of their business operations in mainland China and controlled by
individuals in China, but that are incorporated outside of China),
A-
Shares
(securities of companies incorporated in mainland China that trade on Chinese
exchanges in renminbi) that are accessible through the Shanghai-Hong Kong Stock
Connect program ("Shanghai Connect") or the Shenzhen-Hong Kong Stock Connect
program ("Shenzhen Connect", and together with Shanghai Connect, "Stock Connect
Programs"), and foreign listings such as American Depository Receipts ("ADRs").
The Stock Connect Programs are securities trading and clearing programs that aim
to achieve mutual stock market access between China and Hong Kong. Under Stock
Connect, the Fund's trading of eligible A-shares listed on the SSE or the SZSE,
as applicable, would be effectuated through its Hong Kong brokers. Trading
through the Stock Connect Programs is subject to a daily quota, which limits the
maximum net purchases under Stock Connect Programs each day, and as such, buy
orders for A-shares would be rejected once the daily quota is exceeded (although
the Fund will be permitted to sell A-shares regardless of the daily quota
balance). The daily quota is not specific to the Fund. From time to time, other
stock exchanges in China may participate in Stock Connect, and A-shares listed
and traded on such other stock exchanges and accessible through Stock Connect
may be added to the Underlying Index, as determined by MSCI.
The
Underlying Index follows a rules-based methodology that is designed to select
all constituents of the Parent Index that are classified in the consumer staples
sector under the Global Industry Classification System ("GICS"). The Underlying
Index is weighted according to each component's free-float adjusted market
capitalization, but is modified so that, as of the rebalance date, no group
entity (defined by the Index Provider as companies with a controlling stake
owned by one entity) constitutes more than 10% of the Underlying Index and so
that, in the aggregate, the individual group entities that would represent more
than 5% of the Underlying Index represent no more than 50% of the Underlying
Index ("10/50 Cap"). The Underlying Index is reconstituted and re-weighted
quarterly. The Underlying Index may include large- and mid-capitalization
companies. As of December 31, 2022, the Underlying Index had 54
constituents. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the beverages and food products industries and had significant
exposure to the consumer staples
sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has
significant
exposure to one or more sectors, the Fund’s investments will likely have
significant exposure to such sectors. In such event, the Fund’s performance will
be particularly susceptible to adverse events impacting such industry or sector,
which may include, but are not limited to, the following: general economic
conditions or cyclical market patterns that could negatively affect supply and
demand; competition for resources; adverse labor relations; political or world
events; obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular industry or sector. As a result, the value of the Fund’s investments
may rise and fall more than the value of shares of a fund that invests in
securities of companies in a broader range of industries or sectors.
Risks
Related to Investing in the Beverages Industry:
Beverage companies operate in highly competitive categories and markets.
Companies are frequently required to anticipate and effectively respond to
shifts in consumer trends and preferences, including health trends and
preferences, and failure to account for changes in consumer demographics or
preferences can result in reduced demand for a company’s products. Beverage
companies may be affected by the imposition or proposed imposition of taxes or
other regulations. Any failures of process controls can increase the risk of
product contamination and can result in substantial product liability risk.
Risks
Related to Investing in the Consumer Staples Sector: The
consumer staples sector may be affected by, among other things, marketing
campaigns, changes in consumer demands, government regulations and changes in
commodity prices.
Risks
Related to Investing in the Food Products Industry: The
food products industry is subject to various risks, including evolving consumer
preferences, nutritional and health-related concerns, federal, state and local
food inspection and processing controls, consumer product liability claims,
risks of product tampering, and the availability and expense of liability
insurance. The meat and poultry industries are subject to scrutiny due to the
association of meat and poultry products with outbreaks of illness caused by
food borne pathogens. Product recalls are sometimes required in the food
industry to withdraw contaminated or mislabeled products from the market.
Additionally, the failure to identify and react appropriately to changes in
consumer trends, demands and preferences could lead to, among other things,
reduced demand and price reduction for a company’s products. Companies in the
food products industry may be adversely affected by changes in domestic or
foreign economic conditions, including inflation or deflation, interest rates,
availability of capital markets, consumer spending rates, and energy
availability and costs (including fuel surcharges).
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China.
However,
Chinese markets generally continue to experience inefficiency, volatility and
pricing anomalies resulting from governmental influence, a lack of publicly
available information and/or political and social instability. Chinese companies
are also subject to the risk that Chinese authorities can intervene in their
operations and structure. Internal social unrest or confrontations with other
neighboring countries, including military conflicts in response to such events,
may also disrupt economic development in China and result in a greater risk of
currency fluctuations, currency convertibility, interest rate fluctuations and
higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the
activities
at the Chinese-based operating company are limited and the operating company may
engage in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, China is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Hong Kong: Investments
in Hong Kong issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risk specific to Hong Kong. China is Hong
Kong’s largest trading partner, both in terms of exports and imports. Any
changes in the Chinese economy, trade regulations or currency exchange rates, or
a tightening of China’s control over Hong Kong, including in connection with
recent protests and unrest, may have an adverse impact on Hong Kong’s
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central
governments
and governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
The Fund invests in the Chinese economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the Chinese economy in which the Fund invests. Through its portfolio
companies' trading
partners,
the Fund is specifically exposed to Asian
Economic Risk,
European
Economic Risk,
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance.
The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
3/31/2019 |
29.26% |
Worst
Quarter: |
3/31/2022 |
-19.42% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (12/07/2018) |
Global
X MSCI China Consumer Staples ETF: |
|
|
·Return before
taxes |
-19.51% |
13.47% |
·Return
after taxes on distributions1 |
-19.72% |
12.64% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-11.44% |
10.55% |
MSCI
China Consumer Staples 10/50 Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-18.88% |
14.24% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
1.83% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
the Fund's inception. Mr. Xie has been a Portfolio Manager of the Fund since
March 1, 2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10,
2019. Ms. Yang has been a Portfolio Manager of the Fund since December 2020. Mr.
Lu has been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI China Energy
ETF
Ticker:
CHIE Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI China Energy
ETF ("Fund") seeks to provide investment results that correspond generally to
the price and yield performance, before fees and expenses, of the MSCI China
Energy IMI Plus 10/50 Index ("Underlying Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.65% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.01% |
Total
Annual Fund Operating Expenses: |
0.66% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$67 |
$211 |
$368 |
$822 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 106.55% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI
China Energy IMI Plus 10/50 Index ("Underlying Index") and in American
Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on
the securities in the Underlying Index. The Fund also invests at least 80% of
its total assets in securities of energy companies that are economically tied to
China. For purposes of this policy, energy companies include those companies
that are classified in the energy sector under the Global Industry
Classification System ("GICS"). The Fund's 80% investment policies are
non-fundamental and require 60 days prior written notice to shareholders before
they can be changed.
The
Underlying Index tracks the performance of companies in the MSCI China
Investable Market Index (the "Parent Index") that are classified in the energy
sector, as defined by MSCI, Inc. ("MSCI") the provider of the Underlying Index
("Index Provider"). The Parent Index is a free float-adjusted market
capitalization-weighted index designed to measure the performance of securities
that are classified as operating in China according to the MSCI Global
Investable Markets Index Methodology, and that satisfy minimum market
capitalization and liquidity thresholds. The securities eligible for inclusion
in the Underlying Index include H-Shares (securities of companies incorporated
in China that are denominated in Hong Kong Dollars and listed on the Hong Kong
Stock Exchange (the "HKSE")), B-Shares (securities of companies denominated in
U.S. dollars or Hong Kong dollars and listed on Shanghai Stock Exchange (the
"SSE") or Shenzen Stock Exchange (the "SZSE")), Red Chips (securities of
companies
with a majority of their business operations in mainland China and that are
controlled by the national government or local governments of China, traded on
the HKSE in Hong Kong dollars), P-Chips (securities of companies with the
majority of their business operations in mainland China and controlled by
individuals in China, but that are incorporated outside of China), A-Shares
(securities of companies incorporated in mainland China that trade on Chinese
exchanges in renminbi) that are accessible through the Shanghai-Hong Kong Stock
Connect program ("Shanghai Connect") or the Shenzhen-Hong Kong Stock Connect
program ("Shenzhen Connect", and together with Shanghai Connect, "Stock Connect
Programs"), and foreign listings such as American Depository Receipts ("ADRs").
The Stock Connect Programs are securities trading and clearing programs that aim
to achieve mutual stock market access between China and Hong Kong. Under Stock
Connect, the Fund's trading of eligible A-shares listed on the SSE or the SZSE,
as applicable, would be effectuated through its Hong Kong brokers. Trading
through the Stock Connect Programs is subject to a daily quota, which limits the
maximum net purchases under Stock Connect Programs each day, and as such, buy
orders for A-shares would be rejected once the daily quota is exceeded (although
the Fund will be permitted to sell A-shares regardless of the daily quota
balance). The daily quota is not specific to the Fund. From time to time, other
stock exchanges in China may participate in Stock Connect, and A-shares listed
and traded on such other stock exchanges and accessible through Stock Connect
may be added to the Underlying Index, as determined by MSCI.
The
Underlying Index then follows a rules-based methodology that is designed to
select all constituents of the Parent Index that are classified in the energy
sector under the GICS. The Underlying Index is weighted according to each
component's free-float adjusted market capitalization, but is modified so that,
as of the rebalance date, no issuer constitutes more than 10% of the Underlying
Index and so that, in the aggregate, the issuers that would represent more than
5% of the Underlying Index represent no more than 50% of the Underlying Index
("10/50 Cap"). The Underlying Index is reconstituted and re-weighted quarterly.
The Underlying Index may include large-, mid- and small-capitalization
companies. As of December 31, 2022, the Underlying Index had 28
constituents. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The
Fund concentrates its investments (i.e.,
holds 25% or more of its total assets) in a particular industry or group of
industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the oil, gas and consumable fuels industry and had significant
exposure to the energy sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Energy Sector:
The value of securities issued by companies in the energy sector may decline for
many reasons, including, without limitation, changes in energy prices;
international politics; energy conservation; the success of exploration
projects; natural disasters or other catastrophes; changes in exchange rates,
interest rates, or economic conditions; changes in demand for energy products
and services; and tax and other government regulatory policies. Actions taken by
central governments may dramatically impact supply and demand forces that
influence energy prices, resulting in sudden decreases in value for companies in
the energy sector.
Risks
Related to Investing in the Oil, Gas and Consumable Fuels Industry:
The oil, gas and consumable fuels industry is cyclical and highly dependent on
the market price of fuel. The market value of companies in the oil, gas and
consumable fuels industry are strongly affected by the levels and volatility of
global commodity prices, supply and demand, capital expenditures on exploration
and production, energy conservation efforts, the prices of alternative fuels,
exchange rates and technological advances. Companies in this sector are subject
to substantial government regulation and contractual fixed pricing, which may
increase the cost of business and limit these companies’ earnings. Actions taken
by central governments may dramatically impact supply and demand forces that
influence the market price of fuel, resulting in sudden decreases in value for
companies in the oil, gas and consumable fuels industry. A significant portion
of their revenues depends on a relatively small number of customers, including
governmental entities and utilities. As a result, governmental budget restraints
may have a material adverse effect on the stock prices of companies in the
industry.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese
companies
are also subject to the risk that Chinese authorities can intervene in their
operations and structure. Internal social unrest or confrontations with other
neighboring countries, including military conflicts in response to such events,
may also disrupt economic development in China and result in a greater risk of
currency fluctuations, currency convertibility, interest rate fluctuations and
higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment
value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, China is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Hong Kong: Investments
in Hong Kong issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risk specific to Hong Kong. China is Hong
Kong’s largest trading partner, both in terms of exports and imports. Any
changes in the Chinese economy, trade regulations or currency exchange rates, or
a tightening of China’s control over Hong Kong, including in connection with
recent protests and unrest, may have an adverse impact on Hong Kong’s
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
The Fund invests in the Chinese economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the Chinese economy in which the Fund invests. Through its portfolio
companies' trading partners, the Fund is specifically exposed to Asian
Economic Risk,
European
Economic Risk,
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Turnover
Risk:
The
Fund may engage in frequent and active trading, which may significantly increase
the Fund’s portfolio turnover rate. At
times, the Fund may have a portfolio turnover rate substantially greater than
100%. For example, a portfolio turnover rate of 300%
is equivalent to the Fund buying and selling all of its securities three times
during the course of a year. A
high portfolio turnover rate would result in
high brokerage costs for the Fund, may result in higher taxes when shares are
held in a taxable account and lower Fund
performance.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance. On
December 6, 2018, the name of the Fund changed from the Global X China Energy
ETF to the Global X MSCI China Energy ETF to reflect a change to the Fund's
Index Provider from Solactive AG to MSCI, Inc. and a change in the Fund's
underlying index from the Solactive China Energy Total Return Index to the MSCI
China Energy IMI Plus 10/50 Index. The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
9/30/2021 |
27.30% |
Worst
Quarter: |
3/31/2020 |
-24.63% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Ten
Years Ended December 31, 2022 |
Global
X MSCI China Energy ETF: |
|
|
|
·Return before
taxes |
26.67% |
8.46% |
2.84% |
·Return
after taxes on distributions1 |
26.04% |
7.80% |
2.24% |
·Return
after taxes on distributions and sale of Fund Shares1 |
17.20% |
6.73% |
2.19% |
Hybrid
MSCI China Energy IMI Plus 10/50 Index (net)2
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
27.60% |
9.55% |
3.78% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
-1.40% |
1.44% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
2
Hybrid index performance
reflects the performance of the Solactive China Energy Total Return Index
through December 5, 2018, and the MSCI China Energy IMI Plus 10/50 Index
thereafter.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI China Financials
ETF
Ticker:
CHIX Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI China
Financials ETF ("Fund") seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
MSCI China Financials 10/50 Index ("Underlying
Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.65% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.01% |
Total
Annual Fund Operating Expenses: |
0.66% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$67 |
$211 |
$368 |
$822 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 37.97% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI
China Financials 10/50 Index ("Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund also invests at least 80% of its
total assets in securities of financials companies that are economically tied to
China. For purposes of this policy, financials companies include those companies
that are classified in the financials sector under the Global Industry
Classification System ("GICS"). The Fund's 80% investment policies are
non-fundamental and require 60 days prior written notice to shareholders before
they can be changed. The Fund may lend securities representing up to one-third
of the value of the Fund’s total assets (including the value of the collateral
received).
The
Underlying Index tracks the performance of companies in the MSCI China Index
(the "Parent Index") that are classified in the financials sector, as defined by
MSCI, Inc. ("MSCI") the provider of the Underlying Index ("Index Provider"). The
Parent Index is a free float-adjusted market capitalization-weighted index
designed to measure the performance of securities that are classified as
operating in China according to the MSCI Global Investable Markets Index
Methodology, and that satisfy minimum market capitalization and liquidity
thresholds. The securities eligible for inclusion in the Underlying Index
include H-Shares (securities of companies incorporated in China that are
denominated in Hong Kong Dollars and listed on the Hong Kong Stock Exchange (the
"HKSE")), B-Shares (securities of companies denominated in U.S. dollars or Hong
Kong dollars and listed on Shanghai Stock Exchange (the "SSE") or Shenzen Stock
Exchange (the "SZSE")), Red Chips (securities of companies with a
majority
of their business operations in mainland China and that are controlled by the
national government or local governments of China, traded on the HKSE in Hong
Kong dollars), P-Chips (securities of companies with the majority of their
business operations in mainland China and controlled by individuals in China,
but that are incorporated outside of China), A-Shares (securities of companies
incorporated in mainland China that trade on Chinese exchanges in renminbi) that
are accessible through the Shanghai-Hong Kong Stock Connect program ("Shanghai
Connect") or the Shenzhen-Hong Kong Stock Connect program ("Shenzhen Connect",
and together with Shanghai Connect, "Stock Connect Programs"), and foreign
listings such as American Depository Receipts ("ADRs"). The Stock Connect
Programs are securities trading and clearing programs that aim to achieve mutual
stock market access between China and Hong Kong. Under Stock Connect, the Fund's
trading of eligible A-shares listed on the SSE or the SZSE, as applicable, would
be effectuated through its Hong Kong brokers. Trading through the Stock Connect
Programs is subject to a daily quota, which limits the maximum net purchases
under Stock Connect Programs each day, and as such, buy orders for A-shares
would be rejected once the daily quota is exceeded (although the Fund will be
permitted to sell A-shares regardless of the daily quota balance). The daily
quota is not specific to the Fund. From time to time, other stock exchanges in
China may participate in Stock Connect, and A-shares listed and traded on such
other stock exchanges and accessible through Stock Connect may be added to the
Underlying Index, as determined by MSCI.
The
Underlying Index then follows a rules-based methodology that is designed to
select all constituents of the Parent Index that are classified in the
financials sector under the GICS. The Underlying Index is weighted according to
each component's free-float adjusted market capitalization, but is modified so
that, as of the rebalance date, no group entity (defined by the Index Provider
as companies with a controlling stake owned by one entity) constitutes more than
10% of the Underlying Index and so that, in the aggregate, the individual group
entities that would represent more than 5% of the Underlying Index represent no
more than 50% of the Underlying Index ("10/50 Cap"). The Underlying Index is
reconstituted and re-weighted quarterly. The Underlying Index may include large-
and mid-capitalization companies. As of December 31, 2022, the Underlying
Index had 92 constituents. The Fund's investment objective and Underlying Index
may be changed without shareholder approval.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the banking industry and had significant exposure to the
financials sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the
China
and Hong Kong markets. Stock Connect was developed by Hong Kong Exchanges and
Clearing Limited, the Shanghai Stock Exchange ("SSE") (in the case of Shanghai
Connect) or the Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen
Connect), and the China Securities Depository and Clearing Corporation Limited
(“CSDCC”). The Fund currently intends to gain exposure to A-Shares through the
Stock Connect Programs. Investments in A-Shares are subject to various
regulations and limits, and the recoupment or repatriation of assets invested in
A-Shares is subject to restrictions by the Chinese government. In addition,
investors from outside mainland China may face difficulties or prohibitions
accessing certain A-Shares that are part of a restricted list in countries such
as the U.S. A-Shares may be subject to frequent and widespread trading halts and
may become illiquid. Trading suspensions in certain stock could lead to greater
market execution risk and costs for the Fund, and the creation and redemption of
Creation Units (as defined below) may also be disrupted. These risks, among
others, could adversely affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Banking Industry:
The performance of stocks in the banking industry may be affected by extensive
governmental regulation which may limit both the amounts and types of loans and
other financial commitments they can make, and the interest rates and fees they
can charge and the amount of capital they must maintain. Profitability is
largely dependent on the availability and cost of capital funds and can
fluctuate significantly when interest rates change. Credit losses resulting from
financial difficulties of borrowers can negatively impact banking companies.
Banks may also be subject to severe price competition. Competition is high among
banking companies and failure to maintain or increase market share may result in
lost market value. The impact of changes in capital requirements and recent or
future regulation of any individual banking company, or of the financials sector
as a whole, cannot be predicted. In recent years, cyberattacks and technology
malfunctions and failures have become increasingly frequent in this sector and
have caused significant losses to companies in this sector, which may negatively
impact the Fund.
Risks
Related to Investing in the Financials Sector: Performance
of companies in the financials sector may be adversely impacted by many factors,
including, among others, government regulations, economic conditions, credit
rating downgrades, changes in interest rates, and decreased liquidity in credit
markets. This sector has experienced significant losses in the past, and the
impact of more stringent capital requirements and of current or future
regulation on any individual financial company or on the sector as a whole
cannot be predicted. In recent years, cyber-attacks and technology malfunctions
and failures have become increasingly frequent in this sector and have caused
significant losses to companies in this sector, which may negatively impact the
Fund.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without
the
Chinese-based issuer’s authorization to enter into contractual arrangements in
China. Chops and seals, which are carved stamps used to sign documents,
represent a legally binding commitment by the company. Moreover, any future
regulatory action may prohibit the ability of the shell company to receive the
economic benefits of the Chinese-based operating company, which may cause the
value of the Fund’s investment in the listed shell company to suffer a
significant loss. For example, in 2021, the Chinese government prohibited use of
the VIE structure for investment in after-school tutoring companies. There is no
guarantee that the Chinese government will not place similar restrictions on
other industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, China is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Hong Kong: Investments
in Hong Kong issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risk specific to Hong Kong. China is Hong
Kong’s largest trading partner, both in terms of exports and imports. Any
changes in the Chinese economy, trade regulations or currency exchange rates, or
a tightening of China’s control over Hong Kong, including in connection with
recent protests and unrest, may have an adverse impact on Hong Kong’s
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
The Fund invests in the Chinese economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the Chinese economy in which the Fund invests. Through its portfolio
companies' trading partners, the Fund is specifically exposed to Asian
Economic Risk,
European
Economic Risk,
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance. On
December 6, 2018, the name of the Fund changed from the Global X China
Financials ETF to the Global X MSCI China Financials ETF to reflect a change to
the Fund's Index Provider from Solactive AG to MSCI, Inc. and a change in the
Fund's underlying index from the Solactive China Financials Total Return Index
to the MSCI China Financials 10/50 Index. The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2014 |
24.46% |
Worst
Quarter: |
9/30/2015 |
-25.28% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Ten
Years Ended December 31, 2022 |
Global
X MSCI China Financials ETF: |
|
|
|
·Return before
taxes |
-10.19% |
-4.10% |
1.94% |
·Return
after taxes on distributions1 |
-11.14% |
-4.81% |
1.36% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-4.85% |
-2.78% |
1.71% |
Hybrid
MSCI China Financials 10/50 Index (net)2
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-9.46% |
-3.45% |
2.67% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
-1.40% |
1.44% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
2
Hybrid index performance
reflects the performance of the Solactive China Financials Total Return Index
through December 5, 2018, and the MSCI China Financials 10/50 Index thereafter.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI China Health Care
ETF
Ticker:
CHIH Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI China Health
Care ETF ("Fund") seeks to provide investment results that correspond generally
to the price and yield performance, before fees and expenses, of the MSCI China
Health Care 10/50 Index ("Underlying Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.65% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.65% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$66 |
$208 |
$362 |
$810 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 20.49% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI
China Health Care 10/50 Index ("Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund's 80% investment policy is
non-fundamental and requires 60 days prior written notice to shareholders before
it can be changed.
The
Underlying Index tracks the performance of companies in the MSCI China Index
(the "Parent Index") that are classified in the health care sector, as defined
by MSCI, Inc. ("MSCI") the provider of the Underlying Index ("Index Provider").
The Parent Index is a free float-adjusted market capitalization-weighted index
designed to measure the performance of securities that are classified as
operating in China according to the MSCI Global Investable Markets Index
Methodology, and that satisfy minimum market capitalization and liquidity
thresholds. The securities eligible for inclusion in the Underlying Index
include H-Shares (securities of companies incorporated in China that are
denominated in Hong Kong Dollars and listed on the Hong Kong Stock Exchange (the
"HKSE")), B-Shares (securities of companies denominated in U.S. dollars or Hong
Kong dollars and listed on Shanghai Stock Exchange (the "SSE") or Shenzen Stock
Exchange (the "SZSE")), Red Chips (securities of companies with a majority of
their business operations in mainland China and that are controlled by the
national government or local governments of China, traded on the HKSE in Hong
Kong dollars), P-Chips (securities of companies with the majority of their
business operations in mainland China and controlled by individuals in China,
but that are incorporated outside of China), A-
Shares
(securities of companies incorporated in mainland China that trade on Chinese
exchanges in renminbi) that are accessible through the Shanghai-Hong Kong Stock
Connect program ("Shanghai Connect") or the Shenzhen-Hong Kong Stock Connect
program ("Shenzhen Connect", and together with Shanghai Connect, "Stock Connect
Programs"), and foreign listings such as American Depository Receipts ("ADRs").
The Stock Connect Programs are securities trading and clearing programs that aim
to achieve mutual stock market access between China and Hong Kong. Under Stock
Connect, the Fund's trading of eligible A-shares listed on the SSE or the SZSE,
as applicable, would be effectuated through its Hong Kong brokers. Trading
through the Stock Connect Programs is subject to a daily quota, which limits the
maximum net purchases under Stock Connect Programs each day, and as such, buy
orders for A-shares would be rejected once the daily quota is exceeded (although
the Fund will be permitted to sell A-shares regardless of the daily quota
balance). The daily quota is not specific to the Fund. From time to time, other
stock exchanges in China may participate in Stock Connect, and A-shares listed
and traded on such other stock exchanges and accessible through Stock Connect
may be added to the Underlying Index, as determined by MSCI.
The
Underlying Index then follows a rules-based methodology that is designed to
select all constituents of the Parent Index that are classified in the health
care sector under the Global Industry Classification System ("GICS"). The
Underlying Index is weighted according to each component's free-float adjusted
market capitalization, but is modified so that, as of the rebalance date, no
group entity (defined by the Index Provider as companies with a controlling
stake owned by one entity) constitutes more than 10% of the Underlying Index and
so that, in the aggregate, the individual group entities that would represent
more than 5% of the Underlying Index represent no more than 50% of the
Underlying Index ("10/50 Cap"). The Underlying Index is reconstituted and
re-weighted quarterly. The Underlying Index may include large- and
mid-capitalization companies. As of December 31, 2022, the Underlying Index
had 79 constituents. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the pharmaceuticals industry and had significant exposure to the
health care sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has
significant
exposure to one or more sectors, the Fund’s investments will likely have
significant exposure to such sectors. In such event, the Fund’s performance will
be particularly susceptible to adverse events impacting such industry or sector,
which may include, but are not limited to, the following: general economic
conditions or cyclical market patterns that could negatively affect supply and
demand; competition for resources; adverse labor relations; political or world
events; obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular industry or sector. As a result, the value of the Fund’s investments
may rise and fall more than the value of shares of a fund that invests in
securities of companies in a broader range of industries or sectors.
Risks
Related to Investing in the Health Care Sector: The
health care sector may be affected by government regulations and government
health care programs, increases or decreases in the cost of medical products and
services, an increased emphasis on outpatient services, and product liability
claims, among other factors. Many health care companies are heavily dependent on
patent protection, and the expiration of a company's patent may adversely affect
that company's profitability. Health care companies are subject to competitive
forces that may result in price discounting and may be thinly capitalized and
susceptible to product obsolescence. Companies in the health care sector may
also be affected by unforeseen circumstances including but not limited to the
spread of infectious disease which could impact drug development priorities and
pipelines, supply and demand dynamics for health care equipment, as well as the
ability to receive care in health care service facilities.
Risks
Related to Investing in the Pharmaceuticals Industry:
Companies in the pharmaceuticals industry may be affected by industry
competition, dependency on a limited number of products, obsolescence of
products, government approvals and regulations, loss or impairment of
intellectual property rights and litigation regarding product liability. Demand
for pharmaceuticals, generally speaking and specific to sub-segments, may
fluctuate due to unexpected events, including but not limited to global health
crises like pandemics which could strain health care systems and alter health
care needs. Such demand fluctuations could positively or negatively impact
pharmaceutical companies.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE
structures
do not comply with Chinese law and regulations, including those related to
restrictions on foreign ownership, it could subject a Chinese-based issuer to
penalties, revocation of business and operating licenses, or forfeiture of
ownership interest. In addition, the listed shell company’s control over a VIE
may also be jeopardized if a natural person who holds the equity interest in the
VIE breaches the terms of the agreement, is subject to legal proceedings or if
any physical instruments for authenticating documentation, such as chops and
seals, are used without the Chinese-based issuer’s authorization to enter into
contractual arrangements in China. Chops and seals, which are carved stamps used
to sign documents, represent a legally binding commitment by the company.
Moreover, any future regulatory action may prohibit the ability of the shell
company to receive the economic benefits of the Chinese-based operating company,
which may cause the value of the Fund’s investment in the listed shell company
to suffer a significant loss. For example, in 2021, the Chinese government
prohibited use of the VIE structure for investment in after-school tutoring
companies. There is no guarantee that the Chinese government will not place
similar restrictions on other industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, China is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Hong Kong: Investments
in Hong Kong issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risk specific to Hong Kong. China is Hong
Kong’s largest trading partner, both in terms of exports and imports. Any
changes in the Chinese economy, trade regulations or currency exchange rates, or
a tightening of China’s control over Hong Kong, including in connection with
recent protests and unrest, may have an adverse impact on Hong Kong’s
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support
should
economic growth slow. Additionally, China’s shift away from a zero-COVID policy
creates both opportunities and risks, causing uncertainty for global economic
growth. Market risk factors may result in increased volatility and/or decreased
liquidity in the securities markets. The Fund’s NAV could decline over short
periods due to short-term market movements and over longer periods during market
downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
The Fund invests in the Chinese economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the Chinese economy in which the Fund invests. Through its portfolio
companies' trading partners, the Fund is specifically exposed to Asian
Economic Risk,
European
Economic Risk,
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those
Authorized
Participants is obligated to engage in creation and/or redemption transactions.
To the extent that those Authorized Participants exit the business or are unable
to process creation and/or redemption orders, such as in times of market stress,
Shares may be more likely to trade at a premium or discount to NAV and/or at
wider intraday bid-ask spreads, and possibly face trading halts and/or delisting
from an exchange. Authorized Participants Concentration Risk may be heightened
because the Fund invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart and table that
follow show how the Fund performed on a calendar year basis and provide an
indication of the risks of investing in the Fund by showing changes in the
Fund's performance from year to year and by showing how the Fund's average
annual returns for the indicated periods compare with the Fund's benchmark index
and a broad measure of market
performance.
The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
36.25% |
Worst
Quarter: |
9/30/2022 |
-22.93% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (12/07/2018) |
Global
X MSCI China Health Care ETF: |
|
|
·Return before
taxes |
-22.67% |
3.03% |
·Return
after taxes on distributions1 |
-22.75% |
2.93% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-13.37% |
2.32% |
MSCI
China Health Care 10/50 Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-22.12% |
3.78% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
1.83% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
the Fund's inception. Mr. Xie has been a Portfolio Manager of the Fund since
March 1, 2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10,
2019. Ms. Yang has been a Portfolio Manager of the Fund since December 2020. Mr.
Lu has been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI China Industrials
ETF
Ticker:
CHII Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI China
Industrials ETF ("Fund") seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
MSCI China Industrials 10/50 Index ("Underlying
Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.65% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.65% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$66 |
$208 |
$362 |
$810 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 105.23% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI
China Industrials 10/50 Index ("Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund also invests at least 80% of its
total assets in securities of industrials companies that are economically tied
to China. For purposes of this policy, industrials companies include those
companies that are classified in the industrials sector under the Global
Industry Classification System ("GICS"). The Fund's 80% investment policies are
non-fundamental and require 60 days prior written notice to shareholders before
they can be changed.
The
Underlying Index tracks the performance of companies in the MSCI China Index
(the "Parent Index") that are classified in the industrials sector, as defined
by MSCI, Inc. ("MSCI") the provider of the Underlying Index ("Index Provider").
The Parent Index is a free float-adjusted market capitalization-weighted index
designed to measure the performance of securities that are classified as
operating in China according to the MSCI Global Investable Markets Index
Methodology, and that satisfy minimum market capitalization and liquidity
thresholds. The securities eligible for inclusion in the Underlying Index
include H-Shares (securities of companies incorporated in China that are
denominated in Hong Kong Dollars and listed on the Hong Kong Stock Exchange (the
"HKSE")), B-Shares (securities of companies denominated in U.S. dollars or Hong
Kong dollars and listed on Shanghai Stock Exchange (the "SSE") or Shenzen Stock
Exchange (the "SZSE")), Red Chips (securities of companies with a
majority
of their business operations in mainland China and that are controlled by the
national government or local governments of China, traded on the HKSE in Hong
Kong dollars), P-Chips (securities of companies with the majority of their
business operations in mainland China and controlled by individuals in China,
but that are incorporated outside of China), A-Shares (securities of companies
incorporated in mainland China that trade on Chinese exchanges in renminbi) that
are accessible through the Shanghai-Hong Kong Stock Connect program ("Shanghai
Connect") or the Shenzhen-Hong Kong Stock Connect program ("Shenzhen Connect",
and together with Shanghai Connect, "Stock Connect Programs"), and foreign
listings such as American Depository Receipts ("ADRs"). The Stock Connect
Programs are securities trading and clearing programs that aim to achieve mutual
stock market access between China and Hong Kong. Under Stock Connect, the Fund's
trading of eligible A-shares listed on the SSE or the SZSE, as applicable, would
be effectuated through its Hong Kong brokers. Trading through the Stock Connect
Programs is subject to a daily quota, which limits the maximum net purchases
under Stock Connect Programs each day, and as such, buy orders for A-shares
would be rejected once the daily quota is exceeded (although the Fund will be
permitted to sell A-shares regardless of the daily quota balance). The daily
quota is not specific to the Fund. From time to time, other stock exchanges in
China may participate in Stock Connect, and A-shares listed and traded on such
other stock exchanges and accessible through Stock Connect may be added to the
Underlying Index, as determined by MSCI.
The
Underlying Index then follows a rules-based methodology that is designed to
select all constituents of the Parent Index that are classified in the
industrials sector under the GICS. The Underlying Index is weighted according to
each component's free-float adjusted market capitalization, but is modified so
that, as of the rebalance date, no group entity (defined by the Index Provider
as companies with a controlling stake owned by one entity) constitutes more than
10% of the Underlying Index and so that, in the aggregate, the individual group
entities that would represent more than 5% of the Underlying Index represent no
more than 50% of the Underlying Index ("10/50 Cap"). The Underlying Index is
reconstituted and re-weighted quarterly. The Underlying Index may include large-
and mid-capitalization companies. As of December 31, 2022, the Underlying
Index had 111 constituents. The Fund's investment objective and Underlying Index
may be changed without shareholder approval.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index had significant
exposure to the industrials
sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the
China
and Hong Kong markets. Stock Connect was developed by Hong Kong Exchanges and
Clearing Limited, the Shanghai Stock Exchange ("SSE") (in the case of Shanghai
Connect) or the Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen
Connect), and the China Securities Depository and Clearing Corporation Limited
(“CSDCC”). The Fund currently intends to gain exposure to A-Shares through the
Stock Connect Programs. Investments in A-Shares are subject to various
regulations and limits, and the recoupment or repatriation of assets invested in
A-Shares is subject to restrictions by the Chinese government. In addition,
investors from outside mainland China may face difficulties or prohibitions
accessing certain A-Shares that are part of a restricted list in countries such
as the U.S. A-Shares may be subject to frequent and widespread trading halts and
may become illiquid. Trading suspensions in certain stock could lead to greater
market execution risk and costs for the Fund, and the creation and redemption of
Creation Units (as defined below) may also be disrupted. These risks, among
others, could adversely affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Industrials Sector:
Companies in the industrials sector are subject to fluctuations in supply and
demand for their specific product or service. The products of manufacturing
companies may face product obsolescence due to rapid technological developments.
Government regulation, world events and economic conditions affect the
performance of companies in the industrials sector. Companies also may be
adversely affected by environmental damage and product liability claims.
Companies in the Industrial Sector face increased risk from trade agreements
between countries that develop these technologies and countries in which
customers of these technologies are based. Lack of resolution or potential
imposition of trade tariffs may hinder on the companies’ ability to successfully
deploy their inventories.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits
for
these companies. Although the U.S. and China reached an agreement in September
2022 to grant the U.S. access for such inspections, there is no guarantee that
the agreement will hold up or that U.S. regulatory authorities will continue to
feel satisfied with their access. As of December 31, 2022, the Fund had
significant exposure to VIEs, as defined above.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, China is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Hong Kong: Investments
in Hong Kong issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risk specific to Hong Kong. China is Hong
Kong’s largest trading partner, both in terms of exports and imports. Any
changes in the Chinese economy, trade regulations or currency exchange rates, or
a tightening of China’s control over Hong Kong, including in connection with
recent protests and unrest, may have an adverse impact on Hong Kong’s
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the
electronic
systems of the Fund, the Adviser, and the Fund's other service providers, market
makers, Authorized Participants or the issuers of securities in which the Fund
invests have the ability to cause disruptions and negatively impact the Fund's
business operations, potentially resulting in financial losses to the Fund and
its shareholders. The Fund and the Adviser seek to reduce these operational
risks through controls and procedures. However, these measures do not address
every possible risk and may be inadequate for those risks that they are intended
to address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
The Fund invests in the Chinese economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the Chinese economy in which the Fund invests. Through its portfolio
companies' trading partners, the Fund is specifically exposed to Asian
Economic Risk,
European
Economic Risk,
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Turnover
Risk: The
Fund may engage in frequent and active trading, which may significantly increase
the Fund’s portfolio turnover rate. At
times, the Fund may have a portfolio turnover rate substantially greater than
100%. For example, a portfolio turnover rate of 300%
is equivalent to the Fund buying and selling all of its securities three times
during the course of a year. A
high portfolio turnover rate would result in
high brokerage costs for the Fund, may result in higher taxes when shares are
held in a taxable account and lower Fund
performance.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance. On
December 6, 2018, the name of the Fund changed from the Global X China
Industrials ETF to the Global X MSCI China Industrials ETF to reflect a change
to the Fund's Index Provider from Solactive AG to MSCI, Inc. and a change in the
Fund's underlying index from the Solactive China Industrials Total Return Index
to the MSCI China Industrials 10/50 Index. The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
3/31/2017 |
16.20% |
Worst
Quarter: |
9/30/2015 |
-20.75% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Ten
Years Ended December 31, 2022 |
Global
X MSCI China Industrials ETF: |
|
|
|
·Return before
taxes |
-20.20% |
-1.31% |
2.36% |
·Return
after taxes on distributions1 |
-20.77% |
-1.82% |
1.88% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-11.56% |
-1.03% |
1.80% |
Hybrid
MSCI China Industrials 10/50 Index (net)2
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-19.71% |
-1.33% |
2.90% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
-1.40% |
1.44% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
2
Hybrid index performance
reflects the performance of the Solactive China Industrials Total Return Index
through December 5, 2018, and the MSCI China Industrials 10/50 Index thereafter.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI China Information Technology
ETF
Ticker:
CHIK Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI China
Information Technology ETF ("Fund") seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the MSCI China Information Technology 10/50 Index ("Underlying
Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.65% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.65% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$66 |
$208 |
$362 |
$810 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 32.20% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI
China Information Technology 10/50 Index ("Underlying Index") and in American
Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on
the securities in the Underlying Index. The Fund's 80% investment policy is
non-fundamental and requires 60 days prior written notice to shareholders before
it can be changed. The Fund may lend securities representing up to one-third of
the value of the Fund’s total assets (including the value of the collateral
received).
The
Underlying Index tracks the performance of companies in the MSCI China Index
(the "Parent Index") that are classified in the information technology sector,
as defined by MSCI, Inc. ("MSCI") the provider of the Underlying Index ("Index
Provider"). The Parent Index is a free float-adjusted market
capitalization-weighted index designed to measure the performance of securities
that are classified in as operating in China according to the MSCI Global
Investable Markets Index Methodology, and that satisfy minimum market
capitalization and liquidity thresholds. The securities eligible for inclusion
in the Underlying Index include H-Shares (securities of companies incorporated
in China that are denominated in Hong Kong Dollars and listed on the Hong Kong
Stock Exchange (the "HKSE")), B-Shares (securities of companies denominated in
U.S. dollars or Hong Kong dollars and listed on Shanghai Stock Exchange (the
"SSE") or Shenzen Stock Exchange (the "SZSE")), Red Chips (securities of
companies with a majority of their business operations in mainland China and
that are controlled by the national government or
local
governments of China, traded on the HKSE in Hong Kong dollars), P-Chips
(securities of companies with the majority of their business operations in
mainland China and controlled by individuals in China, but that are incorporated
outside of China), A-Shares (securities of companies incorporated in mainland
China that trade on Chinese exchanges in renminbi) that are accessible through
the Shanghai-Hong Kong Stock Connect program ("Shanghai Connect") or the
Shenzhen-Hong Kong Stock Connect program ("Shenzhen Connect", and together with
Shanghai Connect, "Stock Connect Programs"), and foreign listings such as
American Depository Receipts ("ADRs"). The Stock Connect Programs are securities
trading and clearing programs that aim to achieve mutual stock market access
between China and Hong Kong. Under Stock Connect, the Fund's trading of eligible
A-shares listed on the SSE or the SZSE, as applicable, would be effectuated
through its Hong Kong brokers. Trading through the Stock Connect Programs is
subject to a daily quota, which limits the maximum net purchases under Stock
Connect Programs each day, and as such, buy orders for A-shares would be
rejected once the daily quota is exceeded (although the Fund will be permitted
to sell A-shares regardless of the daily quota balance). The daily quota is not
specific to the Fund. From time to time, other stock exchanges in China may
participate in Stock Connect, and A-shares listed and traded on such other stock
exchanges and accessible through Stock Connect may be added to the Underlying
Index, as determined by MSCI.
The
Underlying Index then follows a rules-based methodology that is designed to
select all constituents of the Parent Index that are classified in the
information technology sector under the Global Industry Classification System
("GICS"). The Underlying Index is weighted according to each component's
free-float adjusted market capitalization, but is modified so that, as of the
rebalance date, no group entity (defined by the Index Provider as companies with
a controlling stake owned by one entity) constitutes more than 10% of the
Underlying Index and so that, in the aggregate, the individual group entities
that would represent more than 5% of the Underlying Index represent no more than
50% of the Underlying Index ("10/50 Cap"). The Underlying Index is reconstituted
and re-weighted quarterly. The Underlying Index may include large- and
mid-capitalization companies. As of December 31, 2022, the Underlying Index
had 105 constituents. The Fund's investment objective and Underlying Index may
be changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the electronic equipment, instruments and components and
semiconductors and semiconductor equipment industries and had significant
exposure to the information technology
sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus
and
in the Statement of Additional Information (“SAI”). The order of the below risk
factors does not indicate the significance of any particular risk
factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Electronic Equipment, Instruments and Components
Industry:
The electronic equipment, instruments and components industry is intensely
competitive, and prices for existing products tend to decrease over their life
cycle. Companies must continue to develop new products and technology to remain
competitive and are therefore dependent on hiring and retailing key personnel.
Companies typically face high fixed operating costs while also being subject to
fluctuations in the cost of raw materials.
Risks
Related to Investing in the Information Technology Sector: Companies
in the information technology sector are subject to rapid changes in technology
product cycles; rapid product obsolescence; government regulation; and increased
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Information technology
companies and companies that rely heavily on technology tend to be more volatile
than the overall market and also are heavily dependent on patent and
intellectual property rights. In addition, information technology companies may
have limited product lines, markets, financial resources or
personnel.
Risks
Related to Investing in the Semiconductors and Semiconductor Equipment
Industry:
The semiconductors and semiconductor equipment industry is highly competitive,
and certain companies in this industry may be restricted from operating in
certain markets due to the sensitive nature of these technologies. Companies in
this space generally seek to increase silicon capacity, improve yields, and
reduce die size in their product designs which may result in significant
increases in worldwide supply and downward pressure on prices. Companies
involved in the semiconductors and semiconductor equipment industry face
increased risk from trade agreements between countries that develop these
technologies and countries in which customers of these technologies are based.
Lack of resolution or potential imposition of trade tariffs may hinder on the
companies’ ability to successfully deploy their inventories. The success of such
companies frequently depends on the ability to develop and produce competitive
new semiconductor technologies. Companies in this industry frequently undertake
substantial research and development expenses in order to remain competitive,
and a failure to successfully demonstrate advanced functionality and performance
can have a material impact on the company’s business.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for
economic
exposure to the performance of the underlying Chinese operating
company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access. As of December 31, 2022, the Fund had significant exposure to
VIEs, as defined above.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, China is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Hong Kong: Investments
in Hong Kong issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risk specific to Hong Kong. China is Hong
Kong’s largest trading partner, both in terms of exports and imports. Any
changes in the Chinese economy, trade regulations or currency exchange rates, or
a tightening of China’s control over Hong Kong, including in connection with
recent protests and unrest, may have an adverse impact on Hong Kong’s
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying Index does not. ETFs that track indices with significant
weight in emerging markets issuers may experience higher tracking error than
other ETFs that do not track such indices.
Reliance
on Trading Partners Risk:
The Fund invests in the Chinese economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the Chinese economy in which the Fund invests. Through its portfolio
companies' trading partners, the Fund is specifically exposed to Asian
Economic Risk,
European
Economic Risk,
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value
of
the loaned securities increases and the collateral is not increased accordingly.
Additionally, the Fund will bear any loss on the investment of cash collateral
it receives. These events could also trigger adverse tax consequences for the
Fund. As securities on loan may not be voted by the Fund, there is a risk that
the Fund may not be able to recall the securities in sufficient time to vote on
material proxy matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance.
The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
32.97% |
Worst
Quarter: |
9/30/2022 |
-28.72% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (12/07/2018) |
Global
X MSCI China Information Technology ETF: |
|
|
·Return before
taxes |
-39.44% |
3.90% |
·Return
after taxes on distributions1 |
-39.56% |
3.48% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-23.29% |
3.02% |
MSCI
China Information Technology 10/50 Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-39.07% |
4.85% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
1.83% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
the Fund's inception. Mr. Xie has been a Portfolio Manager of the Fund since
March 1, 2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10,
2019. Ms. Yang has been a Portfolio Manager of the Fund since December 2020. Mr.
Lu has been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI China Materials
ETF
Ticker:
CHIM Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI China
Materials ETF ("Fund") seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
MSCI China Materials 10/50 Index ("Underlying
Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.65% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.65% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$66 |
$208 |
$362 |
$810 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 101.99% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI
China Materials 10/50 Index ("Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund also invests at least 80% of its
total assets in securities of materials companies that are economically tied to
China. For purposes of this policy, materials companies include those companies
that are classified in the materials sector under the Global Industry
Classification System ("GICS"). The Fund's 80% investment policies are
non-fundamental and require 60 days prior written notice to shareholders before
they can be changed.
The
Underlying Index tracks the performance of companies in the MSCI China Index
(the "Parent Index") that are classified in the materials sector, as defined by
MSCI, Inc. ("MSCI") the provider of the Underlying Index ("Index Provider"). The
Parent Index is a free float-adjusted market capitalization-weighted index
designed to measure the performance of securities that are classified as
operating in China according to the MSCI Global Investable Markets Index
Methodology, and that satisfy minimum market capitalization and liquidity
thresholds. The securities eligible for inclusion in the Underlying Index
include H-Shares (securities of companies incorporated in China that are
denominated in Hong Kong Dollars and listed on the Hong Kong Stock Exchange (the
"HKSE")), B-Shares (securities of companies denominated in U.S. dollars or Hong
Kong dollars and listed on Shanghai Stock Exchange (the "SSE") or Shenzen Stock
Exchange (the "SZSE")), Red Chips (securities of companies with a majority of
their business operations in mainland China and that are controlled by the
national government or local
governments
of China, traded on the HKSE in Hong Kong dollars), P-Chips (securities of
companies with the majority of their business operations in mainland China and
controlled by individuals in China, but that are incorporated outside of China),
A-Shares (securities of companies incorporated in mainland China that trade on
Chinese exchanges in renminbi) that are accessible through the Shanghai-Hong
Kong Stock Connect program ("Shanghai Connect") or the Shenzhen-Hong Kong Stock
Connect program ("Shenzhen Connect", and together with Shanghai Connect, "Stock
Connect Programs"), and foreign listings such as American Depository Receipts
("ADRs"). The Stock Connect Programs are securities trading and clearing
programs that aim to achieve mutual stock market access between China and Hong
Kong. Under Stock Connect, the Fund's trading of eligible A-shares listed on the
SSE or the SZSE, as applicable, would be effectuated through its Hong Kong
brokers. Trading through the Stock Connect Programs is subject to a daily quota,
which limits the maximum net purchases under Stock Connect Programs each day,
and as such, buy orders for A-shares would be rejected once the daily quota is
exceeded (although the Fund will be permitted to sell A-shares regardless of the
daily quota balance). The daily quota is not specific to the Fund. From time to
time, other stock exchanges in China may participate in Stock Connect, and
A-shares listed and traded on such other stock exchanges and accessible through
Stock Connect may be added to the Underlying Index, as determined by
MSCI.
The
Underlying Index then follows a rules-based methodology that is designed to
select all constituents of the Parent Index that are classified in the materials
sector under the GICS. The Underlying Index is weighted according to each
component's free-float adjusted market capitalization, but is modified so that,
as of the rebalance date, no group entity (defined by the Index Provider as
companies with a controlling stake owned by one entity) constitutes more than
10% of the Underlying Index and so that, in the aggregate, the individual group
entities that would represent more than 5% of the Underlying Index represent no
more than 50% of the Underlying Index ("10/50 Cap"). The Underlying Index is
reconstituted and re-weighted quarterly. The Underlying Index may include large-
and mid-capitalization companies. As of December 31, 2022, the Underlying
Index had 105 constituents. The Fund's investment objective and Underlying Index
may be changed without shareholder approval.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the chemicals, and metals and mining industries and had
significant exposure to the materials
sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect
supply and demand; competition for resources; adverse labor relations; political
or world events; obsolescence of technologies; and increased competition or new
product introductions that may affect the profitability or viability of
companies in a particular industry or sector. As a result, the value of the
Fund’s investments may rise and fall more than the value of shares of a fund
that invests in securities of companies in a broader range of industries or
sectors.
Risks
Related to Investing in the Chemicals Industry: The
chemicals industry can be significantly affected by intense competition, product
obsolescence, raw materials prices, and government regulation, and can be
subject to risks associated with the production, handling and disposal of
hazardous components, and litigation arising out of environmental contamination.
Risks
Related to Investing in the Materials Sector:
Companies in the materials sector are affected by commodity price volatility,
exchange rates, import controls and worldwide competition. At times, worldwide
production of industrial materials has exceeded demand, leading to poor
investment returns or outright losses. Issuers in the materials sector are at
risk of depletion of resources, technological progress, labor relations,
governmental regulations and environmental damage and product liability
claims.
Risks
Related to Investing in the Metals and Mining Industry:
Securities in the Fund's portfolio may be significantly subject to the effects
of competitive pressures in the mining industry and commodity prices generally.
Commodity prices may be affected by changes in inflation rates, interest rates,
monetary policy, economic conditions, and political stability. Commodity prices
may fluctuate substantially over short periods of time; therefore, the Fund’s
Share price may be more volatile than other types of investments. In addition,
metals and mining companies may also be significantly affected by import
controls, worldwide competition, liability for environmental damage, depletion
of resources, and mandated expenditures for safety and pollution control
devices. Metals and mining companies may have significant operations in areas at
risk for social and political unrest, security concerns and environmental
damage. These companies may also be at risk for increased government regulation
and intervention. Such risks may adversely affect the issuers to which the Fund
has exposure.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such
events,
may also disrupt economic development in China and result in a greater risk of
currency fluctuations, currency convertibility, interest rate fluctuations and
higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be
unenforceable
under Chinese law, investors in the listed shell company, such as the Fund, may
suffer significant losses with little or no recourse available. If the Chinese
government determines that the agreements establishing the VIE structures do not
comply with Chinese law and regulations, including those related to restrictions
on foreign ownership, it could subject a Chinese-based issuer to penalties,
revocation of business and operating licenses, or forfeiture of ownership
interest. In addition, the listed shell company’s control over a VIE may also be
jeopardized if a natural person who holds the equity interest in the VIE
breaches the terms of the agreement, is subject to legal proceedings or if any
physical instruments for authenticating documentation, such as chops and seals,
are used without the Chinese-based issuer’s authorization to enter into
contractual arrangements in China. Chops and seals, which are carved stamps used
to sign documents, represent a legally binding commitment by the company.
Moreover, any future regulatory action may prohibit the ability of the shell
company to receive the economic benefits of the Chinese-based operating company,
which may cause the value of the Fund’s investment in the listed shell company
to suffer a significant loss. For example, in 2021, the Chinese government
prohibited use of the VIE structure for investment in after-school tutoring
companies. There is no guarantee that the Chinese government will not place
similar restrictions on other industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, China is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Hong Kong: Investments
in Hong Kong issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risk specific to Hong Kong. China is Hong
Kong’s largest trading partner, both in terms of exports and imports. Any
changes in the Chinese economy, trade regulations or currency exchange rates, or
a tightening of China’s control over Hong Kong, including in connection with
recent protests and unrest, may have an adverse impact on Hong Kong’s
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will
continue
and when inflation will return to target levels. This increases the risk that
monetary policy may provide less support should economic growth slow.
Additionally, China’s shift away from a zero-COVID policy creates both
opportunities and risks, causing uncertainty for global economic growth. Market
risk factors may result in increased volatility and/or decreased liquidity in
the securities markets. The Fund’s NAV could decline over short periods due to
short-term market movements and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
The Fund invests in the Chinese economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the Chinese economy in which the Fund invests. Through its portfolio
companies' trading partners, the Fund is specifically exposed to Asian
Economic Risk,
European
Economic Risk,
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Turnover
Risk: The
Fund may engage in frequent and active trading, which may significantly increase
the Fund’s portfolio turnover rate. At
times, the Fund may have a portfolio turnover rate substantially greater than
100%. For example, a portfolio turnover rate of 300%
is equivalent to the Fund buying and selling all of its securities three times
during the course of a year. A
high portfolio turnover rate would result in
high brokerage costs for the Fund, may result in higher taxes when shares are
held in a taxable account and lower Fund performance.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or
that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance. On
December 6, 2018, the name of the Fund changed from the Global X China Materials
ETF to the Global X MSCI China Materials ETF to reflect a change to the Fund's
Index Provider from Solactive AG to MSCI, Inc. and a change in the Fund's
underlying index from the Solactive China Materials Total Return Index to the
MSCI China Materials 10/50 Index. The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2020 |
23.90% |
Worst
Quarter: |
9/30/2015 |
-33.32% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Ten
Years Ended December 31, 2022 |
Global
X MSCI China Materials ETF: |
|
|
|
·Return before
taxes |
-24.09% |
-0.53% |
2.56% |
·Return
after taxes on distributions1 |
-24.49% |
-1.31% |
1.90% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-13.79% |
-0.49% |
1.88% |
Hybrid
MSCI China Materials 10/50 Index (net)2 (Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-23.58% |
0.26% |
2.93% |
MSCI
Emerging Markets Index (net) (Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
-1.40% |
1.44% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
2
Hybrid index performance
reflects the performance of the Solactive China Materials Total Return Index
through December 5, 2018, and the MSCI China Materials 10/50 Index thereafter.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI China Real Estate
ETF
Ticker:
CHIR Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI China Real
Estate ETF ("Fund") seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
MSCI China Real Estate 10/50 Index ("Underlying
Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.65% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.01% |
Total
Annual Fund Operating Expenses: |
0.66% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$67 |
$211 |
$368 |
$822 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 45.91% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI
China Real Estate 10/50 Index ("Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund's 80% investment policy is
non-fundamental and requires 60 days prior written notice to shareholders before
it can be changed.
The
Underlying Index tracks the performance of companies in the MSCI China Index
(the "Parent Index") that are classified in the real estate sector, as defined
by MSCI, Inc. ("MSCI") the provider of the Underlying Index ("Index Provider").
The Parent Index is a free float-adjusted market capitalization-weighted index
designed to measure the performance of securities that are classified as
operating in China according to the MSCI Global Investable Markets Index
Methodology, and that satisfy minimum market capitalization and liquidity
thresholds. The securities eligible for inclusion in the Underlying Index
include H-Shares (securities of companies incorporated in China that are
denominated in Hong Kong Dollars and listed on the Hong Kong Stock Exchange (the
"HKSE")), B-Shares (securities of companies denominated in U.S. dollars or Hong
Kong dollars and listed on Shanghai Stock Exchange (the "SSE") or Shenzen Stock
Exchange (the "SZSE")), Red Chips (securities of companies with a majority of
their business operations in mainland China and that are controlled by the
national government or local governments of China, traded on the HKSE in Hong
Kong dollars), P-Chips (securities of companies with the majority of their
business operations in mainland China and controlled by individuals in China,
but that are incorporated outside of China), A-
Shares
(securities of companies incorporated in mainland China that trade on Chinese
exchanges in renminbi) that are accessible through the Shanghai-Hong Kong Stock
Connect program ("Shanghai Connect") or the Shenzhen-Hong Kong Stock Connect
program ("Shenzhen Connect", and together with Shanghai Connect, "Stock Connect
Programs"), and foreign listings such as American Depository Receipts ("ADRs").
The Stock Connect Programs are securities trading and clearing programs that aim
to achieve mutual stock market access between China and Hong Kong. Under Stock
Connect, the Fund's trading of eligible A-shares listed on the SSE or the SZSE,
as applicable, would be effectuated through its Hong Kong brokers. Trading
through the Stock Connect Programs is subject to a daily quota, which limits the
maximum net purchases under Stock Connect Programs each day, and as such, buy
orders for A-shares would be rejected once the daily quota is exceeded (although
the Fund will be permitted to sell A-shares regardless of the daily quota
balance). The daily quota is not specific to the Fund. From time to time, other
stock exchanges in China may participate in Stock Connect, and A-shares listed
and traded on such other stock exchanges and accessible through Stock Connect
may be added to the Underlying Index, as determined by MSCI.
The
Underlying Index then follows a rules-based methodology that is designed to
select all constituents of the Parent Index that are classified in the real
estate sector under the Global Industry Classification System ("GICS"). The
Underlying Index is weighted according to each component's free-float adjusted
market capitalization, but is modified so that, as of the rebalance date, no
group entity (defined by the Index Provider as companies with a controlling
stake owned by one entity) constitutes more than 10% of the Underlying Index and
so that, in the aggregate, the individual group entities that would represent
more than 5% of the Underlying Index represent no more than 50% of the
Underlying Index ("10/50 Cap"). The Underlying Index is reconstituted and
re-weighted quarterly. The Underlying Index may include large- and
mid-capitalization companies. As of December 31, 2022, the Underlying Index
had 24 constituents. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the real estate management and development industry and had
significant exposure to the real estate
sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Cash
Transaction Risk: Unlike
most exchange-traded funds ("ETFs"), the Fund intends to effect a significant
portion of creations and redemptions for cash, rather than in-kind securities.
As a result, an investment in the Fund may be less tax-efficient than an
investment in a more conventional ETF. Moreover, cash transactions may have to
be carried out over several days if the securities market is relatively illiquid
and may involve considerable brokerage fees and taxes. These factors may result
in wider spreads between the bid and the offered prices of the Fund’s Shares
than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has
significant
exposure to one or more sectors, the Fund’s investments will likely have
significant exposure to such sectors. In such event, the Fund’s performance will
be particularly susceptible to adverse events impacting such industry or sector,
which may include, but are not limited to, the following: general economic
conditions or cyclical market patterns that could negatively affect supply and
demand; competition for resources; adverse labor relations; political or world
events; obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular industry or sector. As a result, the value of the Fund’s investments
may rise and fall more than the value of shares of a fund that invests in
securities of companies in a broader range of industries or sectors.
Risks
Related to Investing in the Real Estate Management and Development
Industry:
Companies in the real estate management and development industry are typically
impacted by general global economic conditions, including include short-term and
long-term interest rates, inflation, fluctuations in debt and equity capital
markets, levels of unemployment, consumer confidence and the general condition
of the U.S. and the global economy. Such companies may also often be
concentrated in certain geographic markets, and any disruptions in those real
estate markets could harm the company’s business.
Risks
Related to Investing in the Real Estate Sector:
The real estate sector includes real estate companies focused on commercial and
residential real estate development, sales, operations, and services, as well as
real estate investment trusts (“REITs”). Real estate is highly sensitive to
general and local economic conditions and developments and characterized by
intense competition and periodic overbuilding. Many real estate companies
utilize leverage (and some may be highly leveraged), which increases risk and
could adversely affect a real estate company's operations and market value in
periods of rising interest rates.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal
proceedings
or if any physical instruments for authenticating documentation, such as chops
and seals, are used without the Chinese-based issuer’s authorization to enter
into contractual arrangements in China. Chops and seals, which are carved stamps
used to sign documents, represent a legally binding commitment by the company.
Moreover, any future regulatory action may prohibit the ability of the shell
company to receive the economic benefits of the Chinese-based operating company,
which may cause the value of the Fund’s investment in the listed shell company
to suffer a significant loss. For example, in 2021, the Chinese government
prohibited use of the VIE structure for investment in after-school tutoring
companies. There is no guarantee that the Chinese government will not place
similar restrictions on other industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access. As of December 31, 2022, the Fund had significant exposure to
VIEs, as defined above.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, China is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Hong Kong: Investments
in Hong Kong issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risk specific to Hong Kong. China is Hong
Kong’s largest trading partner, both in terms of exports and imports. Any
changes in the Chinese economy, trade regulations or currency exchange rates, or
a tightening of China’s control over Hong Kong, including in connection with
recent protests and unrest, may have an adverse impact on Hong Kong’s
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk: The
investable universe of companies in which the Fund may invest may be limited. If
a company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s overall portfolio holdings
and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of
2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
The Fund invests in the Chinese economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the Chinese economy in which the Fund invests. Through its portfolio
companies' trading partners, the Fund is specifically exposed to Asian
Economic Risk,
European
Economic Risk,
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart and table that
follow show how the Fund performed on a calendar year basis and provide an
indication of the risks of investing in the Fund by showing changes in the
Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated
periods compare with the Fund's benchmark index and a broad measure of market
performance. The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2019 |
26.43% |
Worst
Quarter: |
9/30/2022 |
-29.08% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (12/07/2018) |
Global
X MSCI China Real Estate ETF: |
|
|
·Return before
taxes |
-29.15% |
-12.88% |
·Return
after taxes on distributions1 |
-30.35% |
-14.21% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-17.06% |
-9.34% |
MSCI
China Real Estate 10/50 Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-31.36% |
-13.13% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
1.83% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
the Fund's inception. Mr. Xie has been a Portfolio Manager of the Fund since
March 1, 2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10,
2019. Ms. Yang has been a Portfolio Manager of the Fund since December 2020. Mr.
Lu has been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI China Utilities
ETF
Ticker:
CHIU Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI China
Utilities ETF ("Fund") seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
MSCI China Utilities 10/50 Index ("Underlying
Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.65% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.01% |
Total
Annual Fund Operating Expenses: |
0.66% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$67 |
$211 |
$368 |
$822 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 38.78% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI
China Utilities 10/50 Index ("Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund's 80% investment policy is
non-fundamental and requires 60 days prior written notice to shareholders before
it can be changed.
The
Underlying Index tracks the performance of companies in the MSCI China Index
(the "Parent Index") that are classified in the utilities sector, as defined by
MSCI, Inc. ("MSCI") the provider of the Underlying Index ("Index Provider"). The
Parent Index is a free float-adjusted market capitalization-weighted index
designed to measure the performance of securities that are classified as
operating in China according to the MSCI Global Investable Markets Index
Methodology, and that satisfy minimum market capitalization and liquidity
thresholds. The securities eligible for inclusion in the Underlying Index
include H-Shares (securities of companies incorporated in China that are
denominated in Hong Kong Dollars and listed on the Hong Kong Stock Exchange (the
"HKSE")), B-Shares (securities of companies denominated in U.S. dollars or Hong
Kong dollars and listed on Shanghai Stock Exchange (the "SSE") or Shenzen Stock
Exchange (the "SZSE")), Red Chips (securities of companies with a majority of
their business operations in mainland China and that are controlled by the
national government or local governments of China, traded on the HKSE in Hong
Kong dollars), P-Chips (securities of companies with the majority of their
business operations in mainland China and controlled by individuals in China,
but that are incorporated outside of China), A-
Shares
(securities of companies incorporated in mainland China that trade on Chinese
exchanges in renminbi) that are accessible through the Shanghai-Hong Kong Stock
Connect program ("Shanghai Connect") or the Shenzhen-Hong Kong Stock Connect
program ("Shenzhen Connect", and together with Shanghai Connect, "Stock Connect
Programs"), and foreign listings such as American Depository Receipts ("ADRs").
The Stock Connect Programs are securities trading and clearing programs that aim
to achieve mutual stock market access between China and Hong Kong. Under Stock
Connect, the Fund's trading of eligible A-shares listed on the SSE or the SZSE,
as applicable, would be effectuated through its Hong Kong brokers. Trading
through the Stock Connect Programs is subject to a daily quota, which limits the
maximum net purchases under Stock Connect Programs each day, and as such, buy
orders for A-shares would be rejected once the daily quota is exceeded (although
the Fund will be permitted to sell A-shares regardless of the daily quota
balance). The daily quota is not specific to the Fund. From time to time, other
stock exchanges in China may participate in Stock Connect, and A-shares listed
and traded on such other stock exchanges and accessible through Stock Connect
may be added to the Underlying Index, as determined by MSCI.
The
Underlying Index follows a rules-based methodology that is designed to select
all constituents of the Parent Index that are classified in the utilities sector
under the Global Industry Classification System ("GICS"). The Underlying Index
is weighted according to each component's free-float adjusted market
capitalization, but is modified so that, as of the rebalance date, no group
entity (defined by the Index Provider as companies with a controlling stake
owned by one entity) constitutes more than 10% of the Underlying Index and so
that, in the aggregate, the individual group entities that would represent more
than 5% of the Underlying Index represent no more than 50% of the Underlying
Index ("10/50 Cap"). The Underlying Index is reconstituted and re-weighted
quarterly. The Underlying Index may include large- and mid-capitalization
companies. As of December 31, 2022, the Underlying Index had 25
constituents. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the gas utilities and independent power and renewable energy
industries and had significant exposure to the utilities
sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
China
A-Shares Risk:
A-Shares are issued by companies incorporated in mainland China and are traded
on Chinese exchanges. Foreign investors can access A-Shares by obtaining a
Qualified Foreign Institutional Investor ("QFII") or a Renminbi Qualified
Foreign Institutional Investor ("RQFII") license, as well as through the Stock
Connect Program, which is a securities trading and clearing program with an aim
to achieve mutual stock market access between the China and Hong Kong markets.
Stock Connect was developed by Hong Kong Exchanges and Clearing Limited, the
Shanghai Stock Exchange ("SSE") (in the case of Shanghai Connect) or the
Shenzhen Stock Exchange ("SZSE") (in the case of Shenzhen Connect), and the
China Securities Depository and Clearing Corporation Limited (“CSDCC”). The Fund
currently intends to gain exposure to A-Shares through the Stock Connect
Programs. Investments in A-Shares are subject to various regulations and limits,
and the recoupment or repatriation of assets invested in A-Shares is subject to
restrictions by the Chinese government. In addition, investors from outside
mainland China may face difficulties or prohibitions accessing certain A-Shares
that are part of a restricted list in countries such as the U.S. A-Shares may be
subject to frequent and widespread trading halts and may become illiquid.
Trading suspensions in certain stock could lead to greater market execution risk
and costs for the Fund, and the creation and redemption of Creation Units (as
defined below) may also be disrupted. These risks, among others, could adversely
affect the value of the Fund’s investments.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
Chinese yuan depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund. Additionally, the Chinese government heavily regulates the
domestic exchange of foreign currencies and yuan exchange rates in China, which
may adversely affect the operations and financial results of the Fund’s
investments in China. Shares purchased through the Stock Connect Programs will
be purchased using offshore yuan, the value of which may differ from and
experience greater volatility than the value of onshore yuan. Offshore yuan
cannot be freely remitted into or transferred out of China, and there is no
assurance that there will always be sufficient amounts of offshore yuan
available for the Fund to invest in all components of the Underlying Index.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Gas Utilities Industry:
Companies in the natural gas utilities industry may face difficulty in obtaining
natural gas for resale or may be faced with increased fuel or other operating
costs. Reliance on capital construction projects may increase the risks
associated with natural disasters, terrorist attacks, government intervention or
other factors that may render a gas utility company’s equipment unusable or
obsolete and negatively impact profitability.
Risks
Related to Investing in the Independent Power and Renewable Electricity
Producers Industry:
Companies in the independent power and renewable electricity producers industry
may be highly dependent upon government subsidies, contracts with government
entities, and the successful development of new and proprietary technologies. In
addition, seasonal weather conditions, fluctuations in the supply of and demand
for energy products, changes in energy prices, and international political
events may cause fluctuations in the performance of independent power and
renewable electricity producers companies and the prices of their securities.
Risks
Related to Investing in the Utilities Sector:
Companies in the utilities sector may be adversely affected by changes in
exchange rates, domestic and international competition and governmental
regulations on rates charged to customers. Privatization and deregulation in the
utilities sector may subject companies to greater competition and losses in
profitability. Companies in the utilities sector may have difficulty obtaining
an adequate return on invested capital, raising capital, or financing large
construction programs during periods of inflation or unsettled capital markets.
In addition, companies in the utilities sector may be adversely affected due to
increase in fuel and operating costs and the costs of complying with
regulations.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China.
However,
Chinese markets generally continue to experience inefficiency, volatility and
pricing anomalies resulting from governmental influence, a lack of publicly
available information and/or political and social instability. Chinese companies
are also subject to the risk that Chinese authorities can intervene in their
operations and structure. Internal social unrest or confrontations with other
neighboring countries, including military conflicts in response to such events,
may also disrupt economic development in China and result in a greater risk of
currency fluctuations, currency convertibility, interest rate fluctuations and
higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the
activities
at the Chinese-based operating company are limited and the operating company may
engage in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, China is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Hong Kong: Investments
in Hong Kong issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risk specific to Hong Kong. China is Hong
Kong’s largest trading partner, both in terms of exports and imports. Any
changes in the Chinese economy, trade regulations or currency exchange rates, or
a tightening of China’s control over Hong Kong, including in connection with
recent protests and unrest, may have an adverse impact on Hong Kong’s
economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying Index does not. ETFs that track indices with significant
weight in emerging markets issuers may experience higher tracking error than
other ETFs that do not track such indices.
Reliance
on Trading Partners Risk:
The Fund invests in the Chinese economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the Chinese economy in which the Fund invests. Through its portfolio
companies' trading partners, the Fund is specifically exposed to Asian
Economic Risk,
European
Economic Risk,
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Risks
Related to Stock Connect Programs:
The Stock Connect Programs are subject to daily and aggregate quota limitations,
which could affect the Fund’s ability to enter into and exit Stock Connect
positions on a timely basis. The Shenzen and Shanghai markets may operate when
the Stock Connect Programs are not active, and consequently the prices of shares
held via Stock Connect Programs may fluctuate at times when the Fund is unable
to add to or exit its positions. The Stock Connect Programs are new, and the
effect of the introduction of large numbers of foreign investors on the market
for trading Chinese-listed securities is not well understood. Regulations, such
as limitations on redemptions or suspension of trading, may adversely impact the
value of the Fund’s investments. The Fund's investments in A-Shares though the
Stock Connect Program are held by its custodian in accounts in Central Clearing
and Settlement System ("CCASS") maintained by the Hong Kong Securities Clearing
Company Limited ("HKSCC"), which in turn holds the A-Shares, as the nominee
holder, through an omnibus securities account in its name registered with the
CSDCC. The precise nature and rights of the Fund as the beneficial owner of the
SSE Securities or SZSE Securities through HKSCC as nominee is not well defined
under Chinese law. There is no guarantee that the Shenzen, Shanghai, and Hong
Kong Stock Exchanges will continue to support the Stock Connect Programs in the
future.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial
instruments. In such circumstances, the Fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance.
The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
9/30/2021 |
23.81% |
Worst
Quarter: |
3/31/2022 |
-19.79% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (12/07/2018) |
Global
X MSCI China Utilities ETF: |
|
|
·Return before
taxes |
-26.27% |
2.76% |
·Return
after taxes on distributions1 |
-27.10% |
1.60% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-15.21% |
1.91% |
MSCI
China Utilities 10/50 Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-25.76% |
3.65% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
1.83% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
the Fund's inception. Mr. Xie has been a Portfolio Manager of the Fund since
March 1, 2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10,
2019. Ms. Yang has been a Portfolio Manager of the Fund since December 2020. Mr.
Lu has been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI Greece
ETF
Ticker:
GREK Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI Greece ETF
("Fund") seeks to provide investment results that correspond generally to the
price and yield performance, before fees and expenses, of the MSCI All Greece
Select 25/50 Index ("Underlying Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.55% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.02% |
Total
Annual Fund Operating Expenses: |
0.57% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$58 |
$183 |
$318 |
$714 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 24.34% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI All
Greece Select 25/50 Index ("Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund also invests at least 80% of its
total assets in securities of companies that are economically tied to Greece.
The Fund's 80% investment policies are non-fundamental and require 60 days prior
written notice to shareholders before they can be changed. The Fund may lend
securities representing up to one-third of the value of the Fund’s total assets
(including the value of the collateral received).
The
Underlying Index is designed to represent the performance of the broad Greece
equity universe, as defined by MSCI, Inc. ("MSCI"), the provider of the
Underlying Index ("Index Provider"). The broad Greece equity universe includes
securities that are classified in Greece according to the MSCI Global Investable
Market Index Methodology, together with companies that are headquartered or
listed in Greece and carry out the majority of their operations in Greece. The
Underlying Index also applies minimum liquidity thresholds as criteria for
company inclusion. The Fund's investment objective and Underlying Index may be
changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines
the relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the banking industry and had significant exposure to the
financials sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Greece's currency depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Banking Industry: The
performance of stocks in the banking industry may be affected by extensive
governmental regulation which may limit both the amounts and types of loans and
other financial commitments they can make, and the interest rates and fees they
can charge and the amount of capital they must maintain. Profitability is
largely dependent on the availability and cost of capital funds and can
fluctuate significantly when interest rates change. Credit losses resulting from
financial difficulties of borrowers can negatively impact banking companies.
Banks may also be subject to severe price competition. Competition is high among
banking companies and failure to maintain or increase market share may result in
lost market value. The impact of changes in capital requirements and recent or
future regulation of any individual banking company, or of the financials sector
as a whole, cannot be predicted. In recent years, cyberattacks and technology
malfunctions and failures have become increasingly frequent in this sector and
have caused significant losses to companies in this sector, which may negatively
impact the Fund.
Risks
Related to Investing in the Financials Sector: Performance
of companies in the financials sector may be adversely impacted by many factors,
including, among others, government regulations, economic conditions, credit
rating downgrades, changes in interest rates, and decreased liquidity in credit
markets. This sector has experienced significant losses in the past, and the
impact of more stringent capital requirements and of current or future
regulation on any individual financial company or on the sector as a whole
cannot be predicted. In recent years, cyber-attacks and technology malfunctions
and failures have become increasingly frequent in this sector and have caused
significant losses to companies in this sector, which may negatively impact the
Fund.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, Greece is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market
capitalizations,
have less government regulation, and are not subject to as extensive and
frequent accounting, financial, and other reporting requirements as the
securities markets of more developed countries, and there may be greater risk
associated with the custody of securities in emerging markets. It may be
difficult or impossible for the Fund to pursue claims against an emerging market
issuer in the courts of an emerging market country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Greece:
Investments are concentrated in companies in Greece. Greece’s economy is heavily
dependent on the services sector and has a large public sector. Greece’s
exposure to specific industries, such as tourism, could also make it especially
vulnerable to global crises, including but not limited to, pandemics such as
COVID-19. Key trading partners include the United Kingdom and member states of
the European Union ("EU"), most notably Germany, Spain and Italy. Decreasing
demand for Greek products and services or changes in governmental regulations on
trade may have a significantly adverse effect on Greece’s economy. The Greek
economy may also be affected by an economic slowdown in Europe generally, by the
war in Ukraine and by challenges to energy security. Greece’s ability to repay
its sovereign debt is in question, and the possibility of default is not
unlikely, which could limit its ability to borrow in the future. Greece has been
required to impose harsh austerity measures on its population in order to
receive financial aid from the International Monetary Fund ("IMF") and EU member
countries. The success of political parties in Greece opposed to austerity
measures may increase the possibility that Greece would rescind these austerity
measures in the future and consequently fail to receive further financial aid
from these institutions. The persistence of these factors may seriously reduce
the economic performance of Greece and pose serious risks for the country’s
economy in the future. There is the possibility that Greece may exit the
European Monetary Union, which would result in immediate devaluation of the euro
and potential for default. If this were to occur, Greece would face significant
risks related to the process of full currency redenomination as well as the
resulting instability of the Euro zone in general, which would have a severe
adverse effect on the value of the securities held by the Fund. Increased
volatility in the Greek market may result in the increased use of fair value
pricing. Following the funding Greece received in 2015 from the IMF and the
Eurozone, and its exit from the IMF bailout program in 2018, Greece has begun to
show signs of recovery and exited the EU's enhanced monitoring program in August
2022. However, political uncertainty or fiscal instability,
including budgetary constraints, elections, an uptick in social upheaval,
an armed conflict with Turkey, or a global slowdown in growth, could threaten to
stymie a domestic recovery. This may include defaults by the Greek government,
the implementation of additional or extended capital controls (including the
closure of the Athens Exchange for an extended period of time), and the
possibility that Greece may exit the European Monetary Union, which would result
in immediate devaluation of the Greek currency. Each of these scenarios has
potential implications to the markets and may negatively and materially affect
the value of the Fund’s investments. The closure, and any related suspension of
clearance and settlement mechanisms, of the Athens Exchange could prevent the
Fund from buying, selling, or transferring securities traded on the Athens
Exchange. During any closure of the Athens Exchange, the Fund will fair value
its security holdings for which current market valuations are not currently
available using fair value pricing pursuant to the pricing policy and procedures
approved by the Fund’s Board of Trustees. In such a situation, it is possible
that the Fund’s market price could significantly deviate from its NAV. In
addition, any closure of the Athens Exchange, and the related unavailability of
current market quotations for securities contained in the Underlying Index could
cause the Fund’s NAV to have increased tracking error with respect to the Fund’s
Underlying Index, and could also affect the calculation of the Fund’s indicative
optimized portfolio value.
Government
Debt Risk:
Greece currently has high levels of debt and public spending. High levels of
debt and public spending may stifle economic growth, contribute to prolonged
periods of recession or lower a country's sovereign debt rating, all of which
may adversely impact the Fund's investments.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
Economies in emerging market countries generally are dependent heavily upon
commodity prices and international trade and, accordingly, may be affected
adversely by the economies of their trading partners, trade barriers, exchange
controls, managed adjustments in relative currency values, and may suffer from
extreme and volatile debt burdens or inflation rates. Through its portfolio
companies' trading partners, the Fund is specifically exposed to European
Economic Risk, US Economic Risk, and Asian Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial
instruments. In such circumstances, the Fund may be unable to rebalance its
portfolio, may be unable to accurately price its investments and/or may incur
substantial trading losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance. On or
around March 1, 2016, the name of the Fund changed from the Global X FTSE Greece
20 ETF to the Global X MSCI Greece ETF to reflect a change to the Fund's Index
Provider from FTSE International Limited to MSCI, Inc. and a change in the
Fund's underlying index from the FTSE/ATHEX Custom Capped Index to the MSCI All
Greece Select 25/50 Index. The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2020 |
31.50% |
Worst
Quarter: |
3/31/2020 |
-44.00% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Ten
Years Ended December 31, 2022 |
Global
X MSCI Greece ETF: |
|
|
|
·Return before
taxes |
2.95% |
-0.25% |
-4.76% |
·Return
after taxes on distributions1 |
2.35% |
-0.69% |
-5.08% |
·Return
after taxes on distributions and sale of Fund Shares1 |
2.30% |
-0.10% |
-3.35% |
Hybrid
MSCI All Greece Select 25/50 Index (net)2
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
3.53% |
0.14% |
-4.08% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
-1.40% |
1.44% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
2
Hybrid index performance
reflects the performance of the FTSE/ATHEX Custom Capped Index through February
29, 2016 and the MSCI All Greece Select 25/50 Index thereafter.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales
persons
or other intermediary or its employees or associated persons to recommend the
Fund over another investment. Ask your financial adviser or visit your financial
intermediary’s website for more information.
Global X MSCI Norway ETF
Ticker:
NORW Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI Norway ETF
("Fund") seeks investment results that correspond generally to the price and
yield performance, before fees and expenses, of the MSCI Norway IMI 25/50 Index
("Underlying Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 15.58% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI
Norway IMI 25/50 Index (the "Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund also invests at least 80% of its
total assets in securities of companies that are economically tied to Norway.
The Fund's 80% investment policies are non-fundamental and require 60 days prior
written notice to shareholders before they can be changed. The Fund may lend
securities representing up to one-third of the value of the Fund’s total assets
(including the value of the collateral received).
The
Underlying Index is designed to represent the performance of the broad Norway
equity universe, as defined by MSCI, Inc. ("MSCI"), the provider of the
Underlying Index ("Index Provider"). The broad Norway equity universe includes
securities that are classified in Norway according to the MSCI Global Investable
Market Index Methodology, which is a methodology that seeks to identify the
investable universe of companies globally in order to facilitate the
construction of replicable indexes such as the Underlying Index. The MSCI Global
Investable Market Index Methodology screens companies using size, liquidity and
other criteria in order to determine the investable universe. The country
classification of a company is generally determined by the Index Provider using
the company’s country of incorporation and the primary listing of its
securities. The Index Provider will classify a company in the country of
incorporation if its securities have a primary listing in this country. In such
cases where a company’s securities have a primary listing outside of the country
of incorporation, additional criteria such as the
location
of the company’s headquarters and the geographic distribution of its operations
(e.g. assets and revenues), management, and shareholder base are considered for
classification purposes. The Underlying Index follows a rules-based methodology
that is designed to select securities that satisfy the above criteria and which
meet minimum market capitalization and liquidity requirements.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying Index.
The
Underlying Index is weighted according to each component's free-float adjusted
market capitalization. The weights are further modified so that, as of the
rebalance date, no group entity (defined by the Index Provider as companies with
a controlling stake owned by one entity) constitutes more than 25% of the
Underlying Index and so that, in the aggregate, the individual group entities
that would represent more than 5% of the Underlying Index represent no more than
50% of the Underlying Index ("25/50 Cap"). The Underlying Index is reconstituted
and re-weighted quarterly. The Underlying Index may include large-, mid- and
small-capitalization companies, and components primarily include financials,
consumer staples and energy companies. As of December 31, 2022, the
Underlying Index had 69 constituents. The Fund's investment objective and
Underlying Index may be changed without shareholder approval.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the oil, gas and consumable fuels industry and had significant
exposure to the energy sector.
The
Fund is classified as "non-diversified," which means it may invest a larger
percentage of its assets in a smaller number of issuers than a diversified
fund.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Norway's currency depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Energy Sector: The
value of securities issued by companies in the energy sector may decline for
many reasons, including, without limitation, changes in energy prices;
international politics; energy conservation; the success of exploration
projects; natural disasters or other catastrophes; changes in exchange rates,
interest rates, or economic conditions; changes in demand for energy products
and services; and tax and other government regulatory policies. Actions taken by
central governments may dramatically impact supply and demand forces that
influence energy prices, resulting in sudden decreases in value for companies in
the energy sector.
Risks
Related to Investing in the Oil, Gas and Consumable Fuels Industry: The
oil, gas and consumable fuels industry is cyclical and highly dependent on the
market price of fuel. The market value of companies in the oil, gas and
consumable fuels industry are strongly affected by the levels and volatility of
global commodity prices, supply and demand, capital expenditures on exploration
and production, energy conservation efforts, the prices of alternative fuels,
exchange rates and technological advances. Companies in this sector are subject
to substantial government regulation and contractual fixed pricing, which may
increase the cost of business and limit these companies’ earnings. Actions taken
by central governments may dramatically impact supply and demand forces that
influence the market price of fuel, resulting in sudden decreases in value for
companies in the oil, gas and consumable fuels industry. A significant portion
of their revenues depends on a relatively small number of customers, including
governmental entities and utilities. As a result, governmental budget restraints
may have a material adverse effect on the stock prices of companies in the
industry.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in
opposite
directions. In addition, securities of foreign issuers may lose value due to
political, economic and geographic events affecting a foreign issuer or market.
During periods of social, political or economic instability in a country or
region, the value of a foreign security traded on U.S. exchanges could be
affected by, among other things, increasing price volatility, illiquidity, or
the closure of the primary market on which the security (or the security
underlying the ADR or GDR) is traded. You may lose money due to political,
economic and geographic events affecting a foreign issuer or market. Where all
or a portion of the Fund's underlying securities trade in a market that is
closed when the market in which the Fund's shares are listed and trading is
open, there may be differences between the last quote from the security’s closed
foreign market and the value of the security during the Fund’s domestic trading
day. This in turn could lead to differences between the market price of the
Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Brazil: Investment
in Brazilian issuers involves risks that are specific to Brazil, including
legal, regulatory, political and economic risks. The Brazilian economy has
historically been exposed to high rates of inflation, debt, corruption, and
violence, each of which may reduce and/or prevent economic growth.
Risk
of Investing in Developed Markets: The
Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Emerging Markets:
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Norway: Investments
in Norwegian issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risks specific to Norway. Norway is a major
producer of oil and gas, and Norway's economy is subject to the risk of
fluctuations in oil and gas prices. The high value of the Norwegian krone as
compared to other currencies could have a damaging effect on Norwegian exports
and investments.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
Economies in emerging market countries generally are dependent heavily upon
commodity prices and international trade and, accordingly, may be affected
adversely by the economies of their trading partners, trade barriers, exchange
controls, managed adjustments in relative currency values, and may suffer from
extreme and volatile debt burdens or inflation rates. Through its portfolio
companies' trading partners, the Fund is specifically exposed to European
Economic Risk, US Economic Risk, and Asian Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's
Shares.
PERFORMANCE
INFORMATION
The information shown below
reflects the historical performance of the Global X MSCI Norway ETF, a series of
the Global X Funds (the “Predecessor Fund”). Effective as of the close of
business on October 29, 2021, the Predecessor Fund was reorganized into the Fund
(the “Reorganization”). Upon completion of the Reorganization, the Fund assumed
the performance, financial, accounting and other historical information of the
Predecessor Fund’s shares. The Predecessor Fund and the Fund have identical
investment objectives, strategies and restrictions. The portfolio managers of
the Fund are the same members of the portfolio management team of the
Predecessor Fund. The Fund has the same expenses as the Predecessor
Fund.
The bar chart
and table that follow show how the Predecessor Fund performed on a calendar year
basis and provide an indication of the risks of investing in the Fund by showing
changes in the Predecessor Fund’s performance from year to year and by showing
how the Predecessor Fund's average annual returns for the indicated periods
compare with the Fund's benchmark index and a broad measure of market
performance. The Fund’s and the Predecessor
Fund's past performance (before and after taxes) is not necessarily indicative
of how the Fund will perform in the future. Updated performance
information is available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2020 |
24.12% |
Worst
Quarter: |
3/31/2020 |
-37.23% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Ten
Years Ended December 31, 2022 |
Global
X MSCI Norway ETF: |
|
|
|
·Return before
taxes |
-12.92% |
1.96% |
1.50% |
·Return
after taxes on distributions1 |
-13.28% |
1.43% |
0.74% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-6.63% |
1.76% |
1.15% |
Hybrid
MSCI Norway IMI 25/50 Index(net)2
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-12.89% |
2.26% |
1.94% |
MSCI
EAFE Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-14.45% |
1.54% |
4.67% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
2 Hybrid Index performance
reflects the performance of the FTSE Norway 30 Index through July 14, 2014 and
the MSCI Norway IMI 25/50 Index thereafter.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
"Authorized Participants" (as defined in the SAI) who have entered into
agreements with the Fund's distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called "Creation Units". The Fund will issue or redeem Creation
Units in return for a basket of cash and/or securities that the Fund specifies
any day that the national securities exchanges are open for business (“Business
Day”). An investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares of the Fund (bid) and
the lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X DAX Germany
ETF
Ticker:
DAX Exchange: NASDAQ
INVESTMENT OBJECTIVE
The
Global X DAX Germany ETF ("Fund") seeks to provide investment results that
closely correspond, before fees and expenses, generally to the price and yield
performance of the DAX®
Index ("DAX Index" or "Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.20% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.01% |
Total
Annual Fund Operating Expenses: |
0.21% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$22 |
$68 |
$118 |
$268 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 10.74% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the
DAX®
Index ("DAX Index" or "Index") and in American Depositary Receipts ("ADRs") and
Global Depositary Receipts ("GDRs") based on the securities in the Underlying
Index. The Fund's 80% investment policy is non-fundamental and requires 60 days
prior written notice to shareholders before it can be changed. The Fund's
investment objective and Underlying Index may be changed without shareholder
approval.
The
Index tracks the segment of the largest and most actively traded companies -
known as blue chips - on the German equities market. The Index contains the
shares of among the 30 largest German companies in terms of liquidity and
free-float market capitalization admitted to the Frankfurt Stock Exchange in the
Prime Standard segment. Liquidity is defined as book order volume, which is the
sum of the daily turnover over the prior 12-month period. The Prime Standard
segment is a market segment of the Frankfurt Stock Exchange which includes
companies with higher transparency and reporting standards than those of the
General Standard, which is the minimum reporting standard currently required by
EU-regulation. The 30 stocks contained in the Index generally represent about
80% of the market capitalization listed in Germany.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental
or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was not
concentrated in any industry.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
euro depreciates against the U.S. dollar or if there are delays or limits on
repatriation of such currency. Currency exchange rates can be very volatile and
can change quickly and unpredictably. As a result, the Fund's NAV may change
quickly and without warning, which could have a significant negative impact on
the Fund.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events
affecting
a foreign issuer or market. During periods of social, political or economic
instability in a country or region, the value of a foreign security traded on
U.S. exchanges could be affected by, among other things, increasing price
volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Germany:
The Fund’s investment in German issuers subjects the Fund to legal, regulatory,
political, currency, security, and economic risks specific to Germany. Ongoing
concerns in relation to the economic health of the European Union (the “EU”)
continue to constrain the economic resilience of certain EU member states,
including Germany. Germany has an industrial and export dependent economy and
therefore relies heavily on trade with key trading partners, including the
Netherlands, China, the U.S., the United Kingdom, France, Italy and other
European countries. Germany is dependent on the economies of these other
countries, and a decline in the price or demand for German exports may have an
adverse impact on its economy.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As
a result, the gains and losses on a single
investment may have a greater impact on the Fund’s NAV and may make the Fund
more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not.
Reliance
on Trading Partners Risk:
The Fund invests in the German economy, which is heavily dependent upon trading
with key partners. Any reduction in this trading, including as a result of
adverse economic conditions in a trading partner's economy, may cause an adverse
impact on the German economy in which the Fund invests. Through its portfolio
companies' trading partners, the Fund is specifically exposed to European
Economic Risk
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a
national
securities exchange and may, therefore, have a material upward or downward
effect on the market price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance.
The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
The
Fund operated as the Horizons DAX Germany ETF (the "Predecessor Fund"), a series
of Horizons ETF Trust I prior to the Fund's acquisition of the assets and
assumption of the liabilities of the Predecessor Fund on December 24, 2018 (the
"Reorganization"). As a result of the Reorganization, the Fund assumed the
performance and accounting history of the Predecessor Fund. Accordingly,
performance figures for the Fund for periods prior to the date of the
Reorganization represent the performance of the Predecessor
Fund.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
26.45% |
Worst
Quarter: |
3/31/2020 |
-26.58% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (10/22/2014) |
Global
X DAX Germany ETF:1 |
|
|
|
·Return before
taxes |
-18.35% |
-1.34% |
2.61% |
·Return
after taxes on distributions2 |
-18.80% |
-1.87% |
2.19% |
·Return
after taxes on distributions and sale of Fund Shares2 |
-10.40% |
-0.91% |
2.14% |
DAX®
Index
(Index returns do not
reflect deductions for fees, expenses, or
taxes) |
-17.44% |
-0.85% |
3.37% |
DAX®
Index (net)
(Index returns reflect
invested dividends net of non-U.S. withholding taxes, but reflect no
deduction for fees, expenses, or other
taxes) |
-18.15% |
-1.54% |
2.69% |
MSCI
EAFE Index (net) (Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-14.45% |
1.54% |
3.78% |
1
Performance shown for
periods prior to December 24, 2018, reflects that of the Predecessor
Fund.
2
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been Portfolio Manager of the Fund since the
Fund's inception in December 2018 and had managed the Predecessor Fund since
October 2018. Mr. Xie has been Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been Portfolio Manager of the Fund since December 2020. Mr. Lu has been
a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI Portugal
ETF
Ticker:
PGAL Exchange: NYSE
Arca
INVESTMENT OBJECTIVE
The Global X MSCI Portugal ETF
("Fund") seeks to provide investment results that correspond generally to the
price and yield performance, before fees and expenses, of the MSCI All Portugal
Plus 25/50 Index ("Underlying Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.55% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.06% |
Total
Annual Fund Operating Expenses: |
0.61% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$62 |
$195 |
$340 |
$762 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 40.76% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI All
Portugal Plus 25/50 Index ("Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund also invests at least 80% of its
total assets in securities of companies that are economically tied to Portugal.
The Fund's 80% investment policies are non-fundamental and require 60 days prior
written notice to shareholders before they can be changed. The Fund may lend
securities representing up to one-third of the value of the Fund’s total assets
(including the value of the collateral received).
The
Underlying Index is designed to represent the performance of the broad Portugal
equity universe, while including a minimum number of constituents, as defined by
MSCI, Inc. ("MSCI"), the provider of the Underlying Index ("Index Provider").
The broad Portugal equity universe includes securities that are classified in
Portugal according to the MSCI Global Investable Market Index Methodology,
together with companies that are headquartered or listed in Portugal and carry
out the majority of their operations in Portugal. The Fund's investment
objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines
the relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index had significant
exposure to the utilities sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if the
euro depreciates against the U.S. dollar or if there are delays or limits on
repatriation of such currency. Currency exchange rates can be very volatile and
can change quickly and unpredictably. As a result, the Fund's NAV may change
quickly and without warning, which could have a significant negative impact on
the Fund.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Utilities Sector:
Companies in the utilities sector may be adversely affected by changes in
exchange rates, domestic and international competition and governmental
regulations on rates charged to customers. Privatization and deregulation in the
utilities sector may subject companies to greater competition and losses in
profitability. Companies in the utilities sector may have difficulty obtaining
an adequate return on invested capital, raising capital, or financing large
construction programs during periods of inflation or unsettled capital markets.
In addition, companies in the utilities sector may be adversely affected due to
increase in fuel and operating costs and the costs of complying with
regulations.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in China:
Investment exposure to China subjects the Fund to risks specific to China.
Economic,
Political and Social Risk
China
may be subject to considerable degrees of economic, political and social
instability. Concerns about the rising government and household debt levels
could impact the stability of the Chinese economy. China is an emerging market
and demonstrates significantly higher volatility from time to time in comparison
to developed markets. Over the last few decades, the Chinese government has
undertaken reform of economic and market practices, including recent reforms to
liberalize its capital markets and expand the sphere for private ownership of
property in China. However, Chinese markets generally continue to experience
inefficiency, volatility and pricing anomalies resulting from governmental
influence, a lack of publicly available information and/or political and social
instability. Chinese companies are also subject to the risk that Chinese
authorities can intervene in their operations and structure. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation.
China
has experienced major health crises. These health crises include, but are not
limited to, the rapid and pandemic spread of novel viruses commonly known as
SARS, MERS, and COVID-19 (Coronavirus). Such health crises could exacerbate
political, social, and economic risks previously mentioned.
Export
growth continues to be a major driver of China’s rapid economic growth. Elevated
trade tensions between China and its trading partners, including the imposition
of U.S. tariffs on certain Chinese goods and increased international pressure
related to Chinese trade policy and forced technology transfers and intellectual
property protections, may have a substantial impact on the Chinese economy.
Reduction in spending on Chinese products and services, institution of
additional tariffs or other trade barriers (including as a result of heightened
trade tensions between China and the U.S. or in response to actual or alleged
Chinese cyber activity), or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. The
continuation or worsening of the current political climate between China and the
U.S. could result in additional regulatory restrictions being contemplated or
imposed in the U.S. or in China that could impact the Fund’s ability to invest
in certain companies.
Security
Risk
China
has experienced security concerns, such as terrorism and strained international
relations. Additionally, China is alleged to have participated in
state-sponsored cyberattacks against foreign companies and foreign governments.
Actual and threatened responses to such activity, including purchasing
restrictions, sanctions, tariffs or cyberattacks on the Chinese government or
Chinese companies, may impact China’s economy and Chinese issuers of securities
in which the Fund invests. Incidents involving China’s or the region’s security,
including the contagion of infectious viruses or diseases, may cause uncertainty
in Chinese markets and may adversely affect the Chinese economy and the Fund’s
investments.
Heavy
Government Control and Regulation
Chinese
companies, including Chinese companies that are listed on U.S. exchanges, are
not subject to the same degree of regulatory requirements, accounting standards
or auditor oversight as companies in more developed countries, and as a result,
information about the Chinese securities in which the Fund invests may be less
reliable or complete. There may be significant obstacles to obtaining
information necessary for investigations into or litigation against Chinese
companies and shareholders may have limited legal remedies. Investments in China
may be subject to loss due to expropriation or nationalization of assets and
property or the imposition of restrictions on foreign investments and
repatriation of capital. Furthermore, government actions against leaders or
other key figures within companies, or speculation about such actions, may lead
to sudden and unpredictable falls in the value of securities within the
Fund.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund. Should
legislation limit U.S. investors’ ability to invest in specific Chinese
companies through A-shares or other share class listings that are part of the
underlying holdings, these shares may be excluded from Fund
holdings.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the Chinese government restricts foreign
ownership to raise capital from foreign investors. While the shell company has
no equity ownership of the VIE, these contractual arrangements permit the shell
company to consolidate the VIE’s financial statements with its own for
accounting purposes and provide for economic exposure to the performance of the
underlying Chinese operating company.
Therefore,
an investor in the listed shell company, such as the Fund, will have exposure to
the Chinese-based operating company only through contractual arrangements and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign
ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
Chinese government will not place similar restrictions on other
industries.
Chinese
equities that utilize the VIE structure to list in the U.S. as ADRs face the
risk of regulatory action from U.S. authorities, including the risk of
delisting. This will depend in part on whether U.S. regulatory authorities are
satisfied with their access to Mainland China and Hong Kong for the purpose of
conducting inspections on the quality of audits for these companies. Although
the U.S. and China reached an agreement in September 2022 to grant the U.S.
access for such inspections, there is no guarantee that the agreement will hold
up or that U.S. regulatory authorities will continue to feel satisfied with
their access.
Risk
of Investing in Developed Markets:
The Fund’s investment in a developed country issuer may subject the Fund to
regulatory, political, currency, security, economic and other risks associated
with developed countries. Developed countries tend to represent a significant
portion of the global economy and have generally experienced slower economic
growth than some less developed countries. Certain developed countries have
experienced security concerns, such as terrorism and strained international
relations. Incidents involving a country’s or region’s security may cause
uncertainty in its markets and may adversely affect its economy and the Fund’s
investments. In addition, developed countries may be impacted by changes to the
economic conditions of certain key trading partners, regulatory burdens, debt
burdens and the price or availability of certain commodities.
Risk
of Investing in Portugal:
Investments are concentrated in companies in Portugal. Portugal’s economy is
comprised of several sectors but is heavily dependent on the services sector.
Decreasing demand for Portuguese products and services or changes in
governmental regulations on trade may have a significantly adverse effect on
Portugal’s economy. The long-term credit assessment is not favorable for
Portugal, and problems persist with regard to public finances and elevated debt
levels. Secessionist movements, such as the Catalan movement in Spain and the
independence movement in Scotland, may have an adverse effect on the Portuguese
economy.
Risk
of Investing in Spain: Investments
in Spanish issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risks specific to Spain. Among other things,
Spain’s economy has been characterized by slow growth over the past few years
due to factors such as low housing sales and construction declines, and
international credit crises. Political tensions and social conflict have
escalated as a result of a referendum by Catalonia for independence from Spain.
The secessionist movement could have a negative impact on the Spanish economy
and a destabilizing effect on the country. This risk may be heightened during
times of increased market volatility or other unusual market conditions. Spain’s
economic
exposure
to specific industries, such as tourism, could make these economies especially
vulnerable to global crises, including but not limited to, pandemics such as
COVID-19.
Government
Debt Risk:
Portugal currently has high levels of debt and public spending. High levels of
debt and public spending may stifle economic growth, contribute to prolonged
periods of recession or lower a country's sovereign debt rating, all of which
may adversely impact the Fund's investments.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not.
Reliance
on Trading Partners Risk:
The Fund invests in the Portuguese economy, which is heavily dependent upon
trading with key partners. Any reduction in this trading, including as a result
of adverse economic conditions in a trading partner's economy, may cause an
adverse impact on the Portuguese economy. Through its portfolio companies'
trading partners, the Fund is specifically exposed to Asian
Economic Risk, European Economic Risk
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance. On
December 6, 2016, the name of the Fund changed from the Global X FTSE Portugal
20 ETF to the Global X MSCI Portugal ETF to reflect a change to the Fund's Index
Provider from FTSE International Limited to MSCI, Inc. and a change in the
Fund's underlying index from the FTSE Portugal 20 Index to the MSCI All Portugal
Plus 25/50 Index. The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2020 |
23.22% |
Worst
Quarter: |
3/31/2020 |
-25.38% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (11/12/2013) |
Global
X MSCI Portugal ETF: |
|
|
|
·Return before
taxes |
-5.54% |
0.05% |
-0.99% |
·Return
after taxes on distributions1 |
-5.95% |
-0.42% |
-1.48% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-2.45% |
0.35% |
-0.53% |
Hybrid
MSCI All Portugal Plus 25/50 Index (net)2
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-5.15% |
0.14% |
-0.86% |
MSCI
EAFE Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-14.45% |
1.54% |
3.17% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
2
Hybrid index performance
reflects the performance of the FTSE Portugal 20 Index through December 5, 2016,
and the MSCI All Portugal Plus 25/50 Index thereafter.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales
persons
or other intermediary or its employees or associated persons to recommend the
Fund over another investment. Ask your financial adviser or visit your financial
intermediary’s website for more information.
Global X MSCI Colombia
ETF
Ticker:
GXG Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI Colombia ETF
("Fund") seeks to provide investment results that correspond generally to the
price and yield performance, before fees and expenses, of the MSCI All Colombia
Select 25/50 Index (the "Underlying Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.61% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.01% |
Total
Annual Fund Operating Expenses: |
0.62% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$63 |
$199 |
$346 |
$774 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 50.35% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI All
Colombia Select 25/50 Index (the "Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund also invests at least 80% of its
total assets in securities of companies that are economically tied to Colombia.
The Fund's 80% investment policies are non-fundamental and require 60 days prior
written notice to shareholders before they can be changed. The Fund may lend
securities representing up to one-third of the value of the Fund’s total assets
(including the value of the collateral received).
The
Underlying Index is designed to represent the performance of the broad Colombia
equity universe, as defined by MSCI, Inc. ("MSCI"), the provider of the
Underlying Index ("Index Provider"). The broad Colombia equity universe includes
securities that are classified in Colombia according to the MSCI Global
Investable Market Index Methodology, together with companies that are
headquartered or listed in Colombia and carry out the majority of their
operations in Colombia. The Underlying Index also applies minimum liquidity
thresholds as criteria for company inclusion. The Fund's investment objective
and Underlying Index may be changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines
the relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the banking and oil, gas and consumable fuels industries and had
significant exposure to the financials and energy
sectors.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several
days
if the securities market is relatively illiquid and may involve considerable
brokerage fees and taxes. These factors may result in wider spreads between the
bid and the offered prices of the Fund’s Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Colombia's currency depreciates against the U.S. dollar or if there are delays
or limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Banking Industry:
The performance of stocks in the banking industry may be affected by extensive
governmental regulation which may limit both the amounts and types of loans and
other financial commitments they can make, and the interest rates and fees they
can charge and the amount of capital they must maintain. Profitability is
largely dependent on the availability and cost of capital funds and can
fluctuate significantly when interest rates change. Credit losses resulting from
financial difficulties of borrowers can negatively impact banking companies.
Banks may also be subject to severe price competition. Competition is high among
banking companies and failure to maintain or increase market share may result in
lost market value. The impact of changes in capital requirements and recent or
future regulation of any individual banking company, or of the financials sector
as a whole, cannot be predicted. In recent years, cyberattacks and technology
malfunctions and failures have become increasingly frequent in this sector and
have caused significant losses to companies in this sector, which may negatively
impact the Fund.
Risks
Related to Investing in the Energy Sector: The
value of securities issued by companies in the energy sector may decline for
many reasons, including, without limitation, changes in energy prices;
international politics; energy conservation; the success of exploration
projects; natural disasters or other catastrophes; changes in exchange rates,
interest rates, or economic conditions; changes in demand for energy products
and services; and tax and other government regulatory policies. Actions taken by
central governments may dramatically impact supply and demand forces that
influence energy prices, resulting in sudden decreases in value for companies in
the energy sector.
Risks
Related to Investing in the Financials Sector: Performance
of companies in the financials sector may be adversely impacted by many factors,
including, among others, government regulations, economic conditions, credit
rating downgrades, changes in interest rates, and decreased liquidity in credit
markets. This sector has experienced significant losses in the past, and the
impact of more stringent capital requirements and of current or future
regulation on any individual financial company or on the sector as a whole
cannot be predicted. In recent years, cyber-attacks and technology malfunctions
and failures have become increasingly frequent in this sector and have caused
significant losses to companies in this sector, which may negatively impact the
Fund.
Risks
Related to Investing in the Oil, Gas and Consumable Fuels Industry: The
oil, gas and consumable fuels industry is cyclical and highly dependent on the
market price of fuel. The market value of companies in the oil, gas and
consumable fuels industry are strongly affected by the levels and volatility of
global commodity prices, supply and demand, capital expenditures on exploration
and production, energy conservation efforts, the prices of alternative fuels,
exchange rates and technological advances. Companies in this sector are subject
to substantial government regulation and contractual fixed pricing, which may
increase the cost of business and limit these companies’ earnings. Actions taken
by central governments may dramatically impact supply and demand forces that
influence the market price of fuel, resulting in sudden decreases in value for
companies in the oil, gas and consumable fuels industry. A
significant
portion of their revenues depends on a relatively small number of customers,
including governmental entities and utilities. As a result, governmental budget
restraints may have a material adverse effect on the stock prices of companies
in the industry.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Chile:
Investments
in Chilean issuers involve risks that are specific to Chile, including legal,
regulatory, political, currency, environmental and economic risks. Among other
things, the Chilean economy is heavily dependent on the export of certain
commodities.
Risk
of Investing in Colombia:
Investment in Colombian issuers and companies that have significant operations
in Colombia involves risks that are specific to Colombia, including legal,
regulatory, political and economic risks. The Colombian economy depends heavily
on oil, coal and other commodity exports, making it vulnerable to commodity
prices. Armed conflict and terrorism related to Colombia’s civil war and the
ongoing drug trade may impact the economy. Likewise, there are spillover risks
associated with the ongoing political and humanitarian crisis in neighboring
Venezuela which may adversely impact social, political, and economic stability
in Colombia.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, Colombia is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce
or
eliminate its holdings in that company. The reduction or elimination of the
Fund’s holdings in the company may have an adverse impact on the liquidity of
the Fund’s overall portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of
dividends
or interest, tax gains or losses, changes to the Underlying Index or the costs
to the Fund of complying with various new or existing regulatory requirements.
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 the Underlying Index does not. ETFs that track
indices with significant weight in emerging markets issuers may experience
higher tracking error than other ETFs that do not track such indices.
Reliance
on Trading Partners Risk:
The Fund invests in the Colombian economy, which is heavily dependent upon
trading with key partners. Any reduction in this trading, including as a result
of adverse economic conditions in a trading partner's economy, may cause an
adverse impact on the economy in which the Fund invests. Through its portfolio
companies' trading partners, the Fund is specifically exposed to Asian
Economic Risk, European Economic Risk, Latin American Economic Risk
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Security
Risk:
Colombia has experienced security concerns. Incidents involving a country's or
region's security may cause uncertainty in Colombian markets and may adversely
affect Colombia's economy and the Fund's investments.
Structural
Risk:
The countries in which the Fund invests may be subject to considerable degrees
of economic, political and social instability.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance.
Absent any applicable fee waivers and/or expense limitations, performance would
have been lower. On July 15, 2014, the name of the Fund changed from the Global
X FTSE Colombia 20 ETF to the Global X MSCI Colombia ETF to reflect a change to
the Fund's Index Provider from the FTSE International Limited to the MSCI, Inc.
and a change in the Fund's underlying index from FTSE Colombia 20 Index to MSCI
All Colombia Capped Index. On August 31, 2016, the Fund's underlying index
changed from MSCI All Colombia Capped Index to MSCI All Colombia Select 25/50
Index. The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2020 |
38.90% |
Worst
Quarter: |
3/31/2020 |
-46.32% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Ten
Years Ended December 31, 2022 |
Global
X MSCI Colombia ETF: |
|
|
|
·Return before
taxes |
-21.34% |
-8.98% |
-10.75% |
·Return
after taxes on distributions1 |
-24.17% |
-10.30% |
-11.70% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-11.95% |
-6.66% |
-7.00% |
Hybrid
MSCI All Colombia Select 25/50 Index (net)2
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-21.21% |
-8.64% |
-10.08% |
MSCI
Emerging Markets Index (net) (Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
-1.40% |
1.44% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
2 Hybrid index performance
reflects the performance of the FTSE Colombia 20 Index through July 14, 2014,
the MSCI All Colombia Capped Index through August 30, 2016 and the MSCI All
Colombia Select 25/50 Index thereafter.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI Argentina ETF
Ticker:
ARGT Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI Argentina
ETF ("Fund") seeks to provide investment results that correspond generally to
the price and yield performance, before fees and expenses, of the MSCI All
Argentina 25/50 Index ("Underlying Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.59% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.59% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$60 |
$189 |
$329 |
$738 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 44.70% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI All
Argentina 25/50 Index ("Underlying Index") and in American Depositary Receipts
("ADRs") and Global Depositary Receipts ("GDRs") based on the securities in the
Underlying Index. The Fund also invests at least 80% of its total assets in
securities of companies that are economically tied to Argentina. The Fund's 80%
investment policies are non-fundamental and require 60 days prior written notice
to shareholders before they can be changed. The Fund may lend securities
representing up to one-third of the value of the Fund’s total assets (including
the value of the collateral received).
The
Underlying Index is designed to represent the performance of the broad Argentina
equity universe, while including a minimum number of constituents, as defined by
MSCI, Inc. ("MSCI"), the provider of the Underlying Index ("Index Provider").
The broad Argentina equity universe includes securities that are classified in
Argentina according to the MSCI Global Investable Market Index Methodology,
together with companies that are headquartered or listed in Argentina and carry
out the majority of their operations in Argentina. The Underlying Index targets
a minimum of 25 securities and 20 issuers at construction. The Fund's investment
objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines
the relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index had significant
exposure to the consumer discretionary
sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Argentine
Tax Treatment Uncertainty of ADRs: The
sale, exchange or other transfer of Argentinian equity shares and other
securities may be subject to a capital gain tax at a rate of 15% for certain
nonresidents, including the Fund. The application and method of collection of
this tax remains unclear in certain respects, including with respect to the sale
or other disposition of, or the receipt of dividends from, Argentinian ADRs and
GDRs. Such tax laws remain subject to further rulemaking and interpretation,
which may adversely affect the tax treatment of the Fund's investments in
Argentinian ADRs.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Argentina's currency depreciates against the U.S. dollar or if there are delays
or limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Consumer Discretionary Sector: The
consumer discretionary sector may be affected by changes in domestic and
international economies, exchange and interest rates, competition, consumers’
disposable income and consumer preferences, social trends and marketing
campaigns.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Argentina:
Argentina has experienced high interest rates, economic volatility, severe
inflation, drastic currency devaluations, political instability and high
unemployment rates. The economy is heavily dependent on exports and commodities,
making the economy susceptible to fluctuations in commodity markets and
sensitive to its relationships with key trading partners. Argentina’s default on
its debt in 2001 and 2020 continues to impact the confidence of investors in
Argentina, which might adversely impact returns in the Fund. Further defaults
and related actions by Argentina may continue to impact the confidence of
investors in Argentina, which could limit the government’s ability to borrow in
the future. Argentina has privatized, certain industries, which may lose money
or be re-nationalized.
Risk
of Investing in Brazil: Investment
in Brazilian issuers involves risks that are specific to Brazil, including
legal, regulatory, political and economic risks. The Brazilian economy has
historically been exposed to high rates of inflation, debt, corruption, and
violence, each of which may reduce and/or prevent economic
growth.
Risk
of Investing in Canada: The
Canadian economy is highly dependent on the demand for and price of natural
resources. As a result, the Canadian market is relatively concentrated in
issuers involved in the production and distribution of natural resources and any
changes in these sectors could have an adverse impact on the Canadian economy.
The Canadian economy is heavily dependent on relationships with certain key
trading partners, including the United States and China. Developments in the
United States, including renegotiation of the North American Free Trade
Agreement (“NAFTA”) and ratification of the successor United
States-Mexico-Canada Agreement (“USMCA”), which went into effect on July 1,
2020, as well as the imposition of additional tariffs by the United States, may
have implications for the trade arrangements between the United States and
Canada, which could negatively affect the value of securities held by the
Fund.
Risk
of Investing in Chile:
Investments
in Chilean issuers involve risks that are specific to Chile, including legal,
regulatory, political, currency, environmental and economic risks. Among other
things, the Chilean economy is heavily dependent on the export of certain
commodities.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, Argentina is an emerging market country.
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Frontier and Standalone Markets: In
June of 2021, Argentina was reclassified as a standalone market by the Index
Provider due to prolonged and severe capital controls that are undermining
market accessibility. Argentina was previously classified as an emerging market.
Standalone markets are those that do not meet the criteria for classification as
frontier markets or emerging markets. Because standalone countries often face
highly unique circumstances that range from war to liquidity issues, investors
should carefully assess each market and determine the reason for standalone
classification prior to making any investment. In some cases, standalone markets
may be subject to significant sanctions by the international community and may
abruptly lose foreign investors as a result. Investments in frontier markets may
be subject to a greater risk of loss than investments in more developed and
traditional emerging market. Frontier markets often have less uniformity in
accounting and reporting requirements, unreliable securities valuations and
greater risk associated with custody of securities. Economic, political,
liquidity and currency risks may be more pronounced with respect to investments
in frontier markets than in emerging markets and developed markets. Frontier
market countries generally have smaller economies or less developed capital
markets than traditional emerging markets, and, as a result, the risks of
investing in emerging markets countries are magnified in frontier countries. The
economies of frontier countries are less correlated to global economic cycles
than those of their more developed counterparts and their markets have low
trading volumes and the potential for extreme price volatility and illiquidity.
These factors make investing in standalone and frontier countries significantly
riskier than in other countries and any one of them could cause the price of the
Fund's Shares to decline.
Government
Debt Risk: Argentina
currently has high levels of debt and public spending. High levels of debt and
public spending may stifle economic growth, contribute to prolonged periods of
recession or lower a country's sovereign debt rating, all of which may adversely
impact the Fund's investments.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
The Fund invests in the Argentinean economy, which is heavily dependent upon
trading with key partners. Any reduction in this trading, including as a result
of adverse economic conditions in a trading partner's economy, may cause an
adverse impact on the Argentinean economy in which the Fund invests. Through its
portfolio companies' trading partners, the Fund is specifically exposed to
Asian
Economic Risk, European Economic Risk, Latin American Economic Risk
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Structural
Risk:
The countries in which the Fund invests may be subject to considerable degrees
of economic, political and social instability.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance. On
August 15, 2014, the name of the Fund changed from the Global X FTSE Argentina
20 ETF to the Global X MSCI Argentina ETF to reflect a change to the Fund's
Index Provider from FTSE International Limited to MSCI, Inc. and a change in the
Fund's Underlying Index from the FTSE Argentina 20 Index to the MSCI All
Argentina 25/50 Index. The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
6/30/2020 |
45.14% |
Worst
Quarter: |
3/31/2020 |
-38.17% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Ten
Years Ended December 31, 2022 |
Global
X MSCI Argentina ETF: |
|
|
|
·Return before
taxes |
12.52% |
0.59% |
8.07% |
·Return
after taxes on distributions1 |
11.43% |
0.19% |
7.80% |
·Return
after taxes on distributions and sale of Fund Shares1 |
7.47% |
0.32% |
6.50% |
Hybrid
MSCI All Argentina 25/50 Index (net)2
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
12.84% |
0.99% |
8.60% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
-1.40% |
1.44% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
2 Hybrid Index performance
reflects the performance of the FTSE Argentina 20 Index through August 14, 2014
and the MSCI All Argentina 25/50 Index thereafter.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales
persons
or other intermediary or its employees or associated persons to recommend the
Fund over another investment. Ask your financial adviser or visit your financial
intermediary’s website for more information.
Global X MSCI Pakistan
ETF
Ticker:
PAK Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI Pakistan ETF
("Fund") seeks to provide investment results that correspond generally to the
price and yield performance, before fees and expenses, of the MSCI All Pakistan
Select 25/50 Index ("Underlying Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.68% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.12% |
Total
Annual Fund Operating Expenses: |
0.80% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$82 |
$255 |
$444 |
$990 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 28.59% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI All
Pakistan Select 25/50 Index ("Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. The Fund also invests at least 80% of its
total assets in securities of companies that are economically tied to Pakistan.
The Fund's 80% investment policies are non-fundamental and require 60 days prior
written notice to shareholders before they can be changed.
The
Underlying Index is designed to represent the performance of the broad Pakistan
equity universe, while including a minimum number of constituents, as defined by
MSCI, Inc. ("MSCI"), the provider of the Underlying Index ("Index Provider").
The broad Pakistan equity universe includes securities that are classified in
Pakistan according to the MSCI Global Investable Market Index Methodology,
together with companies that are headquartered or listed in Pakistan and carry
out the majority of their operations in Pakistan. The Fund's investment
objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index had significant
exposure to the materials sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Micro-Capitalization
Companies Risk:
Stock prices of micro-cap companies are significantly more volatile, and more
vulnerable to adverse business and economic developments, than those of larger
companies, and their earnings and revenues tend to be less predictable (and some
companies may experience significant losses). Microcap stocks may also be thinly
traded, making it difficult for the Fund to buy and sell them.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Pakistan's currency depreciates against the U.S. dollar or if there are delays
or limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Materials Sector:
Companies in the materials sector are affected by commodity price volatility,
exchange rates, import controls and worldwide competition. At times, worldwide
production of industrial materials has exceeded demand, leading to poor
investment returns or outright losses. Issuers in the materials sector are at
risk of depletion of resources, technological progress, labor relations,
governmental regulations and environmental damage and product liability
claims.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Frontier and Standalone Markets: Standalone
markets are those that do not meet the criteria for classification as frontier
markets or emerging markets. Because standalone countries often face highly
unique circumstances that range from war to liquidity issues, investors should
carefully assess each market and determine the reason for standalone
classification prior to making any investment. In some cases, standalone markets
may be subject to significant sanctions by the international community and may
abruptly lose foreign investors as a result. Investments in frontier markets may
be subject to a greater risk of loss than investments in more developed and
traditional emerging market. Frontier markets often have less uniformity in
accounting and reporting requirements, unreliable securities valuations and
greater risk associated with custody of securities. Economic, political,
liquidity and currency risks may be more pronounced with respect to investments
in frontier markets than in emerging markets and developed markets. Frontier
market countries generally have smaller economies or less developed capital
markets than traditional emerging markets, and, as a result, the risks of
investing in emerging markets countries are magnified in frontier countries. The
economies of frontier countries are less correlated to global economic cycles
than those of their more
developed
counterparts and their markets have low trading volumes and the potential for
extreme price volatility and illiquidity. These factors make investing in
standalone and frontier countries significantly riskier than in other countries
and any one of them could cause the price of the Fund's Shares to decline.
Risk
of Investing in Pakistan:
Pakistan’s economy is heavily dependent on exports and subject to high interest
rates, economic volatility, inflation, currency devaluations, high unemployment
rates and high level of debt and public spending. The worsening of these
conditions could exacerbate Pakistan’s fiscal stability, which in turn could
lead to a default with strongly adverse consequences for Pakistani equities and
the Fund. A deterioration in relations between Pakistan and key multilateral
organizations providing financial aid to Pakistan could also increase the
likelihood of a default. There is also the possibility of nationalization,
expropriation or confiscatory taxation, security market restrictions, political
changes, government regulation or diplomatic developments (including war or
terrorist attacks), which could affect adversely the economy of Pakistan or the
value of the Fund’s investments. As an emerging market, Pakistan’s economy is
susceptible to economic, political and social instability; unanticipated
economic, political or social developments could impact economic growth.
Pakistan is also subject to natural disaster risk. In addition, recent political
instability and protests in the Middle East and South Asia have caused
significant disruptions to many industries. Continued political and social
unrest in these areas may negatively affect the value of your investment in the
Fund. Pakistan has recently seen elevated levels of ethnic and religious
conflict, as well as interregional conflict with neighboring India over the
long-disputed region of Kashmir. In some cases, these conflicts have resulted in
violence or acts of terrorism. Escalation of these conflicts would have an
adverse effect on Pakistan’s economy.
Government
Debt Risk:
Pakistan currently has high levels of debt and public spending. High levels of
debt and public spending may stifle economic growth, contribute to prolonged
periods of recession or lower a country's sovereign debt rating, all of which
may adversely impact the Fund's investments.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified
funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
Economies in emerging market countries generally are dependent heavily upon
commodity prices and international trade and, accordingly, may be affected
adversely by the economies of their trading partners, trade barriers, exchange
controls, managed adjustments in relative currency values, and may suffer from
extreme and volatile debt burdens or inflation rates. Through its portfolio
companies' trading partners, the Fund is specifically exposed to Asian
Economic Risk,
European
Economic Risk,
Middle East Economic Risk,
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a
national
securities exchange and may, therefore, have a material upward or downward
effect on the market price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Security
Risk:
Pakistan has experienced security concerns. Incidents involving a country's or
region's security may cause uncertainty in Pakistan markets and may adversely
affect Pakistan's economy and the Fund's investments.
Structural
Risk:
The countries in which the Fund invests may be subject to considerable degrees
of economic, political and social instability.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance.
The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2019 |
27.28% |
Worst
Quarter: |
3/31/2020 |
-35.29% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (04/22/2015) |
Global
X MSCI Pakistan ETF: |
|
|
|
·Return before
taxes |
-29.82% |
-16.37% |
-11.96% |
·Return
after taxes on distributions1 |
-30.48% |
-16.83% |
-12.62% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-15.86% |
-10.47% |
-7.18% |
MSCI
All Pakistan Select 25/50 Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-28.52% |
-15.25% |
-10.39% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
-1.40% |
1.25% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a
Portfolio
Manager of the Fund since June 10, 2019. Ms. Yang has been a Portfolio Manager
of the Fund since December 2020. Mr. Lu has been a Portfolio Manager of the Fund
since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI Nigeria
ETF
Ticker:
NGE Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI Nigeria ETF
("Fund") seeks to provide investment results that correspond generally to the
price and yield performance, before fees and expenses, of the MSCI All Nigeria
Select 25/50 Index ("Underlying Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.68% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.15% |
Total
Annual Fund Operating Expenses: |
0.83% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$85 |
$265 |
$460 |
$1,025 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 1.95% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI All
Nigeria Select 25/50 Index ("Underlying Index") and in American Depositary
Receipts ("ADRs") and Global Depositary Receipts ("GDRs") based on the
securities in the Underlying Index. As of the date of this Prospectus, the Fund
is not invested in ADRs and GDRs but may do so in the future pending
availability. The Fund also invests at least 80% of its total assets in
securities of companies that are economically tied to Nigeria. The Fund’ s
investments in the securities included in the Underlying Index are denominated
in Naira, Nigeria’s currency. As discussed in more detail below in the section
titled “SUMMARY
OF PRINCIPAL RISKS – Risk of Investing in Nigeria”,
Naira is subject to capital controls and therefore, the Fund has experienced
challenges in converting Naira into other currencies, including U.S. Dollars,
which has impacted its investment in the securities of the Underlying Index. The
Fund's 80% investment policies are non-fundamental and require 60 days prior
written notice to shareholders before they can be changed.
The
Underlying Index is designed to represent the performance of the broad Nigeria
equity universe, while including a minimum number of constituents, as defined by
MSCI, Inc. ("MSCI"), the provider of the Underlying Index ("Index Provider").
The broad Nigeria equity universe includes securities that are classified in
Nigeria according to the MSCI Global Investable Market Index Methodology,
together with companies that are headquartered or listed in Nigeria and carry
out the majority of their operations in Nigeria. The eligibility criteria may
result in the Underlying Index including constituents that are listed in
Nigeria
and have substantial business activity in Nigeria, but which are headquartered
and may face material risks in other jurisdictions. The Fund's investment
objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the banking industry and had significant exposure to the
financials and consumer staples
sectors.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Risk
of Investing in Nigeria:
The Fund’s investments are significantly concentrated in companies in Nigeria
and are denominated in Naira, Nigeria’s currency. The economic development of
Nigeria has been significantly hindered by military rule, mismanagement,
corruption and ethnic conflict. The Nigerian economy is heavily dependent on oil
production and sales and prices of oil in global markets, and the industry makes
up a significant portion of Nigeria’s GDP. In recent years, the decline in oil
prices has put a significant strain on the Nigerian economy and government
finances and has led to the devaluation of Naira. The Nigerian government has
implemented capital controls restricting the free flow of capital to and from
international markets, which has led to bouts of speculative demand and elevated
arbitrage pressures. Specifically, the Nigerian government attempts to manage an
official exchange rate regime that precludes the purchase or sale of Naira
outside of official markets. In 2020, Nigeria experienced a depreciation of the
Naira, as remittances fell and the country grappled with the COVID-19 health
crisis. This steep depreciation also contributed to a sharp sell-off in Nigerian
equities over a relatively short period of time. Given that
the
uncertainties leading to the currency depreciation and divergence and market
selloff in 2020 have not wholly dissipated, it is possible that the depreciation
of the Naira and foreign portfolio outflows may continue.
Nigeria’s
foreign exchange policies have resulted in a sustained inability to convert
Naira to other currencies, including U.S. dollars, and in the rare and
infrequent instances when there is the ready ability to convert Naira to foreign
currencies, significant delays have occurred. Recently, the Naira has
depreciated significantly against the U.S. dollar. While the Naira experienced a
modest depreciation in the official exchange rate, unofficial exchange rates
experienced a far steeper depreciation, resulting in a large and sustained
divergence between official and unofficial exchange rates. As a result of this
divergence, fewer participants have expressed interest in converting U.S.
dollars to Naira at the official exchange rate, which has curtailed the ability
to convert Naira to U.S. dollars. The inability to (or a delay in the ability
to) convert or repatriate Naira will adversely affect the value of and/or
ability to convert the Fund’s investments denominated in Naira and may impede
the Fund’s ability to satisfy redemption requests in U.S. dollars in a timely
manner.
Because the holdings of the Fund are denominated in Naira, and in
light of the fact that the Fund is presently unable to readily convert Naira to
U.S. dollars, the Fund may be forced to borrow U.S. dollars in order to meet
certain obligations of the Fund, including related to qualification as a
regulated investment company (“RIC”) for purposes of the Internal Revenue Code
of 1986, as amended (the “Code”). Such borrowing may increase the Fund’s total
expense ratio. If the Fund experiences difficulty borrowing U.S. dollars in
order to meet these obligations, the Fund’s ability to qualify as a RIC may be
impacted.
As of the date of this Prospectus, because the Fund is unable
to readily convert Naira to U.S. dollars at the official Nigerian exchange rate,
the Fund has conveyed to Authorized Participants that the Fund will honor
requests for redemption principally by delivering Naira. The Fund has traded at
a steep discount for nearly three years as of the date of this Prospectus, and
to the extent that Authorized Participants are unwilling or unable to accept
redemption proceeds in Naira, the Fund may continue to trade at a steep
discount. The Fund could also seek to suspend redemptions of Creation Units in
certain limited circumstances, including in the event that an emergency exists
in which it is not reasonably practicable for the Fund to dispose of its
securities or to determine its NAV, which could also cause the Fund to trade at
a market price that is at a steep discount to its NAV. The Fund could also,
among other things, limit or suspend creations of Creation Units, in a manner
that is consistent with the provisions of the 1940 Act. During the period that
creations are affected, the Fund’s shares could trade at a premium to their NAV.
During a period in which creations are suspended, the Fund could experience
substantial redemptions, which may cause the Fund to experience increased
transaction costs and cause the Fund to make greater taxable distributions to
shareholders of the Fund.
When the Fund holds illiquid investments, its
portfolio may be harder to value. Unless and until the Fund is more readily able
to convert Naira to U.S. dollars, the Fund will not convert U.S. dollars into
additional exposure to Naira-denominated investments, and will opportunistically
seek to repatriate U.S. dollars to shareholders through dividends or other
distributions to the extent possible. U.S. dollars received by the Fund through
creations and repatriations will be used to satisfy fund expenses or will be
distributed to shareholders as part of a distribution, including, if necessary a
return of capital. The Fund may, however, reposition its portfolio of naira and
naira-denominated securities. (See "SUMMARY
OF PRINCIPAL RISKS – Passive Investment Risk - Tracking Error Risk”
below.)
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk:
Compared to mid- and large-capitalization companies, small-capitalization
companies may be less stable and more susceptible to adverse developments, and
their securities may be more volatile and less liquid.
Micro-Capitalization
Companies Risk:
Stock prices of micro-cap companies are significantly more volatile, and more
vulnerable to adverse business and economic developments, than those of larger
companies, and their earnings and revenues tend to be less predictable (and some
companies may experience significant losses). Microcap stocks may also be thinly
traded, making it difficult for the Fund to buy and sell
them.
Currency
Risk: The
Fund invests in securities denominated in foreign currencies, in particular,
Naira. Because the Fund's NAV is determined in U.S. dollars, the Fund's NAV
could decline if Nigeria's currency depreciates against the U.S. dollar and may
decline as a result of delays and limitations on repatriation of Naira to U.S.
dollars. Currency exchange rates can be very volatile and can change quickly and
unpredictably. Moreover, the Fund has experienced an inability to convert Naira
to U.S. dollars at the official Nigerian exchange rate due to government-imposed
capital controls. While the Naira has experienced a modest depreciation in the
official exchange rate, unofficial exchange rates for the Naira have experienced
a far steeper depreciation, resulting in a large and sustained divergence
between official and unofficial exchange rates. As a result, the Fund's NAV may
change quickly and without warning, including as a result of depreciation of the
official exchange rate to a level closer to the unofficial exchange rate, which
could have a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Banking Industry:
The performance of stocks in the banking industry may be affected by extensive
governmental regulation which may limit both the amounts and types of loans and
other financial commitments they can make, and the interest rates and fees they
can charge and the amount of capital they must maintain. Profitability is
largely dependent on the availability and cost of capital funds and can
fluctuate significantly when interest rates change. Credit losses resulting from
financial difficulties of borrowers can negatively impact banking companies.
Banks may also be subject to severe price competition. Competition is high among
banking companies and failure to maintain or increase market share may result in
lost market value. The impact of changes in capital requirements and recent or
future regulation of any individual banking company, or of the financials sector
as a whole, cannot be predicted. In recent years, cyberattacks and technology
malfunctions and failures have become increasingly frequent in this sector and
have caused significant losses to companies in this sector, which may negatively
impact the Fund.
Risks
Related to Investing in the Consumer Staples Sector: The
consumer staples sector may be affected by, among other things, marketing
campaigns, changes in consumer demands, government regulations and changes in
commodity prices.
Risks
Related to Investing in the Financials Sector: Performance
of companies in the financials sector may be adversely impacted by many factors,
including, among others, government regulations, economic conditions, credit
rating downgrades, changes in interest rates, and decreased liquidity in credit
markets. This sector has experienced significant losses in the past, and the
impact of more stringent capital requirements and of current or future
regulation on any individual financial company or on the sector as a whole
cannot be predicted. In recent years, cyber-attacks and technology malfunctions
and failures have become increasingly frequent in this sector and have caused
significant losses to companies in this sector, which may negatively impact the
Fund.
Risks
Related to Investing in the Materials Sector: Companies
in the materials sector are affected by commodity price volatility, exchange
rates, import controls and worldwide competition. At times, worldwide production
of industrial materials has exceeded demand, leading to poor investment returns
or outright losses. Issuers in the materials sector are at risk of depletion of
resources, technological progress, labor relations, governmental regulations and
environmental damage and product liability claims.
Foreign
Securities Risk:
The Fund invests, within U.S. regulations, in foreign securities, namely
securities denominated in Naira. The Fund's investments in foreign securities
are riskier than U.S. securities investments. Investments in the securities of
foreign issuers (including investments in ADRs and GDRs) are subject to the
risks associated with investing in those foreign
markets,
such as heightened risks of inflation or nationalization. The prices of foreign
securities and the prices of U.S. securities have, at times, moved in opposite
directions. In addition, securities of foreign issuers may lose value due to
political, economic and geographic events affecting a foreign issuer or market.
During periods of social, political or economic instability in a country or
region, the value of a foreign security traded on U.S. exchanges could be
affected by, among other things, increasing price volatility, illiquidity, or
the closure of the primary market on which the security (or the security
underlying the ADR or GDR) is traded. You may lose money due to political,
economic and geographic events affecting a foreign issuer or market. Where all
or a portion of the Fund's underlying securities trade in a market that is
closed when the market in which the Fund's shares are listed and trading is
open, there may be differences between the last quote from the security’s closed
foreign market and the value of the security during the Fund’s domestic trading
day. This in turn could lead to differences between the market price of the
Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Frontier and Standalone Markets:
As of the date of this Prospectus, Nigeria is a frontier market country.
Standalone markets are those that do not meet the criteria for classification as
frontier markets or emerging markets. Because standalone countries often face
highly unique circumstances that range from war to liquidity issues, investors
should carefully assess each market and determine the reason for standalone
classification prior to making any investment. In some cases, standalone markets
may be subject to significant sanctions by the international community and may
abruptly lose foreign investors as a result. Investments in frontier markets may
be subject to a greater risk of loss than investments in more developed and
traditional emerging market. Frontier markets often have less uniformity in
accounting and reporting requirements, unreliable securities valuations and
greater risk associated with custody of securities. Economic, political,
liquidity and currency risks may be more pronounced with respect to investments
in frontier markets than in emerging markets and developed markets. Frontier
market countries generally have smaller economies or less developed capital
markets than traditional emerging markets, and, as a result, the risks of
investing in emerging markets countries are magnified in frontier countries. The
economies of frontier countries are less correlated to global economic cycles
than those of their more developed counterparts and their markets have low
trading volumes and the potential for extreme price volatility and illiquidity.
These factors make investing in standalone and frontier countries significantly
riskier than in other countries and any one of them could cause the price of the
Fund's Shares to decline.
Risk
of Investing in Togo: Togo’s
economy is underdeveloped, heavily reliant on agriculture and the export of
minerals such as phosphate, and subject to significant income inequality and
poverty. A significant portion of the population depends on subsistence
agriculture in corn, rice, cocoa beans, coffee, and peanuts, and some of these
crops contribute to Togo’s exports. Unfavorable weather conditions that disrupt
the harvesting of these crops present a risk to Togo’s economy. Fluctuations in
demand and supply of phosphate, disruptions to the phosphate supply chain, or
the long-term risk of phosphate reserve depletion all have significant
implications for Togo. Furthermore, there are political risks that could
adversely affect the value of the fund’s investments. These include the lack of
term limits for the presidency, disputed election results and accusations of
electoral fraud, widespread protests by opposition parties and political
violence. Togo’s 2020 election resulted in the opposition candidate refusing to
concede and facing arrest. If discontent over the fairness of elections
escalates, Togo’s economy and political stability would be negatively impacted.
Political violence in Togo has already resulted in outflows of Togo refugees
into the neighboring countries of Benin and Ghana, and there is no guarantee
that such political violence will not occur again.
In-Kind
ETF Classification Risk:
The Fund will deliver Naira in connection with redemption requests from
Authorized Participants. Consequently, the Fund has elected to be classified as
an in-kind ETF as defined in Rule 22e-4 of the 1940 Act, which means that it
will meet redemptions through in-kind transfers of securities, positions and
assets other than a de minimis amount of U.S. dollars. As a result, for so long
as the Fund retains this designation, the Fund will not meet redemption requests
from Authorized Participants by delivering principally U.S. dollars, but rather
will deliver Naira. To the extent that Authorized Participants are unwilling or
unable to accept redemption proceeds in Naira, the Fund may trade at a steep
discount.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Investable
Universe of Companies Risk:
The investable universe of companies in which the Fund may invest may be
limited. If a company no longer meets the Index Provider’s criteria for
inclusion in the Underlying Index, the Fund may need to reduce or eliminate its
holdings in that company. The reduction or elimination of the Fund’s holdings in
the company may have an adverse impact on the liquidity of the Fund’s overall
portfolio holdings and on Fund performance.
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Liquidity
Risk: Liquidity
risk exists when particular investments are difficult to purchase or sell. This
can reduce the Fund's returns because the Fund may be unable to transact at
advantageous times or prices. Decreased liquidity may result in the Fund’s
shares declining in value, which will result in lower returns. In addition,
transactions in illiquid investments may entail transaction costs that are
higher than those for transactions in liquid investments. In addition to
liquidity risk, the Fund’s investments are denominated in Naira and any sale of
Naira-denominated securities will result in the Fund holding Naira, which the
Fund is unable to readily repatriate in light of capital controls imposed by the
Nigerian government. (See "SUMMARY
OF PRINCIPAL RISKS – Currency Risk".)
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its
methodology
may occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash (including foreign currency), size of the Fund, differences in
timing of the accrual of or the valuation of dividends or interest, tax gains or
losses, changes to the Underlying Index or the costs to the Fund of complying
with various new or existing regulatory requirements. This risk is particularly
heightened for the Fund in light of the Naira repatriation issues. Specifically,
for the past three years, the Fund has typically held a significant portion of
its assets Naira while such Naira is pending repatriation, to U.S. dollars. As a
result, the Fund has had a substantially greater allocation to uninvested
foreign currency during this period than would typically be expected. Because of
the current Naira repatriation issues, the Fund does not anticipate that it
would reinvest at this time any U.S. dollars received into Naira or
Naira-denominated securities, which may further increase tracking error between
the Fund and the Underlying Index. Additionally, because the Fund seeks to
qualify as a RIC, the Fund may be required to reallocate positions at the end of
each fiscal quarter in order to comply with certain diversification
requirements, which may cause the weights of the Fund’s investments to diverge
from the weights of the securities in the Underlying Index. In addition, during
times of increased market volatility or other unusual market conditions tracking
error is exacerbated. Tracking error also may result because the Fund incurs
fees and expenses, while the Underlying Index does not. ETFs that track indices
with significant weight in emerging markets issuers may experience higher
tracking error than other ETFs that do not track such indices.
Redemption
Proceeds Risk: Unlike
most exchange-traded funds ("ETFs"), the Fund will effect all or a significant
portion of creations and redemptions by selling securities and delivering
proceeds in Naira, rather than delivering securities in-kind. As a result, an
investment in the Fund may be less tax-efficient than an investment in a more
conventional ETF. Moreover, these transactions may have to be carried out over
several days if the securities market is relatively illiquid and may involve
considerable brokerage fees and taxes. These factors may result in wider spreads
between the bid and the offered prices of the Fund’s Shares than for more
conventional ETFs.
Reliance
on Trading Partners Risk:
Economies in emerging and frontier market countries generally are dependent
heavily upon commodity prices and international trade and, accordingly, may be
affected adversely by the economies of their trading partners, trade barriers,
exchange controls, managed adjustments in relative currency values, and may
suffer from extreme and volatile debt burdens or inflation rates. Through its
portfolio companies' trading partners, the Fund is specifically exposed to
African
Economic Risk, European Economic Risk
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk: The
Fund has a limited number of financial institutions that may act as Authorized
Participants and engage in creation or redemption transactions directly with the
Fund, and none of those Authorized Participants is obligated to engage in
creation and/or redemption transactions. Moreover, in light of the fact that the
Fund will deliver Naira in connection with redemption transactions, to the
extent that Authorized Participants are unwilling or unable to accept redemption
proceeds in Naira, the Fund may trade at a steep discount. To the extent that
those Authorized Participants exit the business or are unable to process
creation and/or redemption orders, such as in times of market stress, Shares may
be more likely to trade at a premium or discount to NAV and/or at wider intraday
bid-ask spreads, and possibly face trading halts and/or delisting from an
exchange. Authorized Participants Concentration Risk may be heightened because
the Fund invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. As a result of the
repatriation issues experienced by the Fund and the inability for Authorized
Participants to transact with the Fund other than in Naira, the market for the
Shares is less liquid and the Fund has traded at a steep discount for nearly
three years as of the date of this Prospectus. Consequently, if a shareholder
sells Shares at during this time when the market price is at a discount to the
NAV, the shareholder may sustain significant losses. The NAV of the Fund is
calculated at the end of each business day and fluctuates with changes in the
market value of the Fund’s holdings. The trading price of the Fund’s shares
fluctuates, in some cases materially, throughout trading hours in response to
changes in the Fund’s NAV.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). Monetary policies enacted by the
government agencies in Nigeria, limiting its local currency’s repatriation to
safeguard U.S. dollar reserves and exchange rates, significantly impacts the
ability of the Fund to convert local denominated investments to U.S. dollars
using quoted immediate currency settlement rates. The Fund’s investments
denominated in Naira are translated using the Nigerian Autonomous Foreign
Exchange Rate Fixing rate. The use of an alternative exchange rate would impact
the effect of currency translation and the results of operations. The value of
the securities in the Fund's portfolio may change on days when shareholders will
not be able to purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed for the most recent calendar
year and provide an indication of the risks of investing in the Fund by showing
the Fund's performance and by showing how the Fund's average annual returns for
the indicated periods compare with the Fund's benchmark index and a broad
measure of market performance. On August 15, 2014, the name of
the Fund changed from the Global X Nigeria Index ETF to the Global X MSCI
Nigeria ETF to reflect a change to the Fund's Index Provider from Solactive AG
to MSCI, Inc. and a change in the Fund's Underlying Index from the Solactive
Nigeria Index to the MSCI All Nigeria Select 25/50 Index. The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2020 |
29.17% |
Worst
Quarter: |
3/31/2020 |
-34.20% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (04/02/2013) |
Global
X MSCI Nigeria ETF: |
|
|
|
·Return before
taxes |
-6.56% |
-4.88% |
-11.28% |
·Return
after taxes on distributions1 |
-7.88% |
-6.49% |
-12.45% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-3.53% |
-4.06% |
-7.47% |
Hybrid
MSCI All Nigeria Select 25/50 Index (net)2
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-5.47% |
-2.67% |
-9.22% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
-1.40% |
1.70% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
2 Hybrid Index performance
reflects the performance of the Solactive Nigeria Index through August 14, 2014
and the MSCI All Nigeria Select 25/50 Index thereafter.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X MSCI Vietnam
ETF
Ticker:
VNAM Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI Vietnam ETF
("Fund") seeks to provide investment results that correspond generally to the
price and yield performance, before fees and expenses, of the MSCI Vietnam IMI
Select 25/50 Index ("Underlying Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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
Fees: |
0.50% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.50% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$51 |
$160 |
$280 |
$628 |
Portfolio
Turnover:
The Fund pays transaction costs, such as commissions, when it buys and sells
securities (or "turns over" its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the example, affect the Fund's performance. From the
Fund's commencement of operations on December 7, 2021 to the end of the most
recent fiscal period, the Fund's portfolio turnover rate was 78.28% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI
Vietnam IMI Select 25/50 Index (the “Underlying Index”) (typically denominated
in local currency) and in American Depositary Receipts ("ADRs") and Global
Depositary Receipts ("GDRs") based on the securities in the Underlying Index.
The Fund may invest in ADRs and GDRs when the Fund’s portfolio managers
determine doing so to be advantageous versus investing directly in the
securities of the Underlying Index. For example, ADRs or GDRs may at times have
more liquidity than locally denominated securities, may in certain circumstances
be more cost effective than investing in locally denominated securities and/or
may be used where there are prohibitions on investment in locally denominated
securities. The Fund also invests at least 80% of its total assets in securities
of companies that are economically tied to Vietnam. The Fund's 80% investment
policies are non-fundamental and require 60 days prior written notice to
shareholders before they can be changed.
The
Underlying Index is designed to represent the performance of the broad Vietnam
equity universe, while including a minimum number of constituents, as defined by
MSCI, Inc. ("MSCI"), the provider of the Underlying Index ("Index Provider").
The broad Vietnam equity universe includes securities that are classified in
Vietnam according to the MSCI Global Investable Market Index Methodology,
together with companies that are headquartered or listed in Vietnam and carry
out the majority of their operations in Vietnam, as determined solely by the
Index Provider. The country classification of a company is generally determined
by the Index Provider using the company’s country of incorporation and the
primary listing of its securities. The
Index
Provider will classify a company in the country of incorporation if its
securities have a primary listing in that country. In such cases where a
company’s securities have a primary listing outside of the country of
incorporation, additional criteria such as the location of the company’s
headquarters and the geographic distribution of its operations (e.g. assets and
revenues), management, and shareholder base are considered by the Index Provider
for classification purposes. The Underlying Index follows a rules-based
methodology that is designed to select all securities that satisfy the above
criteria and which have a market capitalization greater than or equal to the
99th
percentile of listed developed market securities, have an annual traded value
ratio (a measure of liquidity calculated by the Index Provider) greater than or
equal to 15%, and have traded on greater than or equal to 50% of trading days
over the past twelve months.
The
Underlying Index is weighted according to each component's free-float adjusted
market capitalization. Free-float adjusted market capitalization measures a
company’s market capitalization discounted by the percentage of its shares
readily available to be traded by the general public in the open market (“free
float”). In addition, a liquidity discount factor based on the security’s annual
traded value ratio (“ATVR”) is applied. ATVR is a liquidity metric calculated by
the Index Provider. The liquidity discount factor is applied to each company’s
free float market capitalization for the purposes of calculating the allocated
index weight to each constituent, such that the allocated index weight is lower
for less liquid securities (and higher for more liquid securities) than it would
otherwise be. The weights are further modified for diversification purposes, so
that, as of the rebalance date, no group entity (defined by the Index Provider
as companies that are jointly controlled by a single parent company) constitutes
more than 25% of the Underlying Index and so that, in the aggregate, the
individual group entities that would represent more than 5% of the Underlying
Index represent no more than 50% of the Underlying Index ("25/50 Cap"). The
Underlying Index and the Fund are reconstituted and re-weighted quarterly. The
Underlying Index may include large-, mid- and small-capitalization companies,
and components primarily include real estate companies. As of December 31,
2022, the Underlying Index had 62 constituents. The Fund's investment objective
and Underlying Index may be changed without shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying Index. The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the real estate management and development industry and had
significant exposure to the real estate sector. As of
December 31, 2022, the constituents of the Underlying Index that are
categorized as being part of the real estate management and development industry
include companies that are involved in the construction and development of
apartments, shopping malls, hotels, office buildings, trade centers, retail
complexes and other commercial properties. In addition, these companies may be
involved in property management, brokerage and leasing services. The Fund is
classified as "non-diversified," which means it may invest a larger percentage
of its assets in a smaller number of issuers than a diversified
fund.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely
affect
the Fund’s net asset value (“NAV”), trading price, yield, total return and
ability to meet its investment objective, as well as other risks that are
described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk: Securities
and other assets in the Underlying Index or otherwise held in the Fund's
portfolio may underperform in comparison to the general securities markets, a
particular securities market or other asset classes.
Depositary
Receipts Risk: The
Fund may invest in depositary receipts, such as ADRs and GDRs. Depositary
receipts may be subject to certain of the risks associated with direct
investments in the securities of foreign companies. For additional details on
these risks, please see Foreign
Securities Risk.
Moreover, depositary receipts may not track the price of the underlying foreign
securities on which they are based. A holder of depositary receipts may
also be subject to fees and the credit risk of the financial institution acting
as depositary.
Equity
Securities Risk: Equity
securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk: Investing
in issuers within the same market capitalization category carries the risk that
the category may be out of favor due to current market conditions or investor
sentiment.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk: Compared
to mid- and large-capitalization companies, small-capitalization companies may
be less stable and more susceptible to adverse developments, and their
securities may be more volatile and less liquid.
Micro-Capitalization
Companies Risk: Stock
prices of micro-cap companies are significantly more volatile, and more
vulnerable to adverse business and economic developments, than those of larger
companies, and their earnings and revenues tend to be less predictable (and some
companies may experience significant losses). Microcap stocks may also be thinly
traded, making it difficult for the Fund to buy and sell them.
Cash
Transaction Risk: Unlike
most exchange-traded funds ("ETFs"), the Fund intends to effect a significant
portion of creations and redemptions for cash, rather than in-kind securities.
As a result, an investment in the Fund may be less tax-efficient than an
investment in a more conventional ETF. Moreover, cash transactions may have to
be carried out over several days if the securities market is relatively illiquid
and may involve considerable brokerage fees and taxes. These factors may result
in wider spreads between the bid and the offered prices of the Fund’s Shares
than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
Vietnam's currency depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund.
Custody
Risk: The
Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk: To
the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies
in
a particular industry or sector. As a result, the value of the Fund’s
investments may rise and fall more than the value of shares of a fund that
invests in securities of companies in a broader range of industries or
sectors.
Risks
Related to Investing in the Real Estate Management and Development Industry:
Companies
in the real estate management and development industry are typically impacted by
general global economic conditions, including include short-term and long-term
interest rates, inflation, fluctuations in debt and equity capital markets,
levels of unemployment, consumer confidence and the general condition of the
U.S. and the global economy. Such companies may also often be concentrated in
certain geographic markets, and any disruptions in those real estate markets
could harm the company’s business.
Risks
Related to Investing in the Real Estate Sector: The
real estate sector includes real estate companies focused on commercial and
residential real estate development, sales, operations, and services, as well as
real estate investment trusts (“REITs”). Real estate is highly sensitive to
general and local economic conditions and developments and characterized by
intense competition and periodic overbuilding. Many real estate companies
utilize leverage (and some may be highly leveraged), which increases risk and
could adversely affect a real estate company's operations and market value in
periods of rising interest rates.
Foreign
Securities Risk: The
Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those
shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Frontier and Standalone Markets: Standalone
markets are those that do not meet the criteria for classification as frontier
markets or emerging markets. Because standalone countries often face highly
unique circumstances that range from war to liquidity issues, investors should
carefully assess each market and determine the reason for standalone
classification prior to making any investment. In some cases, standalone markets
may be subject to significant sanctions by the international community and may
abruptly lose foreign investors as a result. Investments in frontier markets may
be subject to a greater risk of loss than investments in more developed and
traditional emerging market. Frontier markets often have less uniformity in
accounting and reporting requirements, unreliable securities valuations and
greater risk associated with custody of securities. Economic, political,
liquidity and currency risks may be more pronounced with respect to investments
in frontier markets than in emerging markets and developed markets. Frontier
market countries generally have smaller economies or less developed capital
markets than traditional emerging markets, and, as a result, the risks of
investing in emerging markets countries are magnified in frontier countries. The
economies of frontier countries are less correlated to global economic cycles
than those of their more developed counterparts and their markets have low
trading volumes and the potential for extreme price volatility and illiquidity.
These factors make investing in standalone and frontier countries significantly
riskier than in other countries and any one of them could cause the price of the
Fund's Shares to decline.
Risk
of Investing in Vietnam: Vietnamese
companies face risks associated with expropriation and/or nationalization of
assets (including property and real estate), restrictions on and government
intervention in international trade, confiscatory taxation, political
instability, including authoritarian and/or military involvement in governmental
decision making, armed conflict, the impact on the economy as a result of civil
war, and social instability as a result of religious, ethnic and/or
socioeconomic unrest. The Vietnamese government may exercise substantial
influence over many aspects of the private sector, and may own or control
certain companies therein. Accordingly, government
actions
could have a significant effect on economic conditions in the country, and on
market conditions, prices and yields of securities in the Fund’s portfolio.
Vietnam is dependent on trading relationships with certain key trading partners,
including the United States, China and Japan, and as a result may be adversely
affected if demand for Vietnam’s exports in those nations decline. Vietnam has
become a manufacturing hub an important component of the global supply chains
for many different industries, in some cases benefiting from the changing
economic and political climate in other regional manufacturing hubs such as
China. If this trend slows or reverses, Vietnamese companies across all
industries would be adversely impacted. The Vietnamese government has undertaken
reform of economic and market practices in recent years, but issues such as
foreign ownership limits and lack of in-kind transfers remain. If deterioration
occurs in Vietnam’s balance of payments, it could impose temporary restrictions
on foreign capital remittances. The Fund could be adversely affected by delays
in, or a refusal to grant, any required governmental approval for repatriation
of capital, as well as by the application to the Fund of any restrictions on
investments. Investing in Vietnam may require the Fund to adopt special
procedures, or seek local government approvals or take other actions, each of
which may involve additional costs to the Fund. Vietnam may levy withholding or
other taxes on dividend and interest income received by the Fund. Although in
some portion of these taxes may be recoverable, the non-recovered portion of
foreign withholding taxes will reduce the income received from the Fund’s
investments. The currencies of frontier markets, such as Vietnam, may be subject
to more significant fluctuations greater likelihood for speculation than the
currencies of more developed markets. The economy of Vietnam is less developed
and less correlated to global economic cycles than those of its more developed
counterparts and its markets have low trading volumes and the potential for
extreme price volatility and illiquidity. This volatility may be further
heightened by the actions of a few major investors. For example, a substantial
increase or decrease in cash flows of mutual funds investing in these markets
could significantly affect local stock prices and, therefore, the price of Fund
Shares. Vietnam may be underprepared for global health crises. For example, the
rapid and global spread of a highly contagious novel coronavirus respiratory
disease, designated COVID-19, has resulted in extreme volatility in the
financial markets and severe losses; reduced liquidity of many instruments;
restrictions on international and, in some cases, local travel; significant
disruptions to business operations (including business closures); strained
healthcare systems; disruptions to supply chains, consumer demand and employee
availability; and widespread uncertainty regarding the duration and long-term
effects of this pandemic. From time to time, certain of the companies in which
the Fund may invest may operate in, or have dealings with, countries subject to
sanctions or embargoes imposed by the U.S. government and the United Nations
and/or countries identified by the U.S. government as state sponsors of
terrorism. A company may suffer damage to its reputation if it is identified as
a company which operates in, or has dealings with, countries subject to
sanctions or embargoes imposed by the U.S. government and the United Nations
and/or countries identified by the U.S. government as state sponsors of
terrorism. As an investor in such companies, the Fund will be indirectly subject
to those risks. These factors make investing in Vietnam significantly riskier
than in other countries and any one of them could cause the price of the Fund’s
Shares to decline.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk: Fund
performance depends on the performance of individual companies in which the Fund
invests. Changes to the financial condition of any of those companies may cause
the value of such company's securities to decline.
Market
Risk: Turbulence
in the financial markets and reduced liquidity may negatively affect issuers,
which could have an adverse effect on the Fund. If the securities held by the
Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk: The
Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk: The
Fund is exposed to operational risk arising from a number of factors, including
but not limited to human error, processing and communication errors, errors of
the Fund's service providers, counterparties or other third-parties, failed or
inadequate processes and technology or systems failures. Additionally, cyber
security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
Economies in emerging and frontier market countries generally are dependent
heavily upon commodity prices and international trade and, accordingly, may be
affected adversely by the economies of their trading partners, trade barriers,
exchange controls, managed adjustments in relative currency values, and may
suffer from extreme and volatile debt burdens or inflation rates. Through its
portfolio companies' trading partners, the Fund is specifically exposed to
African
Economic Risk, European Economic Risk
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). The value of the securities in the Fund's portfolio may change on
days when shareholders will not be able to purchase or sell the Fund's
Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed on a calendar year basis and
provide an indication of the risks of investing in the Fund by showing changes
in the Fund's performance from year to year and by showing how the Fund's
average annual returns for the indicated periods compare with the Fund's
benchmark index and a broad measure of market performance.
The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
3/31/2022 |
-5.43% |
Worst
Quarter: |
6/30/2022 |
-24.32% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Since
Inception (12/07/2021) |
Global
X MSCI Vietnam ETF: |
|
|
·Return before
taxes |
-44.24% |
-39.86% |
·Return
after taxes on distributions1 |
-44.46% |
-40.11% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-26.18% |
-30.33% |
MSCI
Vietnam IMI Select 25-50 Index
(Index returns reflects
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-43.90% |
-39.51% |
MSCI
Emerging Markets Index (Net)
(Index returns reflects
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
-19.06% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To and Xie and Ms. Chan and Ms. Yang have been
Portfolio Managers of the Fund since the Fund's inception. Mr. Lu has been a
Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
"Authorized Participants" (as defined in the SAI) who have entered into
agreements with the Fund's distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called "Creation Units". The Fund will issue or redeem Creation
Units in return for a basket of cash and/or securities that the Fund specifies
any day that the national securities exchanges are open for business (“Business
Day”). An investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares of the Fund (bid) and
the lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
Global X MSCI Next Emerging & Frontier
ETF
Ticker:
EMFM Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X MSCI Next
Emerging & Frontier ETF ("Fund") seeks to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the MSCI Select Emerging and Frontier Markets Access Index
("Underlying Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.49% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.06% |
Total
Annual Fund Operating Expenses: |
0.55% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$56 |
$176 |
$307 |
$689 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 20.09% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the MSCI
Select Emerging and Frontier Markets Access Index ("Underlying Index") and in
American Depositary Receipts ("ADRs") and Global Depositary Receipts ("GDRs")
based on the securities in the Underlying Index. The Fund also invests at least
80% of its total assets in securities of companies that are economically tied to
emerging and frontier markets, as defined by MSCI, the provider of the
Underlying Index ("Index Provider"). The Fund's 80% investment policies are
non-fundamental and require 60 days prior written notice to shareholders before
they can be changed.
The
Underlying Index is designed to reflect equity performance of select emerging
markets and frontier markets companies while maintaining diversification across
individual countries, sectors and issuers. The Underlying Index is constructed
from the MSCI EFM ex BRICKT (Brazil, Russia, India, China, South Korea &
Taiwan) Index (the "Parent Index"). Securities from the Parent Index are
classified into emerging markets countries and frontier markets countries based
on the market classification approach of the Index Provider. Constituents within
the emerging markets countries classification are weighted by free-float
adjusted market capitalization and constituents within the frontier markets
countries classification are weighted by their doubled free-float adjusted
market capitalization, subject, in each case, to applicable country, sector, and
issuer capping constraints.
As
of December 31, 2022, the Underlying Index had 202 constituents from the
following countries: Indonesia, Malaysia, Mexico, Philippines, Poland, Qatar,
Saudi Arabia, South Africa, Thailand, Turkey, United Arab Emirates and Vietnam.
The Fund's investment objective and Underlying Index may be changed without
shareholder approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines the relative weightings of the securities in the Underlying Index and
publishes information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
were to use a replication strategy, it would be expected to have greater
correlation to the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the banking industry and had significant exposure to the
financials sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk: Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have
smaller
revenues, narrower product lines, less management depth and experience, smaller
shares of their product or service markets, fewer financial resources and less
competitive strength than large-capitalization companies.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Banking Industry:
The performance of stocks in the banking industry may be affected by extensive
governmental regulation which may limit both the amounts and types of loans and
other financial commitments they can make, and the interest rates and fees they
can charge and the amount of capital they must maintain. Profitability is
largely dependent on the availability and cost of capital funds and can
fluctuate significantly when interest rates change. Credit losses resulting from
financial difficulties of borrowers can negatively impact banking companies.
Banks may also be subject to severe price competition. Competition is high among
banking companies and failure to maintain or increase market share may result in
lost market value. The impact of changes in capital requirements and recent or
future regulation of any individual banking company, or of the financials sector
as a whole, cannot be predicted. In recent years, cyberattacks and technology
malfunctions and failures have become increasingly frequent in this sector and
have caused significant losses to companies in this sector, which may negatively
impact the Fund.
Risks
Related to Investing in the Financials Sector: Performance
of companies in the financials sector may be adversely impacted by many factors,
including, among others, government regulations, economic conditions, credit
rating downgrades, changes in interest rates, and decreased liquidity in credit
markets. This sector has experienced significant losses in the past, and the
impact of more stringent capital requirements and of current or future
regulation on any individual financial company or on the sector as a whole
cannot be predicted. In recent years, cyber-attacks and technology malfunctions
and failures have become increasingly frequent in this sector and have caused
significant losses to companies in this sector, which may negatively impact the
Fund.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the
Fund's
underlying securities trade in a market that is closed when the market in which
the Fund's shares are listed and trading is open, there may be differences
between the last quote from the security’s closed foreign market and the value
of the security during the Fund’s domestic trading day. This in turn could lead
to differences between the market price of the Fund’s shares and the underlying
value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in Emerging Markets:
Investments in emerging markets may be subject to a greater risk of loss than
investments in developed markets. Securities markets of emerging market
countries are less liquid, subject to greater price volatility, have smaller
market capitalizations, have less government regulation, and are not subject to
as extensive and frequent accounting, financial, and other reporting
requirements as the securities markets of more developed countries, and there
may be greater risk associated with the custody of securities in emerging
markets. It may be difficult or impossible for the Fund to pursue claims against
an emerging market issuer in the courts of an emerging market
country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Frontier and Standalone Markets: Standalone
markets are those that do not meet the criteria for classification as frontier
markets or emerging markets. Because standalone countries often face highly
unique circumstances that range from war to liquidity issues, investors should
carefully assess each market and determine the reason for standalone
classification prior to making any investment. In some cases, standalone markets
may be subject to significant sanctions by the international community and may
abruptly lose foreign investors as a result. Investments in frontier markets may
be subject to a greater risk of loss than investments in more developed and
traditional emerging market. Frontier markets often have less uniformity in
accounting and reporting requirements, unreliable securities valuations and
greater risk associated with custody of securities. Economic, political,
liquidity and currency risks may be more pronounced with respect to investments
in frontier markets than in emerging markets and developed markets. Frontier
market countries generally have smaller economies or less developed capital
markets than traditional emerging markets, and, as a result, the risks of
investing in emerging markets countries are magnified in frontier countries. The
economies of frontier countries are less correlated to global economic cycles
than those of their more developed counterparts and their markets have low
trading volumes and the potential for extreme price volatility and illiquidity.
These factors make investing in standalone and frontier countries significantly
riskier than in other countries and any one of them could cause the price of the
Fund's Shares to decline.
Risk
of Investing in Indonesia: Investments
in Indonesian issuers may subject the Fund to legal, regulatory, political,
security and economic risk specific to Indonesia. Among other things, the
Indonesian economy is heavily dependent on trading relationships with certain
key trading partners, including China, Japan, Singapore and the United States.
In the past, Indonesia has experienced acts of terrorism, predominantly targeted
at foreigners. Such acts of terrorism have had a negative impact on tourism, an
important sector of the Indonesian economy.
Risk
of Investing in Malaysia: Investments
in Malaysian issuers may subject the Fund to legal, regulatory, political,
currency and economic risk specific to Malaysia. Among other things, Malaysia’s
economy is heavily dependent on trading relationships with certain key trading
partners, including the United States, China, Japan and Singapore. Reduction in
spending on Malaysian products and services, or economic or other changes in the
U.S. or any of the Asian economies, trade regulations or currency exchange rates
may have an adverse impact on the Malaysian economy.
Risk
of Investing in Mexico: Investments
in Mexican issuers involve risks that are specific to Mexico, including legal,
regulatory, political, currency, security and economic risks. In the past,
Mexico has experienced high interest rates, economic volatility and high
unemployment rates. Recent political developments in the U.S. have potential
implications
for the current trade arrangements between the U.S. and Mexico, which could
negatively affect the value of securities held by the Fund.
Risk
of Investing in the Philippines: The
Philippine economy is heavily dependent on relationships with certain key
trading partners, including China, Japan and the United States. As a result,
continued growth of the Philippine economy is dependent on the growth of these
economies.
Risk
of Investing in Poland:
Poland’s economy is still relatively underdeveloped and is heavily dependent on
relationships with certain key trading partners, including Germany and other
European Union countries. As a result, Poland’s continued growth is dependent on
the growth of these economies.
Risk
of Investing in Qatar: The
economy of Qatar is dominated by petroleum exports. A sustained decrease in
commodity prices could have a negative impact on all aspects of the economy. The
non-oil economy, concentrated in Doha’s service sector, notably in tourism, real
estate, banking and re-export trade, has grown rapidly over the past few years.
Although the political situation in Qatar is largely stable, there remains the
possibility that instability in the larger Middle East region could adversely
impact the economy of Qatar and strained relations with other countries in the
Middle East may adversely affect the Fund's investments. Recent political
instability and civil unrest in North Africa and the Middle East have caused
significant disruptions to many industries. Continued political and social
unrest in these areas may adversely affect the value of the Fund.
Risk
of Investing in Saudi Arabia:
The ability of foreign investors (such as the Fund) to invest in Saudi Arabian
issuers is relatively new and untested. Such ability could be restricted or
revoked by the Saudi Arabian government at any time, and unforeseen risks could
materialize due to foreign ownership in such securities. The economy of Saudi
Arabia is dominated by petroleum exports. A sustained decrease in petroleum
prices could have a negative impact on all aspects of the economy. Investments
in securities of Saudi Arabian issuers involve risks not typically associated
with investments in securities of issuers in more developed countries that may
negatively affect the value of the Fund’s investments. Such heightened risks may
include, among others, expropriation and/or nationalization of assets,
restrictions on and government intervention in international trade, confiscatory
taxation, political instability, including authoritarian and/ or military
involvement in governmental decision making, armed conflict, crime and
instability as a result of religious, ethnic and/or socioeconomic unrest. There
remains the possibility that instability in the larger Middle East region could
adversely impact the economy of Saudi Arabia, and there is no assurance of
political stability in Saudi Arabia.
Risk
of Investing in South Africa: Investing
in South African securities involves significant risks, including legal,
regulatory and economic risks specific to South Africa. Among other things,
South Africa’s economy is heavily dependent on its agriculture and mining
sectors, and, thus, susceptible to fluctuations in the commodity
markets.
Risk
of Investing in Thailand: Investments
in Thai issuers may subject the Fund to legal, regulatory, political, currency,
security, and economic risks specific to Thailand. Among other things,
Thailand’s economy is heavily dependent on trading relationships with certain
key trading partners, including the United States, China, Japan and other Asian
countries.
Risk
of Investing in Turkey: The
Turkish economy is heavily dependent on relationships with certain key trading
partners, including European Union countries, China and Russia. The Turkish
economy has certain significant economic weaknesses, such as its relatively high
current account deficit and currency volatility. Turkey has historically
experienced acts of terrorism and strained relations related to border disputes
with certain neighboring countries. The continuation of the conflict on the
Turkish-Syrian border, for example, could have an adverse impact on the Turkish
economy. Turkey may be subject to considerable degrees of social and political
instability. Unanticipated or sudden political or social developments may cause
uncertainty in the Turkish stock market and as a result adversely affect issuers
to which the Fund has exposure. In February 2023, a severe earthquake struck
central and southern Turkey, causing tens of thousands of fatalities, the
collapse of buildings and infrastructure, disruption of supply chains, and other
forms of immense economic damage.
Risk
of Investing in the United Arab Emirates:
The economy of the United Arab Emirates (the "UAE") is dominated by petroleum
exports. A sustained decrease in commodity prices, particularly oil and natural
gas, could have a negative impact on all aspects of the UAE economy. The nonoil
UAE economy, which is concentrated in Dubai’s service sector, could be affected
by declines in tourism, real estate, banking and re-export trade. The UAE and
the governments of the individual emirates exercise substantial influence over
many aspects of the private sector. Governmental actions could have a
significant effect on economic conditions in the UAE, which could adversely
affect
the
value of the Fund. In addition, recent political instability and protests in
North Africa and the Middle East have caused significant disruptions to many
industries. Continued political and social unrest in these areas may adversely
affect the value of the Fund.
Risk
of Investing in Vietnam:
Vietnamese companies face risks associated with expropriation and/or
nationalization of assets (including property and real estate), restrictions on
and government intervention in international trade, confiscatory taxation,
political instability, including authoritarian and/or military involvement in
governmental decision making, armed conflict, the impact on the economy as a
result of civil war, and social instability as a result of religious, ethnic
and/or socioeconomic unrest. The Vietnamese government may exercise substantial
influence over many aspects of the private sector, and may own or control
certain companies therein. Accordingly, government actions could have a
significant effect on economic conditions in the country, and on market
conditions, prices and yields of securities in the Fund’s portfolio. Vietnam is
dependent on trading relationships with certain key trading partners, including
the United States, China and Japan, and as a result may be adversely affected if
demand for Vietnam’s exports in those nations decline. Vietnam has become a
manufacturing hub an important component of the global supply chains for many
different industries, in some cases benefiting from the changing economic and
political climate in other regional manufacturing hubs such as China. If this
trend slows or reverses, Vietnamese companies across all industries would be
adversely impacted. The Vietnamese government has undertaken reform of economic
and market practices in recent years, but issues such as foreign ownership
limits and lack of in-kind transfers remain. If deterioration occurs in
Vietnam’s balance of payments, it could impose temporary restrictions on foreign
capital remittances. The Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental approval for repatriation of
capital, as well as by the application to the Fund of any restrictions on
investments. Investing in Vietnam may require the Fund to adopt special
procedures, or seek local government approvals or take other actions, each of
which may involve additional costs to the Fund. Vietnam may levy withholding or
other taxes on dividend and interest income received by the Fund. Although in
some portion of these taxes may be recoverable, the non-recovered portion of
foreign withholding taxes will reduce the income received from the Fund’s
investments. The currencies of frontier markets, such as Vietnam, may be subject
to more significant fluctuations greater likelihood for speculation than the
currencies of more developed markets. The economy of Vietnam is less developed
and less correlated to global economic cycles than those of its more developed
counterparts and its markets have low trading volumes and the potential for
extreme price volatility and illiquidity. This volatility may be further
heightened by the actions of a few major investors. For example, a substantial
increase or decrease in cash flows of mutual funds investing in these markets
could significantly affect local stock prices and, therefore, the price of Fund
Shares. Vietnam may be underprepared for global health crises. For example, the
rapid and global spread of a highly contagious novel coronavirus respiratory
disease, designated COVID-19, has resulted in extreme volatility in the
financial markets and severe losses; reduced liquidity of many instruments;
restrictions on international and, in some cases, local travel; significant
disruptions to business operations (including business closures); strained
healthcare systems; disruptions to supply chains, consumer demand and employee
availability; and widespread uncertainty regarding the duration and long-term
effects of this pandemic. From time to time, certain of the companies in which
the Fund may invest may operate in, or have dealings with, countries subject to
sanctions or embargoes imposed by the U.S. government and the United Nations
and/or countries identified by the U.S. government as state sponsors of
terrorism. A company may suffer damage to its reputation if it is identified as
a company which operates in, or has dealings with, countries subject to
sanctions or embargoes imposed by the U.S. government and the United Nations
and/or countries identified by the U.S. government as state sponsors of
terrorism. As an investor in such companies, the Fund will be indirectly subject
to those risks. These factors make investing in Vietnam significantly riskier
than in other countries and any one of them could cause the price of the Fund’s
Shares to decline.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions
from Authorized Participants, which could have a negative impact on the Fund.
Furthermore, local, regional or global events such as war, acts of terrorism,
the spread of infectious illness or other public health issues, recessions, or
other events could have a significant impact on the Fund and its investments and
trading of its Shares. For example, at the start of 2023, central banks had
already increased interest rates at the fastest rate on record, and it is
unknown how long this trend will continue and when inflation will return to
target levels. This increases the risk that monetary policy may provide less
support should economic growth slow. Additionally, China’s shift away from a
zero-COVID policy creates both opportunities and risks, causing uncertainty for
global economic growth. Market risk factors may result in increased volatility
and/or decreased liquidity in the securities markets. The Fund’s NAV could
decline over short periods due to short-term market movements and over longer
periods during market downturns.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
Economies in emerging and frontier market countries generally are dependent
heavily upon commodity prices and international trade and, accordingly, may be
affected adversely by the economies of their trading partners, trade barriers,
exchange controls, managed adjustments in relative currency values, and may
suffer from extreme and volatile debt burdens or inflation rates. Through its
portfolio companies' trading partners, the Fund is specifically exposed to
African
Economic Risk,
Asian Economic Risk,
European Economic Risk,
Latin American Economic Risk,
Middle East Economic Risk,
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those
Authorized
Participants is obligated to engage in creation and/or redemption transactions.
To the extent that those Authorized Participants exit the business or are unable
to process creation and/or redemption orders, such as in times of market stress,
Shares may be more likely to trade at a premium or discount to NAV and/or at
wider intraday bid-ask spreads, and possibly face trading halts and/or delisting
from an exchange. Authorized Participants Concentration Risk may be heightened
because the Fund invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Security
Risk:
The countries in which the Fund invests have experienced security concerns.
Incidents involving a country's or region's security may cause uncertainty in
emerging and frontier market countries and may adversely affect their economies
and the Fund's investments
Structural
Risk:
The countries in which the Fund invests may be subject to considerable degrees
of economic, political and social instability.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart
and table that follow show how the Fund performed for the most recent calendar
year and provide an indication of the risks of investing in the Fund by showing
the Fund's performance from year to year and by showing how the Fund's average
annual returns for the indicated periods compare with the Fund's benchmark index
and a broad measure of market performance. On January 16, 2019,
the name of the Fund changed from the Global X Next Emerging & Frontier ETF
to the Global X MSCI Next Emerging & Frontier ETF to reflect a change to the
Fund's Index Provider from Solactive AG to MSCI, Inc. and a change in the Fund's
underlying index from the Solactive Next Emerging & Frontier Index to the
MSCI Select Emerging and Frontier Markets Access Index. The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2020 |
18.00% |
Worst
Quarter: |
3/31/2020 |
-29.18% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Since
Inception (11/06/2013) |
Global
X MSCI Next Emerging & Frontier ETF: |
|
|
|
·Return before
taxes |
-8.94% |
-2.98% |
-1.04% |
·Return
after taxes on distributions1 |
-9.41% |
-3.59% |
-1.53% |
·Return
after taxes on distributions and sale of Fund Shares1 |
-4.84% |
-2.23% |
-0.72% |
Hybrid
MSCI Select Emerging and Frontier Markets Access Index (net)2
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-8.33% |
-2.25% |
-0.32% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
-1.40% |
1.73% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
2
Hybrid index performance
reflects the performance of the Solactive Next Emerging & Frontier Index
through January 15, 2019, and the MSCI Select Emerging and Frontier Markets
Access Index thereafter.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
The
professionals primarily responsible for the day-to-day management of the Fund
are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
Global X FTSE Southeast Asia
ETF
Ticker:
ASEA Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X FTSE Southeast
Asia ETF ("Fund") seeks to provide investment results that correspond generally
to the price and yield performance, before fees and expenses, of the FTSE/ASEAN
40 Index ("Underlying Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“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 table and examples
below.
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment):
|
|
|
|
|
|
Management
Fees: |
0.65% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses: |
0.00% |
Total
Annual Fund Operating Expenses: |
0.65% |
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
One
Year |
Three
Years |
Five
Years |
Ten
Years |
$66 |
$208 |
$362 |
$810 |
Portfolio
Turnover:
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or "turns over"
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
example, affect the Fund's performance. During the most recent fiscal year, the
Fund's portfolio turnover rate was 13.92% of the average value of its
portfolio.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund invests at least 80% of its total assets in the securities of the
FTSE/ASEAN 40 Index ("Underlying Index") and in American Depositary Receipts
("ADRs") and Global Depositary Receipts ("GDRs") based on the securities in the
Underlying Index. The Fund also invests at least 80% of its total assets in
securities of companies that are economically tied to Singapore, Malaysia,
Indonesia, Thailand and the Philippines. The Fund's 80% investment policies are
non-fundamental and require 60 days prior written notice to shareholders before
they can be changed. The Fund may lend securities representing up to one-third
of the value of the Fund’s total assets (including the value of the collateral
received).
The
Underlying Index tracks the equity performance of the 40 largest and most liquid
companies in the five Association of Southeast Asian Nations ("ASEAN") regions:
Singapore, Malaysia, Indonesia, Thailand and the Philippines, as defined by FTSE
International Limited ("FTSE"), the provider of the Underlying Index ("Index
Provider"). In order to be eligible for inclusion in the Underlying Index, a
company must be a member of the FTSE All World Country Index for Singapore,
Malaysia, Thailand, Indonesia or the Philippines. The Fund's investment
objective and Underlying Index may be changed without shareholder
approval.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). The Index Provider
determines
the relative weightings of the securities in the Underlying Index and publishes
information regarding the market value of the Underlying Index.
The
Adviser uses a "passive" or indexing approach to try to achieve the Fund's
investment objective. Unlike many investment companies, the Fund does not try to
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally will use a replication strategy. A replication strategy is an
indexing strategy that involves investing in the securities of the Underlying
Index in approximately the same proportions as in the Underlying Index. However,
the Fund may utilize a representative sampling strategy with respect to the
Underlying Index when a replication strategy might be detrimental or
disadvantageous to shareholders, such as when there are practical difficulties
or substantial costs involved in compiling a portfolio of equity securities to
replicate the Underlying Index, in instances in which a security in the
Underlying Index becomes temporarily illiquid, unavailable or less liquid, or as
a result of legal restrictions or limitations (such as tax diversification
requirements) that apply to the Fund but not the Underlying Index.
The
Adviser expects that, over time, the correlation between the Fund's performance
and that of the Underlying Index, before fees and expenses, will exceed 95%. A
correlation percentage of 100% would indicate perfect correlation. If the Fund
uses a replication strategy, it can be expected to have greater correlation to
the Underlying Index than if it uses a representative sampling
strategy.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. As of December 31, 2022, the Underlying Index was
concentrated in the banking industry and had significant exposure to the
financials sector.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Funds
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Equity
Securities Risk:
Equity securities are subject to changes in value, and their values may be more
volatile than other asset classes, as a result of such factors as a company’s
business performance, investor perceptions, stock market trends and general
economic conditions.
Capitalization
Risk:
Investing in issuers within the same market capitalization category carries the
risk that the category may be out of favor due to current market conditions or
investor sentiment.
Large-Capitalization
Companies Risk: Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if an
ASEAN currency depreciates against the U.S. dollar or if there are delays or
limits on repatriation of such currency. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the Fund's NAV
may change quickly and without warning, which could have a significant negative
impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Risks
Related to Investing in the Banking Industry:
The performance of stocks in the banking industry may be affected by extensive
governmental regulation which may limit both the amounts and types of loans and
other financial commitments they can make, and the interest rates and fees they
can charge and the amount of capital they must maintain. Profitability is
largely dependent on the availability and cost of capital funds and can
fluctuate significantly when interest rates change. Credit losses resulting from
financial difficulties of borrowers can negatively impact banking companies.
Banks may also be subject to severe price competition. Competition is high among
banking companies and failure to maintain or increase market share may result in
lost market value. The impact of changes in capital requirements and recent or
future regulation of any individual banking company, or of the financials sector
as a whole, cannot be predicted. In recent years, cyberattacks and technology
malfunctions and failures have become increasingly frequent in this sector and
have caused significant losses to companies in this sector, which may negatively
impact the Fund.
Risks
Related to Investing in the Financials Sector: Performance
of companies in the financials sector may be adversely impacted by many factors,
including, among others, government regulations, economic conditions, credit
rating downgrades, changes in interest rates, and decreased liquidity in credit
markets. This sector has experienced significant losses in the past, and the
impact of more stringent capital requirements and of current or future
regulation on any individual financial company or on the sector as a whole
cannot be predicted. In recent years, cyber-attacks and technology malfunctions
and failures have become increasingly frequent in this sector and have caused
significant losses to companies in this sector, which may negatively impact the
Fund.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security during the
Fund’s domestic trading day. This in turn could lead to differences between the
market price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in the Southeast Asian Nations (ASEAN) Region: Investments
in the ASEAN region involve risks not typically associated with investments in
securities of issuers in more developed countries that may negatively affect the
value of your investment in the Fund. Singapore, Malaysia, Thailand, Indonesia
and the Philippines present different economic and political conditions from
those in Western markets, and less social, political and economic stability. In
the past, some of these economies have experienced high interest rates, economic
volatility, inflation, currency devaluations and high unemployment rates.
Political instability could have an adverse effect on economic or social
conditions in these economies and may result in outbreaks of civil unrest,
terrorist attacks or threats or acts of
war
in the affected areas, any of which could materially and adversely affect the
companies in which the Fund may invest.
Risk
of Investing in Emerging Markets:
As of the date of this Prospectus, Malaysia, Indonesia, Thailand and the
Philippines are emerging market countries. Investments in emerging markets may
be subject to a greater risk of loss than investments in developed markets.
Securities markets of emerging market countries are less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation, and are not subject to as extensive and frequent
accounting, financial, and other reporting requirements as the securities
markets of more developed countries, and there may be greater risk associated
with the custody of securities in emerging markets. It may be difficult or
impossible for the Fund to pursue claims against an emerging market issuer in
the courts of an emerging market country.
There
may be significant obstacles to obtaining information necessary for
investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies. Emerging markets may be
more likely to experience inflation, political turmoil and rapid changes in
economic conditions than more developed markets. Emerging market economies’
exposure to specific industries, such as tourism, and lack of efficient or
sufficient health care systems, could make these economies especially vulnerable
to global crises, including but not limited to, pandemics such as the global
COVID-19 pandemic. Certain emerging market countries may have privatized, or
have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Risk
of Investing in Indonesia: Investments
in Indonesian issuers may subject the Fund to legal, regulatory, political,
security and economic risk specific to Indonesia. Among other things, the
Indonesian economy is heavily dependent on trading relationships with certain
key trading partners, including China, Japan, Singapore and the United States.
In the past, Indonesia has experienced acts of terrorism, predominantly targeted
at foreigners. Such acts of terrorism have had a negative impact on tourism, an
important sector of the Indonesian economy.
Risk
of Investing in Malaysia: Investments
in Malaysian issuers may subject the Fund to legal, regulatory, political,
currency and economic risk specific to Malaysia. Among other things, Malaysia’s
economy is heavily dependent on trading relationships with certain key trading
partners, including the United States, China, Japan and Singapore. Reduction in
spending on Malaysian products and services, or economic or other changes in the
U.S. or any of the Asian economies, trade regulations or currency exchange rates
may have an adverse impact on the Malaysian economy.
Risk
of Investing in the Philippines: The
Philippine economy is heavily dependent on relationships with certain key
trading partners, including China, Japan and the United States. As a result,
continued growth of the Philippine economy is dependent on the growth of these
economies.
Risk
of Investing in Singapore:
Investments in Singaporean issuers involve risks that are specific to Singapore,
including legal, regulatory, political and economic risks. In addition, because
Singapore’s economy is export-driven, Singapore relies heavily on its trading
partners. Political and economic developments of Singapore's neighbors may have
an adverse effect on Singapore's economy.
Risk
of Investing in Thailand: Investments
in Thai issuers may subject the Fund to legal, regulatory, political, currency,
security, and economic risks specific to Thailand. Among other things,
Thailand’s economy is heavily dependent on trading relationships with certain
key trading partners, including the United States, China, Japan and other Asian
countries.
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Issuer
Risk:
Fund performance depends on the performance of individual companies in which the
Fund invests. Changes to the financial condition of any of those companies may
cause the value of such company's securities to decline.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central
governments
and governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
Non-Diversification
Risk:
The Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940 ("1940 Act"). As a result, the Fund is subject to
the risk that it may be more volatile than a diversified fund because the Fund
may invest its assets in a smaller number of issuers or may invest a larger
proportion of its assets in a single issuer. As a result, the gains and losses
on a single investment may have a greater impact on the Fund’s NAV and may make
the Fund more volatile than more diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. 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 the Underlying
Index does not. ETFs that track indices with significant weight in emerging
markets issuers may experience higher tracking error than other ETFs that do not
track such indices.
Reliance
on Trading Partners Risk:
Economies in emerging market countries generally are dependent heavily upon
commodity prices and international trade and, accordingly, may be affected
adversely by the economies of their trading partners, trade barriers, exchange
controls, managed adjustments in relative currency values, and may suffer from
extreme and
volatile
debt burdens or inflation rates. Through its portfolio companies' trading
partners, the Fund is specifically exposed to Asian
Economic Risk
and North
American Economic Risk.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Securities
Lending Risk:
Securities lending involves a risk of loss because the borrower may fail to
return the securities in a timely manner or at all. If the Fund is not able to
recover the securities loaned, it may sell the collateral and purchase a
replacement security in the market. Lending securities entails a risk of loss to
the Fund if and to the extent that the market value of the loaned securities
increases and the collateral is not increased accordingly. Additionally, the
Fund will bear any loss on the investment of cash collateral it receives. These
events could also trigger adverse tax consequences for the Fund. As securities
on loan may not be voted by the Fund, there is a risk that the Fund may not be
able to recall the securities in sufficient time to vote on material proxy
matters.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading
losses.
Valuation
Risk: The sales price the Fund could receive for
a security may differ from the Fund’s valuation of the security and may differ
from the value used by the Underlying Index, particularly for securities that
trade in low value or volatile markets or that are valued using a fair value
methodology (such as during trading halts). The value of the securities in
the Fund's portfolio may change on days when shareholders will not be able to
purchase or sell the Fund's Shares.
PERFORMANCE
INFORMATION
The bar chart and table that
follow show how the Fund performed on a calendar year basis and provide an
indication of the risks of investing in the Fund by showing changes in the
Fund's performance from year to year and by showing how the Fund's average
annual returns for the indicated periods compare with the Fund's benchmark index
and a broad measure of market
performance.
The Fund's past performance
(before and after taxes) is not necessarily indicative of how the Fund will
perform in the future. Updated performance information is
available online at www.globalxetfs.com.
Annual Total Returns (Years Ended December
31)
|
|
|
|
|
|
|
|
|
Best
Quarter: |
12/31/2020 |
25.93% |
Worst
Quarter: |
3/31/2020 |
-31.11% |
Average Annual Total Returns (for the Periods
Ended December 31, 2022)
|
|
|
|
|
|
|
|
|
|
|
|
|
One
Year Ended December 31, 2022 |
Five
Years Ended December 31, 2022 |
Ten
Years Ended December 31, 2022 |
Global
X FTSE Southeast Asia ETF: |
|
|
|
·Return before
taxes |
5.16% |
0.54% |
1.74% |
·Return
after taxes on distributions1 |
4.48% |
-0.33% |
0.87% |
·Return
after taxes on distributions and sale of Fund Shares1 |
3.33% |
0.20% |
1.10% |
FTSE/ASEAN
40 Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
5.88% |
1.24% |
2.40% |
MSCI
Emerging Markets Index (net)
(Index returns reflect
invested dividends net of withholding taxes, but reflect no deduction for
fees, expenses, or other
taxes) |
-20.09% |
-1.40% |
1.44% |
1
After-tax returns are
calculated using the historical highest individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Your actual after-tax returns
will depend on your specific tax situation and may differ from those shown
above. After-tax returns are not relevant to investors who hold Shares of the
Fund through tax-advantaged arrangements, such as 401(k) plans or individual
retirement accounts (IRAs).
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Mr. To has been a Portfolio Manager of the Fund since
March 1, 2018. Mr. Xie has been a Portfolio Manager of the Fund since March 1,
2019. Ms. Chan has been a Portfolio Manager of the Fund since June 10, 2019. Ms.
Yang has been a Portfolio Manager of the Fund since December 2020. Mr. Lu has
been a Portfolio Manager of the Fund since March 2022.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called Creation Units. The Fund will issue or redeem Creation Units
in return for a basket of cash and/or securities that the Fund specifies any day
that the national securities exchanges are open for business (“Business Day”).
An investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase shares of the Fund (bid) and the
lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement,
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
ADDITIONAL
INFORMATION ABOUT THE FUNDS
This
Prospectus contains information about investing in a Fund. Please read this
Prospectus carefully before you make any investment decisions. Shares of a Fund
are listed for trading on a national securities exchange. The market price for a
Share of a Fund may be different from the Fund's most recent NAV. ETFs are funds
that trade like other publicly-traded securities. A Fund is designed to track an
Underlying Index. Similar to shares of an index mutual fund, each Share of a
Fund represents an ownership interest in an underlying portfolio of securities.
Unlike shares of a mutual fund, which can be bought and redeemed from the
issuing fund by all shareholders at a price based on NAV, Shares of a Fund may
be purchased or redeemed directly from the Fund at NAV solely by Authorized
Participants and only in Creation Unit increments. Also unlike shares of a
mutual fund, Shares of a Fund are listed on a national securities exchange and
trade in the secondary market at market prices that change throughout the day. A
Fund is designed to be used as part of broader asset allocation strategies.
Accordingly, an investment in a Fund should not constitute a complete investment
program. An index is a financial calculation, based on a grouping of financial
instruments, and is not an investment product, while a Fund is an actual
investment portfolio. The performance of a Fund and its Underlying Index may
vary for a number of reasons, including transaction costs, non-U.S. currency
valuations, asset valuations, corporate actions (such as mergers and spin-offs),
timing variances and differences between a Fund’s portfolio and the Underlying
Index resulting from the Fund's legal restrictions (such as diversification
requirements) that apply to the Fund but not to the Underlying Index.
Each
Fund invests at least 80% of its total assets in the securities of the
Underlying Index. Each Fund’s 80% investment policy is non-fundamental and
requires 60 days prior written notice to shareholders before it can be changed.
The Adviser anticipates that, generally, each Fund will hold all of the
securities that comprise its Underlying Index in proportion to their weightings
in such Underlying Index. However, under various circumstances, it may not be
possible or practicable to purchase all of those securities in those weightings.
In these circumstances, a Fund may purchase a sample of securities in its
Underlying Index. There also may be instances in which the Adviser may choose to
underweight or overweight a security in a Fund’s Underlying Index, purchase
securities not in the Fund’s Underlying Index that the Adviser believes are
appropriate to substitute for certain securities in such Underlying Index or
utilize various combinations of other available investment techniques in seeking
to replicate as closely as possible, before fees and expenses, the price and
yield performance of a Fund’s Underlying Index. In addition, each Fund may also
invest in equity index futures for cash flow management purposes and as a
portfolio management technique. Each Fund may sell securities that are
represented in its Underlying Index in anticipation of their removal from such
Underlying Index or purchase securities not represented in its Index in
anticipation of their addition to such Underlying Index. Each Fund’s investment
objective and its Underlying Index may be changed without shareholder approval
upon at least 60 days prior written notice to shareholders.
A
FURTHER DISCUSSION OF PRINCIPAL RISKS
Each
Fund is subject to various risks, including the principal risks noted below, any
of which may adversely affect the Fund’s NAV, trading price, yield, total return
and ability to meet its investment objective. You could lose all or part of your
investment in the Fund, and the Fund could underperform other investments.
Argentine
Tax Treatment Uncertainty of ADRs
Argentine
Tax Treatment Uncertainty of ADRs applies to the Global X MSCI Argentina
ETF
The
sale, exchange or other transfer of Argentinian equity shares and other
securities may be subject to a capital gain tax at a rate of 15% for certain
nonresidents, including the Fund. The application and method of collection of
this tax remains unclear in certain respects, including with respect to the sale
or other disposition of, or the receipt of dividends from, Argentinian ADRs and
GDRs. Such tax laws remain subject to further rulemaking and interpretation,
which may adversely affect the tax treatment of the Fund's investments in
Argentinian ADRs.
Recent
tax reform bills, including Decree 1112/2017, have attempted to clarify the
application of Argentinian tax law. Pursuant to this decree, nonresidents such
as the Fund may be exempt from income tax on gains from the sale or exchange of
Argentinian listed shares, ADRs or GDRs. In June of 2021, Law 27/630 established
the 7% withholding tax on dividends as a permanent rate for profits accrued
beginning January 1, 2021, replacing the 13% rate that was previously
established in Decree 1112/2017.
Asset
Class Risk
Asset
Class Risk applies to each Fund
The
returns from the types of securities and/or assets in which the Fund invests may
under-perform returns from the various general securities markets or different
asset classes. The assets in the Underlying Index may under-perform investments
that track other markets, segments, sectors or assets. Different types of assets
tend to go through cycles of out-performance and under-performance in comparison
to the general securities markets.
China
A-Shares Risk
China
A-Shares Risk applies to the Global X MSCI China Communication Services ETF,
Global X MSCI China Consumer Discretionary ETF, Global X MSCI China Consumer
Staples ETF, Global X MSCI China Energy ETF, Global X MSCI China Financials ETF,
Global X MSCI China Health Care ETF, Global X MSCI China Industrials ETF, Global
X MSCI China Information Technology ETF, Global X MSCI China Materials ETF,
Global X MSCI China Real Estate ETF and Global X MSCI China Utilities
ETF
A-Shares
are issued by companies incorporated in mainland China and are traded on Chinese
exchanges. Foreign investors can access A-Shares by obtaining a QFII or a RQFII
license, as well as through the Stock Connect Programs. The Fund currently
intends to gain exposure to A-Shares through the Stock Connect Programs. Trading
suspensions in certain stocks could lead to greater market execution risk,
valuation risks, liquidity risks and costs for the Fund, as well as for
Authorized Participants that create and redeem Creation Units of the Fund. The
SSE and SZSE currently apply a daily limit of the amount of fluctuation
permitted in the prices of A-shares during a single trading day. The daily limit
refers to price movements only and does not restrict trading within the relevant
limit. There can be no assurance that a liquid market on an exchange will exist
for any particular A-share or for any particular time. Additionally, during
instances where aggregate limits on foreign ownership are exceeded. the Fund may
be unable to purchase additional equity securities of a particular company. This
could increase the Fund’s tracking error and/or cause the Fund to trade in the
market at greater bid-ask spreads or greater premiums or discounts to the Fund’s
NAV. Given that the A-share market is considered volatile and unstable (with the
risk of widespread trading suspensions or government intervention), the creation
and redemption of Creation Units (as defined below) may also be disrupted. These
risks, among others, could adversely affect the value of the Fund’s
investments.
Depositary
Receipts Risk:
Depositary
Receipts Risk applies to the Global X MSCI Vietnam ETF
The
Fund may invest in depositary receipts, such as ADRs and GDRs. ADRs are
certificates that evidence ownership of shares of a foreign issuer and are
alternatives to purchasing the underlying foreign securities directly in their
national markets and currencies. GDRs are certificates issued by an
international bank that generally are traded and denominated in the currencies
of countries other than the home country of the issuer of the underlying
shares. Depositary receipts may be subject to certain of the risks
associated with direct investments in the securities of foreign companies. For
additional details on these risks, please see Foreign Securities Risk.
Moreover, depositary receipts may not track the price of the underlying foreign
securities on which they are based. Certain countries may limit the ability
to convert depositary receipts into the underlying foreign securities and vice
versa, which may cause the securities of the foreign company to trade at a
discount or premium to the market price of the related depositary receipts. A
holder of depositary receipts may also be subject to fees and the credit risk of
the financial institution acting as depositary.
Equity
Securities Risk
Equity
Securities Risk applies to each Fund
The
Fund may invest in equity securities, which are subject to changes in value that
may be attributable to market perception of a particular issuer, general stock
market fluctuations that affect all issuers, or as a result of such factors as a
company’s business performance, investor perceptions, stock market trends and
general economic conditions. Investments in equity securities may be more
volatile than investments in other asset classes.
Capitalization
Risk
Investing
in issuers within the same market capitalization category carries the risk that
the category may be out of favor due to current market conditions or investor
sentiment.
Large-Capitalization
Companies Risk
Large-Capitalization
Companies Risk applies to the Global X MSCI China Communication Services ETF,
Global X MSCI China Consumer Discretionary ETF, Global X MSCI China Consumer
Staples ETF, Global X MSCI China Energy ETF, Global X MSCI China Financials ETF,
Global X MSCI China Health Care ETF, Global X MSCI China Industrials ETF, Global
X MSCI China Information Technology ETF, Global X MSCI China Materials ETF,
Global X MSCI China Real Estate ETF, Global X MSCI China Utilities ETF, Global X
MSCI Norway ETF, Global X DAX Germany ETF, Global X MSCI Portugal ETF, Global X
MSCI Next Emerging & Frontier ETF and Global X FTSE Southeast Asia
ETF
Large-capitalization
companies may trail the returns of the overall stock market.
Large-capitalization stocks tend to go through cycles of doing better - or worse
- than the stock market in general. These periods have, in the past, lasted for
as long as several years.
Mid-Capitalization
Companies Risk
Mid-Capitalization
Companies Risk applies to the Global X MSCI China Communication Services ETF,
Global X MSCI China Consumer Discretionary ETF, Global X MSCI China Consumer
Staples ETF, Global X MSCI China Energy ETF, Global X MSCI China Financials ETF,
Global X MSCI China Health Care ETF, Global X MSCI China Industrials ETF, Global
X MSCI China Information Technology ETF, Global X MSCI China Materials ETF,
Global X MSCI China Real Estate ETF, Global X MSCI China Utilities ETF, Global X
MSCI Greece ETF, Global X MSCI Norway ETF, Global X MSCI Portugal ETF, Global X
MSCI Colombia ETF, Global X MSCI Argentina ETF, Global X MSCI Nigeria ETF,
Global X MSCI Vietnam ETF and Global X MSCI Next Emerging & Frontier
ETF
Mid-capitalization
companies may have greater price volatility, lower trading volume and less
liquidity than large-capitalization companies. In addition, mid-capitalization
companies may have smaller revenues, narrower product lines, less management
depth and experience, smaller shares of their product or service markets, fewer
financial resources and less competitive strength than large-capitalization
companies.
Small-Capitalization
Companies Risk
Small-Capitalization
Companies Risk applies to the Global X MSCI China Energy ETF, Global X MSCI
Greece ETF, Global X MSCI Norway ETF, Global X MSCI Portugal ETF, Global X MSCI
Colombia ETF, Global X MSCI Argentina ETF, Global X MSCI Pakistan ETF, Global X
MSCI Nigeria ETF and Global X MSCI Vietnam ETF
The
Fund may invest a significant percentage of its assets in small-capitalization
companies. If it does so, it may be subject to certain risks associated with
small-capitalization companies. These companies often have greater price
volatility, lower trading volume and less liquidity than larger, more
established companies. In addition, these companies are often subject to less
analyst coverage and may be in early and less predictable periods of their
corporate existences. These companies tend to have smaller revenues, narrower
product lines, less management depth and experience, smaller shares of their
product or service markets, fewer financial resources and less competitive
strength than larger companies.
Micro-Capitalization
Companies Risk
Micro-Capitalization
Companies Risk applies to the Global X MSCI Pakistan ETF, Global X MSCI Nigeria
ETF and Global X MSCI Vietnam ETF
The
Fund may invest in micro-capitalization companies. These companies are subject
to substantially greater risks of loss and price fluctuations because their
earnings and revenues tend to be less predictable (and some companies may
experience significant losses), and their share prices tend to be more volatile
and their markets less liquid than companies with larger market capitalizations.
Micro-capitalization companies may be newly formed or in the early stages of
development, with limited product lines, markets or financial resources and may
lack management depth. In addition, there may be less public information
available about these companies. The shares of micro-capitalization companies
tend to trade less frequently than those of larger, more established companies,
which can adversely affect the pricing of these securities and the future
ability to sell these securities. Also, it may take a long time before the Fund
realizes a gain, if any, on an investment in a micro-capitalization company.
Cash
Transaction Risk
Cash
Transaction Risk applies to the Global X MSCI China Communication Services ETF,
Global X MSCI China Consumer Staples ETF, Global X MSCI China Energy ETF, Global
X MSCI China Financials ETF, Global X MSCI China Health Care ETF, Global X MSCI
China Industrials ETF, Global X MSCI China Information Technology ETF, Global X
MSCI China Materials ETF, Global X MSCI China Real Estate ETF, Global X MSCI
China Utilities ETF, Global X MSCI Colombia ETF, Global X MSCI Pakistan ETF,
Global X MSCI Vietnam ETF and Global X MSCI Next Emerging & Frontier ETF
Unlike
most ETFs, the Fund intends to effect a significant portion of creations and
redemptions for cash, rather than in-kind securities. As a result, an investment
in the Fund may be less tax-efficient than an investment in a more conventional
ETF. 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 intends to effect redemptions for cash, rather than in-kind
distributions, it may be required to sell portfolio securities in order to
obtain the cash needed to distribute redemption proceeds. If the Fund recognizes
gain on these sales, this generally will cause the Fund to recognize gain it
might not otherwise have recognized, or to recognize such gain sooner than would
otherwise be required if it were to distribute portfolio securities in-kind. The
Fund generally intends to distribute these gains to shareholders to avoid being
taxed on this gain at the Fund level and otherwise comply with the special tax
rules that apply to it. This strategy may cause shareholders to be subject to
tax on gains they would not otherwise be subject to, or at an earlier date than,
if they had made an investment in a different ETF. Moreover, cash transactions
may have to be carried out over several days if the securities market is
relatively illiquid and may involve considerable brokerage fees and taxes. These
factors may result in wider spreads between the bid and the offered prices of
the Fund’s Shares than for more conventional ETFs. To the extent that the
maximum additional variable charge for cash creation or cash redemption
transactions is insufficient to cover the transaction costs of purchasing or
selling portfolio securities, the Fund’s performance could be negatively
impacted.
Currency
Risk
Currency
Risk applies to each Fund except the Global X MSCI Nigeria ETF
Foreign
currencies are subject to risks, which include changes in the debt level and
trade deficit of the country issuing the foreign currency; inflation rates of
the United States and the country issuing the foreign currency; investors’
expectations concerning inflation rates; interest rates of the United States and
the country issuing the foreign currency; investors’ expectations concerning
interest rates; investment and trading activities of mutual funds, hedge funds
and currency funds; and global or regional political, economic or financial
events and situations.
In
addition, a foreign currency in which the Fund invests may not maintain its
long-term value in terms of purchasing power in the future. When the price of a
foreign currency in which the Fund invests declines, it may have an adverse
impact on the Fund.
Foreign
exchange rates are influenced by the factors identified above and may also be
influenced by: changing supply and demand for a particular currency; monetary
policies of governments (including exchange control programs, restrictions on
local exchanges or markets and limitations on foreign investment in a country or
on investment by residents of a country in other countries); changes in balances
of payments and trade; trade restrictions; and currency devaluations and
revaluations. Also, governments from time to time intervene in the currency
markets, directly and by regulation, in order to influence prices directly.
These events and actions are unpredictable. The resulting volatility in the
USD/foreign currency exchange rate could materially and adversely affect the
performance of the Fund.
Currency
Risk
Currency
Risk applies to the Global X MSCI Nigeria ETF
The
Fund invests in securities denominated in foreign currencies, in particular,
Naira. Because the Fund's NAV is determined in U.S. dollars, the Fund's NAV
could decline if Nigeria's currency depreciates against the U.S. dollar and may
decline as a result of delays and limitations on repatriation of Naira to U.S.
dollars. Currency exchange rates can be very volatile and can change quickly and
unpredictably. Moreover, the Fund has experienced an inability to convert Naira
to U.S. dollars at the official Nigerian exchange rate due to government-imposed
capital controls. While the Naira has experienced a modest depreciation in the
official exchange rate, unofficial exchange rates for the Naira have experienced
a far steeper depreciation, resulting in a large and sustained divergence
between official and unofficial exchange rates. As a result, the Fund's NAV may
change quickly and without warning, including as a result of depreciation of the
official exchange rate to a level closer to the unofficial exchange rate, which
could have a significant negative impact on the Fund.
Custody
Risk
Custody
Risk applies to the Global X MSCI China Communication Services ETF, Global X
MSCI China Consumer Discretionary ETF, Global X MSCI China Consumer Staples ETF,
Global X MSCI China Energy ETF, Global X MSCI China Financials ETF, Global X
MSCI China Health Care ETF, Global X MSCI China Industrials ETF, Global X MSCI
China Information Technology ETF, Global X MSCI China Materials ETF, Global X
MSCI China Real Estate ETF, Global X MSCI China Utilities ETF, Global X MSCI
Greece ETF, Global X MSCI Colombia ETF, Global X MSCI Argentina ETF, Global X
MSCI Pakistan ETF, Global X MSCI Nigeria ETF, Global X MSCI Vietnam ETF, Global
X MSCI Next Emerging & Frontier ETF and Global X FTSE Southeast Asia
ETF
Custody
risk refers to risks in the process of clearing and settling trades and in the
holding of securities by local banks, agents and depositories. Low trading
volumes and volatile prices in less developed markets make trades harder to
complete and settle. Local agents are held only to the standard of care of the
local markets. Governments or trade groups may compel local agents to hold
securities in designated depositories that are subject to independent
evaluation. Generally, the less developed a country’s securities market, the
greater the likelihood of custody problems occurring.
Focus
Risk
Focus
Risk applies to each Fund
In
following its methodology, the Underlying Index may be focused to a significant
degree in securities of issuers in a particular industry or group of industries
and/or may have significant exposure to one or more sectors. To the extent that
the Underlying Index focuses in the securities of issuers in such an area, the
Fund will also focus its investments to approximately the same extent. In such
event, the Fund’s performance will be particularly susceptible to adverse events
impacting such industry or sector, and the Fund will face greater risk than if
it were diversified broadly over numerous such areas. Such heightened risks, any
of which may adversely affect the companies in which the Fund invests, may
include, but are not limited to, the following: general economic conditions or
cyclical market patterns that could negatively affect supply and demand;
competition for resources; adverse labor relations; political or world events;
obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular industry or sector. In addition, at times, such industry, group of
industries or sector may be out of favor and underperform other such categories
or the market as a whole.
Risks
Related to Investing in the Automobiles Industry
Risks
Related to Investing in the Automobiles Industry applies to
The
automobiles industry can be highly cyclical, and companies in the industry may
suffer periodic operating losses. The industry can be significantly affected by
labor relations and fluctuating component prices. While most of the major
manufacturers are large, financially strong companies, many others are small and
can be non-diversified in both product line and customer base. Additionally,
developments in automotive technologies (e.g., autonomous vehicle technologies)
may require significant capital expenditures that may not generate profits for
several years, if any. Companies in the automobiles industry may be
significantly subject to government policies and regulations regarding imports
and exports of automotive products. Governmental policies affecting the
automotive industry, such as taxes, tariffs, duties, subsidies, and import and
export restrictions on automotive products can influence industry profitability.
In addition, such companies must comply with environmental laws and regulations.
Additional or more stringent environmental laws and regulations may be enacted
in the future and such changes could have a material adverse effect on the value
of such companies.
Risks
Related to Investing in the Banking Industry
Risks
Related to Investing in the Banking Industry applies to the Global X MSCI China
Financials ETF, Global X MSCI Greece ETF, Global X MSCI Colombia ETF, Global X
MSCI Nigeria ETF, Global X MSCI Next Emerging & Frontier ETF and Global X
FTSE Southeast Asia ETF
Companies
in the banking sector of an economy are subject to extensive governmental
regulation and intervention, which may adversely affect the scope of their
activities, the prices they can charge, the amount of capital they must maintain
and, potentially, their size. The extent to which the Fund may invest in a
company that engages in securities-related activities or banking is limited by
applicable law. Extensive governmental regulation may limit the amounts and
types of loans and other financial commitments companies in the banking sector
can make, the interest rates and fees they can charge, the scope of their
activities, the prices they can charge and the amount of capital they must
maintain. Such governmental regulation may change frequently and may have
significant adverse consequences for
companies
in the banking sector, including effects not intended by such regulation.
Legislation enacted in 2018 in the U.S. relaxed capital requirements and other
regulatory burdens on certain U.S. banks. While the effect of the legislation
may benefit certain companies in the financials sector, increased risk taking by
affected banks may also result in greater overall risk in the U.S. and global
financials sector. The impact of changes in capital requirements, or recent or
future regulation in various countries, on any individual financial company or
on the financials sector as a whole cannot be predicted. Certain risks may
impact the value of investments in the financials sector more severely than
those of investments outside this sector, including the risks associated with
companies that operate with substantial financial leverage. Banking companies
may also be adversely affected by increases in interest rates and loan losses,
decreases in the availability of money or asset valuations, credit rating
downgrades and adverse conditions in other related markets. Their profitability
is heavily dependent on the availability and cost of capital funds and can
fluctuate significantly when interest rates change or due to increased
competition. Credit losses resulting from financial difficulties of borrowers
can negatively impact banking companies. The banking sector is particularly
sensitive to fluctuations in interest rates. The banking sector is also a target
for cyberattacks, and may experience technology malfunctions and disruptions. In
recent years, cyberattacks and technology malfunctions and failures have become
increasingly frequent in this sector and have reportedly caused losses to
companies in this sector, which may negatively impact the Fund.
Risks
Related to Investing in the Beverages Industry
Risks
Related to Investing in the Beverages Industry applies to the Global X MSCI
China Consumer Staples ETF
Beverage
companies operate in highly competitive categories and markets. Companies are
frequently required to anticipate and effectively respond to shifts in consumer
trends and preferences, including health trends and preferences, and failure to
account for changes in consumer demographics or preferences can result in
reduced demand for a company’s products. Beverage companies may be affected by
the imposition or proposed imposition of taxes or other regulations. Any
failures of process controls can increase the risk of product contamination and
can result in substantial product liability risk.
Risks
Related to Investing in the Chemicals Industry
Risks
Related to Investing in the Chemicals Industry applies to the Global X MSCI
China Materials ETF
The chemicals industry
can be significantly affected by competition, product obsolescence, raw
materials prices, and government regulation. As regulations are developed and
enforced, chemical companies could be required to alter or cease production of a
product, to pay fines, to pay for cleaning up a disposal site, or to agree to
restrictions on their operations. Some of the materials and processes used by
these companies involve hazardous components and there can be risks associated
with their production, handling, and disposal.
Risks
Related to Investing in the Communication Services Sector
Risks
Related to Investing in the Communication Services Sector applies to the Global
X MSCI China Communication Services ETF
The
communication services sector consists of both companies in the
telecommunication services industry as well as those in the media and
entertainment industry. Examples of companies in the telecommunication services
industry group include providers of fiber-optic, fixed-line, cellular and
wireless telecommunications networks. Companies in the media and entertainment
industry group encompass a variety of services and products including television
broadcasting, gaming products, social media, networking platforms, online
classifieds, online review websites, and Internet search engines. Companies in
the communication services sector may be affected by industry competition,
substantial capital requirements, government regulation, and obsolescence of
communications products and services due to technological advancement.
Fluctuating domestic and international demand, shifting demographics and often
unpredictable changes in consumer tastes can drastically affect a communication
services company's profitability. In addition, while all companies may be
susceptible to network security breaches, certain companies in the communication
services sector may be particular targets of hacking and potential theft of
proprietary or consumer information or disruptions in service, which could have
a material adverse effect on their businesses.
The
communication services sector of a country’s economy is often subject to
extensive government regulation. The costs of complying with governmental
regulations, delays or failure to receive required regulatory approvals, or the
enactment of new regulatory requirements may negatively affect the business of
communications companies.
Government
actions around the world, specifically in the area of pre-marketing clearance of
products and prices, can be arbitrary and unpredictable. Companies in the
communication services sector may encounter distressed cash flows due to the
need to commit substantial capital to meet increasing competition, particularly
in developing new products and services using new technology. Technological
innovations may make the products and services of certain communications
companies obsolete.
In
the U.S., the communication services sector is characterized by increasing
competition and regulation by the U.S. Federal Communications Commission and
various state regulatory authorities. Companies in the communication services
sector are generally required to obtain franchises or licenses in order to
provide services in a given location. Licensing and franchise rights in the
communication services sector are limited, which may provide an advantage to
certain participants. Limited availability of such rights, high barriers to
market entry and regulatory oversight, among other factors, have led to
consolidation of companies within the sector, which could lead to further
regulation or other negative effects in the future. Furthermore, operations of
foreign communication services sector companies may be perceived by domestic
regulators as national security risks, resulting in restrictions or even bans on
such operations.
Risks
Related to Investing in the Consumer Discretionary Sector
Risks
Related to Investing in the Consumer Discretionary Sector applies to the Global
X MSCI China Consumer Discretionary ETF and Global X MSCI Argentina
ETF
The
success of consumer product manufacturers and retailers is tied closely to the
performance of the overall domestic and international economy, interest rates,
competition and consumer confidence. Success depends heavily on disposable
household income and consumer spending and may be strongly affected by social
trends and marketing campaigns. Moreover, the consumer discretionary sector can
be significantly affected by several factors, including, without limitation, the
performance of domestic and international economies, exchange rates, changing
consumer preferences, demographics, marketing campaigns, cyclical revenue
generation, consumer confidence, commodity price volatility, labor relations,
interest rates, import and export controls, intense competition, technological
developments and government regulation. Consumer recessionary fears could impact
discretionary spending due to rising interest rates and a high inflationary
environment.
Risks
Related to Investing in the Consumer Staples Sector
Risks
Related to Investing in the Consumer Staples Sector applies to the Global X MSCI
China Consumer Staples ETF and Global X MSCI Nigeria ETF
Companies
in the consumer staples sector may be affected by the regulation of various
product components and production methods, marketing campaigns and changes in
the global economy, consumer spending and consumer demand. Tobacco companies, in
particular, may be adversely affected by new laws, regulations and litigation.
Household and personal products are particularly sensitive to increased
competition, decreased demand due to changes in consumer preferences and brand
diminution. Food products are subject to the risk that raw materials are
accidentally or maliciously contaminated or that products are contaminated
through the supply chain due to human error or equipment failure. Such incidents
may result in loss of market share and loss of revenue for companies in the
consumer staples sector. Companies in the consumer staples sector may also be
adversely affected by changes or trends in commodity prices, which may be
influenced by unpredictable factors. These companies may be subject to severe
competition, which may have an adverse impact on their profitability.
Risks
Related to Investing in the Electronic Equipment, Instruments and Components
Industry
Risks
Related to Investing in the Electronic Equipment, Instruments and Components
Industry applies to the Global X MSCI China Information Technology ETF
The
electronic equipment, instruments and components industry is intensely
competitive, and prices for existing products tend to decrease over their life
cycle. Companies must continue to develop new products and technology to remain
competitive and are therefore dependent on hiring and retailing key personnel.
Companies typically face high fixed operating costs while also being subject to
fluctuations in the cost of raw materials.
Risks
Related to Investing in the Energy Sector
Risks
Related to Investing in the Energy Sector applies to the Global X MSCI China
Energy ETF, Global X MSCI Norway ETF and Global X MSCI Colombia ETF
The
success of companies in the energy sector may be cyclical and highly dependent
on energy prices. Securities of companies in the energy sector are subject to
swift energy price and supply fluctuations caused by events relating to
international politics, energy conservation, the success of exploration
projects, and tax and other governmental regulatory policies. Actions taken by
central governments may dramatically impact supply and demand forces that
influence energy prices, resulting in sudden decreases in value for companies in
the energy sector. Weak demand for the companies’ products or services or for
energy products and services in general, as well as negative developments in
these other areas, would adversely impact the Fund's performance. Companies in
the oil and gas sector (including alternative energy suppliers) may be adversely
affected by natural disasters or other catastrophes and may be at risk for
environmental damage claims. Additionally, these companies could be negatively
impacted by the adoption of other and/or novel energy sources, driven by
economic, environmental, and/or regulatory reasons, among others. These
companies may also be adversely affected by changes in exchange rates, interest
rates, economic conditions or world events in the regions that the companies
operate (i.e., expropriation, nationalization, confiscation of assets and coups,
social unrest, violence or labor unrest). Investments in companies located in
emerging market countries may heighten these risks. Companies engaged in the
distribution of energy, including electricity and gas, may be adversely affected
by governmental limitation on rates charged to customers. Deregulation and
greater competition may adversely affect the profitability of these companies
and lead to diversification outside of their original geographic regions and
their traditional lines of business, potentially increasing risk and making the
price of their equity securities more volatile.
Risks
Related to Investing in the Entertainment Industry
Risks
Related to Investing in the Entertainment Industry applies to the Global X MSCI
China Communication Services ETF
Entertainment
companies may be impacted by high costs of research and development of new
content and services in an effort to stay relevant in a highly competitive
industry, and entertainment products may face a risk of rapid obsolescence.
Entertainment companies are subject to risks that include cyclicality of
revenues and earnings, changing tastes and topical interests, and decreases in
the discretionary income of their targeted consumers. Sales of content through
physical formats and traditional content delivery services may be displaced by
new content delivery mechanisms, such as streaming technology, and it is
possible that such new content delivery mechanisms may themselves become
obsolete over time. The entertainment industry is regulated, and changes
to rules regarding advertising and the content produced by entertainment
companies can increase overall production and distribution costs. Companies in
the entertainment industry have at times faced increased regulatory pressure
which has delayed or prohibited the release of entertainment
content.
Risks
Related to Investing in the Financials Sector
Risks
Related to Investing in the Financials Sector applies to the Global X MSCI China
Financials ETF, Global X MSCI Greece ETF, Global X MSCI Colombia ETF, Global X
MSCI Nigeria ETF, Global X MSCI Next Emerging & Frontier ETF and Global X
FTSE Southeast Asia ETF
Companies
in the financials sector are subject to government intervention and extensive
governmental regulation, which may adversely affect the scope of their
activities, the prices they can charge, the amount of capital they must maintain
and, potentially, their size. Governmental regulation may change frequently and
may have significant adverse consequences for companies in the financials
sector, including effects not intended by such regulation. Recently enacted
legislation in the U.S. has relaxed capital requirements and other regulatory
burdens on certain U.S. banks. While the effect of the legislation may benefit
certain companies in the financials sector, increased risk taking by affected
banks may also result in greater overall risk in the financials sector. The
impact of changes in capital requirements, or recent or future regulation in
various countries, on any individual financial company or on the financials
sector as a whole cannot be predicted. The financials sector is exposed to risks
that may impact the value of investments in the financials sector more severely
than investments outside this sector, including operating with substantial
financial leverage. The financials sector may also be adversely affected by
increases in interest rates and loan losses, decreases in the availability of
money or asset valuations and adverse conditions in other related markets.
Additionally, the deterioration of the credit markets during the 2008-2009
global financial crisis caused an adverse impact in a broad range of mortgage,
asset-backed, auction rate and other markets, including U.S. and international
credit and interbank money markets generally, thereby affecting a wide range of
financial services institutions and markets. This situation created instability
in the financial services markets and caused certain financial services
companies
to incur large losses or even become insolvent or bankrupt. Some financial
services companies experienced downgrades in their credit ratings, declines in
the valuations of their assets, took action to raise capital (such as the
issuance of debt or equity securities), or even ceased operations. These actions
caused the securities of many financial services companies to decline in value
and could occur again if credit markets were substantially affected once more.
Insurance companies may be subject to severe price competition. The financials
sector is also a target for cyber-attacks and may experience technology
malfunctions and disruptions. In recent years, cyber-attacks and technology
malfunctions and failures have become increasingly frequent in this sector and
have reportedly caused losses to companies in this sector, which may negatively
impact the Fund.
Risks
Related to Investing in the Food Products Industry
Risks
Related to Investing in the Food Products Industry applies to the Global X MSCI
China Consumer Staples ETF
The
food products industry is subject to various risks, including evolving consumer
preferences, nutritional and health-related concerns, federal, state and local
food inspection and processing controls, consumer product liability claims,
risks of product tampering, and the availability and expense of liability
insurance. The meat and poultry industries are subject to scrutiny due to the
association of meat and poultry products with outbreaks of illness caused by
food borne pathogens. Product recalls are sometimes required in the food
industry to withdraw contaminated or mislabeled products from the market.
Additionally, the failure to identify and react appropriately to changes in
consumer trends, demands and preferences could lead to, among other things,
reduced demand and price reduction for a company’s products. Companies in the
food products industry may be adversely affected by changes in domestic or
foreign economic conditions, including inflation or deflation, interest rates,
availability of capital markets, consumer spending rates, and energy
availability and costs (including fuel surcharges).
Risks
Related to Investing in the Gas Utilities Industry
Risks
Related to Investing in the Gas Utilities Industry applies to the Global X MSCI
China Utilities ETF
Companies
in the natural gas utilities industry may face difficulty in obtaining natural
gas for resale or may be faced with increased fuel or other operating costs.
Reliance on capital construction projects may increase the risks associated with
natural disasters, terrorist attacks, government intervention or other factors
that may render a gas utility company’s equipment unusable or obsolete and
negatively impact profitability.
Risks
Related to Investing in the Health Care Sector
Risks
Related to Investing in the Health Care Sector applies to the Global X MSCI
China Health Care ETF
The
profitability of companies in the health care sector may be adversely affected
by the following factors, among others: extensive government regulations,
restrictions on government reimbursement for medical expenses, rising costs of
medical products and services, pricing pressure, an increased emphasis on
outpatient services, changes in the demand for medical products and services, a
limited number of products, industry innovation, changes in technologies and
other market developments. A number of issuers in the health care sector have
recently merged or otherwise experienced consolidation. The effects of this
trend toward consolidation are unknown and may be far-reaching. Many health care
companies are heavily dependent on patent protection. The expiration of a
company’s patents may adversely affect that company’s profitability. Many health
care companies are subject to extensive litigation based on product liability
and similar claims. Health care companies are subject to competitive forces that
may make it difficult to raise prices and, in fact, may result in price
discounting. Many new products in the health care sector may be subject to
regulatory approvals. The process of obtaining such approvals may be long and
costly, and such efforts ultimately may be unsuccessful. Companies in the health
care sector may be thinly capitalized and may be susceptible to product
obsolescence. In addition, a number of legislative proposals concerning health
care have been considered by the U.S. Congress in recent years. It is unclear
what proposals will ultimately be enacted, if any, and what effect they may have
on U.S. and non-U.S. companies in the health care sector. Companies in the
health care sector may also be affected by unforeseen circumstances including
but not limited to the spread of infectious disease which could impact drug
development priorities and pipelines, supply and demand dynamics for health care
equipment, as well as the ability to receive care in health care service
facilities.
Risks
Related to Investing in the Independent Power and Renewable Electricity
Producers Industry
Risks
Related to Investing in the Independent Power and Renewable Electricity
Producers Industry applies to the Global X MSCI China Utilities ETF
Companies
in the independent power and renewable electricity producers industry may be
highly dependent upon government subsidies, contracts with government entities,
and the successful development of new and proprietary technologies. In addition,
seasonal weather conditions, fluctuations in the supply of and demand for energy
products, changes in energy prices, and international political events may cause
fluctuations in the performance of independent power and renewable electricity
producers companies and the prices of their securities.
Risks
Related to Investing in the Industrials Sector
Risks
Related to Investing in the Industrials Sector applies to the Global X MSCI
China Industrials ETF
The
stock prices of companies in the industrials sector are affected by supply and
demand both for their specific product or service and for industrials sector
products in general. The products of manufacturing companies may face product
obsolescence due to rapid technological developments and frequent new product
introduction. Government regulation, trade disputes, world events and economic
conditions affect the performance of companies in the industrials sector.
Companies in the industrials sector may be adversely affected by damages from
environmental claims and product liability claims. The industrials sector may
also be adversely affected by changes or trends in commodity prices, which may
be influenced by unpredictable factors. Companies in the industrials sector,
particularly aerospace and defense companies, may also by adversely affected by
government spending policies because companies in this sector tend to rely to a
significant extent on government demand for their products and services.
Risks
Related to Investing in the Information Technology Sector
Risks
Related to Investing in the Information Technology Sector applies to the Global
X MSCI China Information Technology ETF
Market
or economic factors impacting information technology companies and companies
that rely heavily on technology advances could have a major effect on the value
of the Fund’s investments. The value of stocks of information technology
companies and companies that rely heavily on technology is particularly
vulnerable to rapid changes in technology product cycles, rapid product
obsolescence, government regulation and increased competition, both domestically
and internationally, including competition from foreign competitors with lower
production costs. Information technology companies and companies that rely
heavily on technology, especially those of smaller, less-seasoned companies,
tend to be more volatile than the overall market. These companies also are
heavily dependent on patent and intellectual property rights, the loss or
impairment of which may adversely affect profitability. Additionally, companies
in the information technology sector may face dramatic and often unpredictable
changes in growth rates and competition for the services of qualified personnel.
Companies in the information technology sector are facing increased government
and regulatory scrutiny and may be subject to adverse government or regulatory
action. Companies in the application software industry, in particular, may also
be negatively affected by the decline or fluctuation of subscription renewal
rates for their products and services, which may have an adverse effect on
profit margins. Companies in the systems software industry may be adversely
affected by, among other things, actual or perceived security vulnerabilities in
their products and services, which may result in individual or class action
lawsuits, state or federal enforcement actions and other remediation costs.
Risks
Related to Investing in the Interactive Media and Services Industry
Risks
Related to Investing in the Interactive Media and Services Industry applies to
the Global X MSCI China Communication Services ETF
The
success of the interactive media and services industry may be tied closely to
the performance of the overall domestic and global economy, interest rates,
competition and consumer confidence. Success depends heavily on disposable
household income and consumer spending. Also, companies in the interactive media
and services industry may be subject to severe competition, which may have an
adverse impact on their respective profitability. Changes in demographics and
consumer tastes can also affect the demand for, and success of, interactive
media and services in the marketplace.
Risks
Related to Investing in the Internet and Direct Marketing Retail
Industry
Risks
Related to Investing in the Internet and Direct Marketing Retail Industry
applies to the Global X MSCI China Consumer Discretionary ETF
Companies
in the internet and direct marketing retail industry are dependent on internal
infrastructure and on the availability, reliability and security of the internet
and related systems. Critical systems and operations may be vulnerable to damage
or interruption from fire, flood, power loss, telecommunications failure,
terrorist attacks, cyber-attacks, acts of war, break-ins, earthquake and similar
events. Any system interruption that results in the unavailability of a
company’s website or mobile app or reduced performance of transaction systems
could interrupt or substantially reduce a company’s ability to conduct its
business. Companies in the internet and direct marketing retail industry are
dependent on paid and unpaid natural search engines and are therefore dependent
on business decisions made by companies that offer natural search engines. Any
business changes by dominant providers of natural search engines can be
detrimental to an internet and direct marketing retail company’s business while
being totally outside of the control of such company.
Risks
Related to Investing in the Materials Sector
Risks
Related to Investing in the Materials Sector applies to the Global X MSCI China
Materials ETF, Global X MSCI Pakistan ETF and Global X MSCI Nigeria
ETF
Issuers
in the materials sector could be adversely affected by commodity price
volatility, exchange rates, import controls, increased competition, depletion of
resources, technical advances, labor relations, over-production, litigation and
government regulations, among other factors. At times, worldwide production of
industrial materials has exceeded demand as a result of over-building or
economic downturns, leading to poor investment returns or losses. Issuers in the
materials sector are at risk for environmental damage and product liability
claims and may be adversely affected by depletion of resources, technical
progress, labor relations and governmental regulations.
Risks
Related to Investing in the Metals and Mining Industry
Risks
Related to Investing in the Metals and Mining Industry applies to the Global X
MSCI China Materials ETF
Because
the Fund invests in stocks and depositary receipts of U.S. and foreign companies
that are involved in the mining industry, it is subject to certain risks
associated with such companies. Competitive pressures may have a significant
effect on the financial condition of companies in the mining industry. Also,
mining companies are highly dependent on the price of the commodity they
produce. These prices may fluctuate substantially over short periods of time;
therefore the Fund’s Share price may be more volatile than other types of
investments. In particular, a drop in the price of a given commodity could
adversely affect the profitability of mining companies and their ability to
secure financing. In addition, metals and mining companies may be significantly
affected by changes in global demand for certain metals, economic developments,
energy conservation, the success of exploration projects, changes in exchange
rates, interest rates, economic conditions, tax treatment, trade treaties, and
government regulation and intervention, and events in the regions that the
companies to which the Fund has exposure operate (e.g., expropriation,
nationalization, confiscation of assets and property, the imposition of
restrictions on foreign investments or repatriation of capital, military coups,
social or political unrest, violence and labor unrest).
Risks
Related to Investing in the Oil, Gas and Consumable Fuels Industry
Risks
Related to Investing in the Oil, Gas and Consumable Fuels Industry applies to
the Global X MSCI China Energy ETF, Global X MSCI Norway ETF and Global X MSCI
Colombia ETF
The
oil, gas and consumable fuels industry is cyclical and highly dependent on the
market price of fuel. The market value of companies in the oil, gas and
consumable fuels industry are strongly affected by the levels and volatility of
global commodity prices, supply and demand, capital expenditures on exploration
and production, energy conservation efforts, the prices of alternative fuels,
exchange rates and technological advances. Companies in this sector are subject
to substantial government regulation and contractual fixed pricing, which may
increase the cost of business and limit these companies’ earnings. Actions taken
by central governments may dramatically impact supply and demand forces that
influence the market price of fuel, resulting in sudden decreases in value for
companies in the oil, gas and consumable fuels industry. A significant portion
of their revenues depends on a relatively small number of customers, including
governmental entities and utilities. As a result, governmental budget restraints
may have a material adverse effect on the stock prices of companies in the
industry.
Companies
in the oil, gas and consumable fuels industry may also operate in countries with
less developed regulatory regimes or a history of expropriation, nationalization
or other adverse policies. Companies in the oil, gas and consumable fuels
industry also face a significant civil liability from accidents resulting in
injury or loss of life or property, pollution or other environmental mishaps,
equipment malfunctions or mishandling of materials, and a risk of loss from
terrorism or other natural disasters. Any such event could have serious
consequences for the general population of the area affected and result in a
material adverse impact on the Fund’s portfolio securities and the performance
of the Fund. Companies in the oil, gas and consumable fuels industry can be
significantly affected by the supply of and demand for specific products and
services, weather conditions, exploration and production spending, government
regulation, world events and general economic conditions.
Risks
Related to Investing in the Pharmaceuticals Industry
Risks
Related to Investing in the Pharmaceuticals Industry applies to the Global X
MSCI China Health Care ETF
Companies
in the pharmaceuticals industry are subject to competitive forces that may make
it difficult to raise prices and, in fact, may result in price discounting. The
profitability of some companies in the pharmaceuticals industry may be dependent
on a relatively limited number of products. In addition, their products can
become obsolete due to industry innovation, changes in technologies or other
market developments. Many new products in the pharmaceuticals industry are
subject to government approvals, regulation and reimbursement rates. The process
of obtaining government approvals may be long and costly. Many companies in the
pharmaceuticals industry are heavily dependent on patents and intellectual
property rights. The loss or impairment of these rights may adversely affect the
profitability of these companies. Companies in the pharmaceuticals industry may
be subject to extensive litigation based on product liability and similar
claims. Demand for pharmaceuticals, generally speaking and specific to
sub-segments, may fluctuate due to unexpected events, including but not limited
to global health crises like pandemics which could strain health care systems
and alter health care needs. Such demand fluctuations could positively or
negatively impact pharmaceutical companies.
Risks
Related to Investing in the Real Estate Management and Development
Industry
Risks
Related to Investing in the Real Estate Management and Development Industry
applies to the Global X MSCI China Real Estate ETF and Global X MSCI Vietnam
ETF
Companies
in the real estate management and development industry are typically impacted by
general global economic conditions, including include short-term and long-term
interest rates, inflation, fluctuations in debt and equity capital markets,
levels of unemployment, consumer confidence and the general condition of the
U.S. and the global economy. Such companies may also often be concentrated in
certain geographic markets, and any disruptions in those real estate markets
could harm the company’s business.
Risks
Related to Investing in the Real Estate Sector
Risks
Related to Investing in the Real Estate Sector applies to the Global X MSCI
China Real Estate ETF and Global X MSCI Vietnam ETF
The
real estate sector includes real estate companies focused on commercial and
residential real estate development, sales, operations, and services, as well as
real estate investment trusts (“REITs”). Real estate is highly sensitive to
general and local economic conditions and developments and characterized by
intense competition and periodic overbuilding. Many real estate companies
utilize leverage (and some may be highly leveraged), which increases risk and
could adversely affect a real estate company's operations and market value in
periods of rising interest rates.
Risks
Related to Investing in the Semiconductors and Semiconductor Equipment
Industry
Risks
Related to Investing in the Semiconductors and Semiconductor Equipment Industry
applies to the Global X MSCI China Information Technology ETF
The
semiconductors and semiconductor equipment industry is highly competitive, and
certain companies in this industry may be restricted from operating in certain
markets due to the sensitive nature of these technologies. Companies in this
space generally seek to increase silicon capacity, improve yields, and reduce
die size in their product designs which may result in significant increases in
worldwide supply and downward pressure on prices. The success of such companies
frequently depends on the ability to develop and produce competitive new
semiconductor
technologies.
Companies in this industry frequently undertake substantial research and
development expenses in order to remain competitive, and a failure to
successfully demonstrate advanced functionality and performance can have a
material impact on the company’s business.
Risks
Related to Investing in the Utilities Sector
Risks
Related to Investing in the Utilities Sector applies to the Global X MSCI China
Utilities ETF and Global X MSCI Portugal ETF
Stock
prices for companies in the utilities sector are affected by supply and demand,
operating costs, government regulation, environmental factors, liabilities for
environmental damage and general civil liabilities, and rate caps or rate
exchanges. Although rate changes of a utility usually fluctuate in approximate
correlation with financing costs due to political and regulatory factors, rate
changes ordinarily occur only following a delay after the changes in financing
costs. This factor will tend to favorably affect a regulated utility company's
earnings and dividends in times of decreasing costs, but conversely, will tend
to adversely affect earnings and dividends are rising in times of rising costs.
The value of regulated utility equity securities may tend to have an inverse
relationship to the movement of interest rates. Certain utility companies have
experienced full or partial deregulation in recent years. These utility
companies are frequently more similar to industrial companies in that they are
subject to greater competition and have been permitted by regulators to
diversify outside of their original geographic regions and their traditional
lines of business. These opportunities may permit certain utility companies to
earn more than their traditional regulated rate of return. Some companies,
however, may be forced to defend their core business and may be less profitable.
In addition, natural disasters, terrorist attacks, government intervention or
other factors may render a utility company's equipment unusable or obsolete and
negatively impact profitability.
Foreign
Securities Risk
Foreign
Securities Risk applies to each Fund except for the Global X MSCI Nigeria
ETF
The
Fund’s assets may be invested within the equity markets of countries outside of
the United States. These markets are subject to special risks associated with
foreign investment, including, but not limited to: lower levels of liquidity and
market efficiency; greater securities price volatility; exchange rate
fluctuations and exchange controls; less availability of public information
about issuers; limitations on foreign ownership of securities; imposition of
withholding or other taxes; imposition of restrictions on the expatriation of
the assets of the Fund; restrictions placed on U.S. investors by U.S.
regulations governing foreign investments; higher transaction and custody costs
and delays in settlement procedures; difficulties in enforcing contractual
obligations; lower levels of regulation of the securities market; weaker
accounting, disclosure and reporting requirements; and legal principles relating
to corporate governance and directors’ fiduciary duties and liabilities.
Shareholder rights under the laws of some foreign countries may not be as
favorable as U.S. laws. Thus, a shareholder may have more difficulty in
asserting its rights or enforcing a judgment against a foreign company than a
shareholder of a comparable U.S. company. Investment of more than 25% of the
Fund’s total assets in securities located in one country or region will subject
the Fund to increased country or region risk with respect to that country or
region. Where all or a portion of the Fund's underlying securities trade in a
market that is closed when the market in which the Fund's shares are listed and
trading is open, there may be differences between the last quote from the
security’s closed foreign market and the value of the security during the Fund’s
domestic trading day. This in turn could lead to differences between the market
price of the Fund’s shares and the underlying value of those shares.
Foreign
Securities Risk
Foreign
Securities Risk applies to the Global X MSCI Nigeria ETF
The
Fund invests, within U.S. regulations, in foreign securities, namely securities
denominated in Naira. The Fund's investments in foreign securities are riskier
than U.S. securities investments. Investments in the securities of foreign
issuers (including investments in ADRs and GDRs) are subject to the risks
associated with investing in those foreign markets, such as heightened risks of
inflation or nationalization. The prices of foreign securities and the prices of
U.S. securities have, at times, moved in opposite directions. In addition,
securities of foreign issuers may lose value due to political, economic and
geographic events affecting a foreign issuer or market. During periods of
social, political or economic instability in a country or region, the value of a
foreign security traded on U.S. exchanges could be affected by, among other
things, increasing price volatility, illiquidity, or the closure of the primary
market on which the security (or the security underlying the ADR or GDR) is
traded. You may lose money due to political, economic and geographic events
affecting a foreign issuer or market. Where all or a portion of the Fund's
underlying securities trade in a market that is closed when the market in which
the Fund's shares are listed
and
trading is open, there may be differences between the last quote from the
security’s closed foreign market and the value of the security during the Fund’s
domestic trading day. This in turn could lead to differences between the market
price of the Fund’s shares and the underlying value of those shares.
Geographic
Risk
Geographic
Risk applies to each Fund
Geographic
risk is the risk that the Fund’s assets may be focused in countries located in
the same geographic region. This investment focus will subject the Fund to risks
associated with that particular region, or a region economically tied to that
particular region, such as a natural, biological or other disaster. Outbreaks of
contagious viruses and diseases may reduce business activity or disrupt market
activity, and have the potential to exacerbate market risks in the countries and
regions in which they occur. The securities in which the Fund invests and,
consequently, the Fund are also subject to specific risks as a result of their
business operations, including, but not limited to:
Risk
of Investing in Argentina
Risk
of Investing in Argentina applies to the Global X MSCI Argentina ETF
Argentina’s
economy is heavily dependent on exports and commodities, making the economy
susceptible to fluctuations in commodity markets and sensitive to its
relationships with key trading partners. Argentina’s key trading and foreign
investment partners are Brazil, China and the U.S. Reduction in spending on
Argentinean products and services, or changes in China, the U.S., or any of the
Latin American economies, trade regulations or currency exchange rates may
adversely impact the Argentinean economy.
Argentina
has experienced a high level of debt and public spending. Argentina’s default on
its debt in 2001 and 2020 continues to impact the confidence of investors in
Argentina, which might adversely impact returns in the Fund. In 2014, minority
bondholders of Argentina’s previously defaulted debt sought, and won, an
injunction that prohibited Argentina from repaying bonds that had been
renegotiated, unless they simultaneously paid the holdout minority bondholders
their full amount due as well. As a result, the Argentinian government, in 2014,
subsequently entered a technical default on its debt. In 2016, after a series of
court appeals and negotiations, the government and minority bondholders entered
into a settlement to resolve the dispute. Further defaults, potential debt
renegotiations with the IMF or other international creditors, and related
actions by Argentina may continue to impact the confidence of investors in
Argentina, which could limit the government’s ability to borrow in the future.
Argentina
has experienced periods of significant political instability and certain sectors
and regions of Argentina experience high unemployment, which may cause downturns
in the Argentinean market and adversely impact investments in the Fund.
Uncertainty over direction of Argentina’s economic reforms can emerge abruptly
with the resignation or dismissal of the Minister of Economy. Heavy regulation
of labor and product markets is pervasive in Argentina and may stifle
Argentinean economic growth or contribute to prolonged periods of recession.
Argentina has privatized, certain industries, which may lose money or be
re-nationalized. In the past, Argentina’s government decided to partially
nationalize YPF S.A., Argentina’s largest energy company.
Argentina
has previously imposed capital controls that affected the inflow and
repatriation of capital and the free transfer of securities. If such capital
controls are reinstituted, or if new capital controls are implemented, it could
disrupt the creation/redemption process, which could affect the trading of Fund
shares, resulting in Fund shares trading at a price that is materially different
from NAV. Argentina is currently implementing a system of multiple exchange
rates in a bid to prevent devaluation of the Argentinian Peso. The addition of
new exchange rates for various purposes or adjustments to tax policies for the
aforementioned rates is subject to change.
Risk
of Investing in the Southeast Asian Nations (ASEAN) Region
Risk
of Investing in the Southeast Asian Nations (ASEAN) Region applies to the Global
X FTSE Southeast Asia ETF
Investments
in the ASEAN region involve risks not typically associated with investments in
securities of issuers in more developed countries that may negatively affect the
value of your investment in the Fund. Singapore, Malaysia, Thailand, Indonesia
and the Philippines present different economic and political conditions from
those in Western markets, and less social, political and economic stability. In
the past, some of these economies have experienced high interest rates, economic
volatility, inflation, currency devaluations and high unemployment rates.
Political instability could have an adverse effect on economic or social
conditions in these economies and may result in outbreaks of civil
unrest,
terrorist attacks or threats or acts of war in the affected areas, any of which
could materially and adversely affect the companies in which the Fund may
invest.
Risk
of Investing in Brazil
Risk
of Investing in Brazil applies to the Global X MSCI Norway ETF and Global X MSCI
Argentina ETF
Investment
in Brazilian issuers involves risks that are specific to Brazil, including
legal, regulatory, political, currency and economic risks. Specifically,
Brazilian issuers are subject to possible regulatory and economic interventions
by the Brazilian government, including the imposition of wage and price controls
and the limitation of imports. In addition, the market for Brazilian securities
is directly influenced by the flow of international capital and economic and
market conditions of certain countries, especially other emerging market
countries in Central and South America. The Brazilian economy has historically
been exposed to high rates of inflation, a high level of debt, and violence,
each of which may reduce and/or prevent economic growth. A rising unemployment
rate could also have the same effect. Corruption and subsequent legal
consequences have led to political upsets and sudden changes in
leadership.
Risk
of Investing in Canada
Risk
of Investing in Canada applies to the Global X MSCI Argentina ETF
The
United States is Canada’s largest trading and investment partner, and the
Canadian economy is significantly affected by developments in the U.S. economy
and by changes in U.S. trade policy. Since the implementation of NAFTA in 1994
among Canada, the United States and Mexico, total two-way merchandise trade
between the United States and Canada has more than doubled. To further this
relationship, the three NAFTA countries entered into the Security and Prosperity
Partnership of North America in March 2005, which has further affected Canada’s
dependency on the U.S. economy. Any downturn in U.S. or Mexican economic
activity is likely to have an adverse impact on the Canadian economy. The
Canadian economy is also dependent upon external trade with other key trading
partners, including China and the European Union. Any trade policy changes by
the United States, China or the European Union which reduced Canada's ability to
trade with such regions could therefore have significant impact on the Canadian
economy. Developments in the United States, including renegotiation of NAFTA,
ratification of the successor USMCA, which received legislative approval and
went into effect in 2020, and imposition of tariffs by the United States, may
have implications for the trade arrangements among the United States and Canada,
which could negatively affect the value of securities held by the Funds. In
addition, Canada is a large supplier of natural resources (e.g., oil, natural
gas and agricultural products). As a result, the Canadian economy is sensitive
to fluctuations in certain commodity prices.
Risk
of Investing in Chile
Risk
of Investing in Chile applies to the Global X MSCI Colombia ETF and Global X
MSCI Argentina ETF
Investment
in Chilean issuers involves risks that are specific to Chile, including, legal,
regulatory, political, environmental and economic risks. Chile’s economy is
export-dependent and relies heavily on trading relationships with certain key
trading partners, including China, Brazil, Japan, South Korea, the U.S.,
Argentina and Germany. Future changes in the price or the demand for Chilean
exported products by China, Brazil, Japan, South Korea, the U.S., Argentina and
Germany, changes in these countries’ economies, trade regulations or currency
exchange rates could adversely impact the Chilean economy and the issuers to
which the Fund has exposure.
Risk
of Investing in China
Risk
of Investing in China applies to the Global X MSCI China Communication Services
ETF, Global X MSCI China Consumer Discretionary ETF, Global X MSCI China
Consumer Staples ETF, Global X MSCI China Energy ETF, Global X MSCI China
Financials ETF, Global X MSCI China Health Care ETF, Global X MSCI China
Industrials ETF, Global X MSCI China Information Technology ETF, Global X MSCI
China Materials ETF, Global X MSCI China Real Estate ETF, Global X MSCI China
Utilities ETF and Global X MSCI Portugal ETF
The
Chinese economy is subject to a considerable degree of economic, political and
social instability.
Political
and Social Risk
The
Chinese government is authoritarian and has periodically used force to suppress
civil dissent. Disparities of wealth and the pace of economic liberalization may
lead to social turmoil, violence and labor unrest. In addition, China continues
to experience disagreements related to integration with Hong Kong and religious
and nationalist disputes in Tibet and Xinjiang. There is also a greater risk in
China than in many other countries of currency fluctuations, currency
nonconvertibility, interest rate fluctuations and higher rates of inflation as a
result of internal social unrest or conflicts with other countries.
Unanticipated political or social developments may result in sudden and
significant investment losses. China’s growing income inequality, rapidly aging
population and significant environmental issues also are factors that may affect
the Chinese economy. Concerns about the rising government and household debt
levels could impact the stability of the Chinese economy.
Heavy
Government Control and Regulation
The
Chinese government has implemented significant economic reforms in order to
liberalize trade policy, promote foreign investment in the economy, reduce
government control of the economy and develop market mechanisms. There can be no
assurance these reforms will continue or that they will be effective. Despite
recent reform and privatizations, government control over certain sectors or
enterprises and significant regulation of investment and industry is still
pervasive, including restrictions on investment in companies or industries
deemed to be sensitive to particular national interests, and the Chinese
government may restrict foreign ownership of Chinese corporations and/or the
repatriation of assets by foreign investors. Chinese companies that maintain
large amounts of sensitive data or produce some form of adverse social cost are
particularly at risk as the government moves forward with the Common Prosperity
agenda. Limitations or restrictions on foreign ownership of securities may have
adverse effects on the liquidity and performance of the Fund and could lead to
higher tracking error. Chinese government intervention in the market may have a
negative impact on market sentiment, which may in turn affect the performance of
the Chinese economy and the Fund’s investments. Chinese markets generally
continue to experience inefficiency, volatility and pricing anomalies that may
be connected to governmental influence, lack of publicly-available information,
and political and social instability.
Economic
Risk
The
Chinese economy has grown rapidly in the recent past and there is no assurance
that this growth rate will be maintained. In fact, the Chinese economy may
experience a significant slowdown as a result of, among other things, a
deterioration in global demand for Chinese exports, a systemic failure in the
property sector, as well as contraction in spending on domestic goods by Chinese
consumers. In addition, China may experience substantial rates of inflation or
economic recessions, which would have a negative effect on its economy and
securities market. Delays in enterprise restructuring, slow development of
well-functioning financial markets and widespread corruption have also hindered
performance of the Chinese economy. China continues to receive substantial
pressure from trading partners to liberalize official currency exchange rates.
Elevated
geopolitical tensions between China and its trading partners, including the
imposition of U.S. tariffs on certain Chinese goods, the imposition of trade and
non-trade related barriers for certain Chinese companies, and increased
international pressure related to Chinese trade policy, forced technology
transfers and intellectual property protections, may have a substantial impact
on the Chinese economy. The continuation or worsening of the current political
climate between China and the U.S. could result in additional regulatory
restrictions being contemplated or imposed on the U.S. or in China that could
impact the Fund’s ability to invest in certain companies. Reduction in spending
on Chinese products and services, institution of additional tariffs or other
trade barriers (including as a result of heightened trade tensions between China
and the U.S. or in response to actual or alleged Chinese cyber activity), or a
downturn in any of the economies of China’s key trading partners may have an
adverse impact on the Chinese economy and the Chinese issuers of securities in
which the Fund invests. For example, the U.S. has added certain foreign
technology companies to the U.S. Department of Commerce’s Bureau of Industry and
Security’s “Entity List,” which is a list of companies believed to pose a
national security risk to the U.S. U.S. investors may also be barred by U.S.
authorities from investing in certain companies, including those with ties to
the military, intelligence, and security services in China. Actions like these
may have unanticipated and disruptive effects on the Chinese economy. Any such
response that targets Chinese financial markets or securities exchanges could
interfere with orderly trading, delay settlement or cause market disruptions.
Public health crises or major health-related developments may have a substantial
impact on the Chinese economy or holdings in the Fund. Outbreaks of contagious
viruses and diseases, including the novel viruses commonly known as SARS, MERS,
and Covid-19 (Coronavirus), may reduce business activity or disrupt market
activity, and have the potential to exacerbate market risks such as volatility
in exchange rates or the trading of Chinese securities listed domestically or
abroad. Likewise, factories, ports, and critical infrastructure in China may
close to limit contagion risk. In response to the Covid-19 crisis, China is
implementing strict lockdowns to keep cases extremely low and there is no
assurance that China will relax this approach or not revert back to it after
an
attempt at relaxation. Foreign investors’ access to domestic markets may also be
limited during such health crises, especially if domestic exchanges are closed
for an extended period. Market closures could interfere with the orderly trading
or settlement mechanisms of Chinese securities listed domestically or abroad.
The Chinese economy or holdings in the Fund may also be adversely impacted
should health crises create political uncertainty or social unrest. The
implications of such health crises are difficult to ascertain but may put strain
on China’s supply chains, trading relationships, and international
relations.
Expropriation
Risk
The
Chinese government maintains a major role in economic policy making and
investing in China involves risk of loss due to expropriation, nationalization,
confiscation of assets and property or the imposition of restrictions on foreign
investments and on repatriation of capital invested.
Security
Risk
China
has strained international relations with Taiwan, India, Russia and other
neighbors due to territorial disputes, historical animosities, defense concerns
and other security concerns. Relations between China’s Han ethnic majority and
other ethnic groups in China, including Tibetans and Uighurs, are also strained
and have been marked by protests and violence. Additionally, China is alleged to
have participated in state-sponsored cyberattacks against foreign companies and
foreign governments. Actual and threatened responses to such activity, including
purchasing restrictions, sanctions, tariffs or cyberattacks on the Chinese
government or Chinese companies, may impact China’s economy and Chinese issuers
of securities in which the Fund invests. These situations may cause uncertainty
in the Chinese market and may adversely affect the Chinese economy. In addition,
conflict on the Korean Peninsula could adversely affect the Chinese economy.
Tax
Risk
China
has implemented a number of tax reforms in recent years and may amend or revise
its existing tax laws and/or procedures in the future, possibly with retroactive
effect. Changes in applicable Chinese tax law could reduce the after-tax profits
of the Fund, directly or indirectly, including by reducing the after-tax profits
of companies in China in which the Fund invests. Uncertainties in Chinese tax
rules could result in unexpected tax liabilities for the Fund.
Hong
Kong Political Risk
Hong
Kong reverted to Chinese sovereignty on July 1, 1997 as a Special Administrative
Region (SAR) of the People’s Republic of China under the principle of “one
country, two systems.” Although China is obligated to maintain the current
capitalist economic and social system of Hong Kong through June 30, 2047, the
continuation of economic and social freedoms enjoyed in Hong Kong is dependent
on the government of China. Since 1997, there have been tensions between the
Chinese government and many people in Hong Kong who perceive China as tightening
of control over Hong Kong’s semi-autonomous liberal political, economic, legal,
and social framework. Recent protests and unrest have increased tensions even
further. Due to the interconnected nature of the Hong Kong and Chinese
economies, this instability in Hong Kong may cause uncertainty in the Hong Kong
and Chinese markets. In addition, the Hong Kong dollar trades at a fixed
exchange rate in relation to (or, is “pegged” to) the U.S. dollar, which has
contributed to the growth and stability of the Hong Kong economy. However, it is
uncertain how long the currency peg will continue or what effect the
establishment of an alternative exchange rate system would have on the Hong Kong
economy. Because the Fund’s NAV is denominated in U.S. dollars, the
establishment of an alternative exchange rate system could result in a decline
in the Fund’s NAV.
Special
Risk Considerations of Investing in China – Variable Interest Entity
Investments
For
purposes of raising capital offshore on exchanges outside of China, including on
U.S. exchanges, many Chinese-based operating companies are structured as
Variable Interest Entities (“VIEs”). In this structure, the Chinese-based
operating company is the VIE and establishes a shell company in a foreign
jurisdiction, such as the Cayman Islands. The shell company lists on a foreign
exchange and enters into contractual arrangements with the VIE. This structure
allows Chinese companies in which the government restricts foreign ownership to
raise capital from foreign investors. While the shell company has no equity
ownership of the VIE, these contractual arrangements permit the shell company to
consolidate the VIE’s financial statements with its own for accounting purposes
and provide for economic exposure to the performance of the underlying Chinese
operating company. Therefore, an investor in the listed shell company, such as
the Fund, will have exposure to the Chinese-based operating company only through
contractual arrangements
and
has no ownership in the Chinese-based operating company. Furthermore, because
the shell company only has specific rights provided for in these service
agreements with the VIE, its abilities to control the activities at the
Chinese-based operating company are limited and the operating company may engage
in activities that negatively impact investment value.
While
the VIE structure has been widely adopted, it is not formally recognized under
Chinese law and therefore there is a risk that the Chinese government could
prohibit the existence of such structures or negatively impact the VIE’s
contractual arrangements with the listed shell company by making them invalid.
If these contracts were found to be unenforceable under Chinese law, investors
in the listed shell company, such as the Fund, may suffer significant losses
with little or no recourse available. If the Chinese government determines that
the agreements establishing the VIE structures do not comply with Chinese law
and regulations, including those related to restrictions on foreign ownership,
it could subject a Chinese-based issuer to penalties, revocation of business and
operating licenses, or forfeiture of ownership interest. In addition, the listed
shell company’s control over a VIE may also be jeopardized if a natural person
who holds the equity interest in the VIE breaches the terms of the agreement, is
subject to legal proceedings or if any physical instruments for authenticating
documentation, such as chops and seals, are used without the Chinese-based
issuer’s authorization to enter into contractual arrangements in China. Chops
and seals, which are carved stamps used to sign documents, represent a legally
binding commitment by the company. Moreover, any future regulatory action may
prohibit the ability of the shell company to receive the economic benefits of
the Chinese-based operating company, which may cause the value of the Fund’s
investment in the listed shell company to suffer a significant loss. For
example, in 2021, the Chinese government prohibited use of the VIE structure for
investment in after-school tutoring companies. There is no guarantee that the
government will not place similar restrictions on other
industries.
Chinese equities that utilize the VIE structure to list in
the U.S. as ADRs face the risk of regulatory action from U.S. authorities,
including the risk of delisting. This will depend in part on whether U.S.
regulatory authorities are satisfied with their access to Mainland China and
Hong Kong for the purpose of conducting inspections on the quality of audits for
these companies. Although the U.S. and China reached an agreement in September
2022 to grant the U.S. access for such inspections, there is no guarantee that
the agreement will hold up or that U.S. regulatory authorities will continue to
feel satisfied with their access.
Risk
of Investing in Colombia
Risk
of Investing in Colombia applies to the Global X MSCI Colombia ETF
Colombia’s
economy is heavily dependent on exports. The oil, coal and coffee sectors of
Colombia’s economy account for a large portion of its exports. Any changes in
these sectors could have an adverse impact on the Colombian economy. For
example, in 2022 the Colombian government passed restrictions on new contracts
for oil exploration in an effort to reduce reliance on the sector. Colombia’s
key trading and foreign investment partners are the U.S., Brazil, China, the
E.U., Venezuela and Mexico. Reduction in spending on Colombian products and
services, or changes in the U.S. or any of the Latin American economies, trade
regulations or currency exchange rates may adversely impact the Colombian
economy.
Colombia
has experienced a high level of debt and public spending, which may stifle
economic growth, contribute to prolonged periods of recession or lower the
country’s sovereign debt rating and adversely impact investments in the Fund.
Colombia has experienced periods of political instability, violence, and social
unrest in the past. Although levels of violence associated with internal
conflicts and drug-trafficking have fallen, they remain high by international
standards. Moreover, ongoing tension between Colombia and Venezuela, or the
ongoing humanitarian and political crisis in Venezuela, could adversely affect
the Colombian economy.
In
the past, Colombia has imposed stringent capital controls that have restricted
the inflow and repatriation of capital and the free transfers of securities.
These controls have since been eased but there can be no assurance that they
will be reinstated or changed again and without prior warning. These capital
controls could disrupt the creation/redemption process thereby adversely
affecting trading of the Shares. For example, these controls could cause the
Shares to trade at a price that is materially different from its NAV.
Colombia
is located in a part of the world that has historically been prone to natural
disasters, such as earthquakes, volcanoes, droughts, floods and tsunamis. In
addition, emerging markets are especially economically sensitive to
environmental events.
A
substantial portion of Colombia’s exports are from businesses in the agriculture
and mining sectors of its economy. Commodity prices or negative changes in these
sectors could have an adverse impact on Colombia’s economy and companies located
in Colombia.
Risk
of Investing in Developed Markets
Risk
of Investing in Developed Markets applies to the Global X MSCI Norway ETF,
Global X DAX Germany ETF and Global X MSCI Portugal ETF
Investment
in developed country issuers may subject the Fund to regulatory, political,
currency, security, and economic risk specific to developed countries. Developed
countries generally tend to rely on services sectors (e.g., the financial
services sector) as the primary means of economic growth. A prolonged slowdown
in, among others, services sectors is likely to have a negative impact on
economies of certain developed countries, although economies of individual
developed countries can be impacted by slowdowns in other sectors. In the past,
certain developed countries have been targets of terrorism, and some geographic
areas in which the Fund invests have experienced strained international
relations due to territorial disputes, historical animosities, defense concerns
and other security concerns. These situations may cause uncertainty in the
financial markets in these countries or geographic areas and may adversely
affect the performance of the issuers to which the Fund has exposure. Heavy
regulation of certain markets, including labor and product markets, may have an
adverse effect on certain issuers. Such regulations may negatively affect
economic growth or cause prolonged periods of recession. Many developed
countries are heavily indebted and face rising healthcare and retirement
expenses and may be underprepared for global health crises. For example, the
rapid and global spread of a highly contagious novel coronavirus respiratory
disease, designated COVID-19, resulted in extreme volatility in the financial
markets and severe losses; reduced liquidity of many instruments; restrictions
on international and, in some cases, local travel; significant disruptions to
business operations (including business closures); strained healthcare systems;
disruptions to supply chains, consumer demand and employee availability; and
widespread uncertainty regarding the duration and long-term effects of this
pandemic. In addition, price fluctuations of certain commodities and regulations
impacting the import of commodities may negatively affect developed country
economies.
Risk
of Investing in Emerging Markets
Risk
of Investing in Emerging Markets applies to the Global X MSCI China
Communication Services ETF, Global X MSCI China Consumer Discretionary ETF,
Global X MSCI China Consumer Staples ETF, Global X MSCI China Energy ETF, Global
X MSCI China Financials ETF, Global X MSCI China Health Care ETF, Global X MSCI
China Industrials ETF, Global X MSCI China Information Technology ETF, Global X
MSCI China Materials ETF, Global X MSCI China Real Estate ETF, Global X MSCI
China Utilities ETF, Global X MSCI Greece ETF, Global X MSCI Norway ETF, Global
X MSCI Colombia ETF, Global X MSCI Argentina ETF, Global X MSCI Next Emerging
& Frontier ETF and Global X FTSE Southeast Asia ETF
The
securities markets of emerging market countries may be less liquid, subject to
greater price volatility, have smaller market capitalizations, have less
government regulation and not be subject to as extensive and frequent
accounting, financial and other reporting requirements as the securities markets
of more developed countries, as has historically been the case. Issuers and
securities markets in emerging markets are generally not subject to as extensive
and frequent accounting, financial and other reporting requirements or as
comprehensive government regulations as are issuers and securities markets in
the developed markets. In particular, the assets and profits appearing on the
financial statements of emerging market issuers may not reflect their financial
position or results of operations in the same manner as financial statements for
developed market issuers. Substantially less information may be publicly
available about emerging market issuers than is available about issuers in
developed markets. It may be difficult or impossible for the Fund to pursue
claims against an emerging market issuer in the courts of an emerging market
country. There may be significant obstacles to obtaining information necessary
for investigations into or litigation against emerging market companies and
shareholders may have limited legal rights and remedies.
Emerging
markets are generally located in the Asia and Pacific regions, the Middle East,
Eastern Europe, Latin America, and Africa. Emerging markets typically are
classified as such by lacking one or more of the following characteristics:
sustainability of economic development, large and liquid securities markets,
openness to foreign ownership, ease of capital inflows and outflows, efficiency
of the market’s operational framework, and/or stability of the institutional
framework. The Fund’s purchase and sale of portfolio securities in certain
emerging market countries may be constrained by limitations relating to daily
changes in the prices of listed securities, periodic trading or settlement
volume and/or limitations on aggregate holdings of foreign investors. Such
limitations may be computed based on the aggregate trading volume by or holdings
of the Fund, the Adviser, its affiliates and their respective clients
and
other service providers. The Fund may not be able to sell securities in
circumstances where price, trading or settlement volume limitations have been
reached.
Foreign
investment in the securities markets of certain emerging market countries is
restricted or controlled to varying degrees, which may limit investment in such
countries or increase the administrative costs of such investments. For example,
certain Asian countries require government approval prior to investments by
foreign persons or limit investment by foreign persons to only a specified
percentage of an issuer's outstanding securities or a specific class of
securities which may have less advantageous terms (including price) than
securities of the issuer available for purchase by nationals. In addition,
certain countries may restrict or prohibit investment opportunities in issuers
or industries deemed important to national interests. Such restrictions may
affect the market price, liquidity and rights of securities that may be
purchased by the Fund. The repatriation of both investment income and capital
from certain emerging market countries is subject to restrictions, such as the
need for governmental consents. In situations where a country restricts direct
investment in securities (which may occur in certain Asian, Latin American and
other countries), the Fund may invest in such countries through other investment
funds in such countries. Certain emerging market countries may have privatized,
or have begun the process of privatizing, certain entities and industries.
Privatized entities may lose money or be re-nationalized.
Many
emerging market countries have experienced currency devaluations, substantial
(and, in some cases, extremely high) rates of inflation, and economic
recessions. These circumstances have had a negative effect on the economies and
securities markets of those emerging market countries. Economies in emerging
market countries generally are dependent upon commodity prices and international
trade and, accordingly, have been, and may continue to be, affected adversely by
the economies of their trading partners, trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist measures
imposed or negotiated by the countries with which they trade. As a result,
emerging market countries are particularly vulnerable to downturns of the world
economy. The 2008-2009 global financial crisis tightened international credit
supplies and weakened the global demand for their exports. As a result, certain
of these economies faced significant economic difficulties, which caused some
emerging market economies to fall into recession. Recovery from such conditions
may be gradual and/or halting as weak economic conditions in developed markets
may continue to suppress demand for exports from emerging market countries.
Many
emerging market countries are subject to a substantial degree of economic,
political and social instability. Governments of some emerging market countries
are authoritarian in nature or have been installed or removed as a result of
military coups, while governments in other emerging market countries have
periodically used force to suppress civil dissent. Disparities of wealth, the
pace and success of democratization, and ethnic, religious and racial
disaffection, among other factors, have also led to social unrest, violence
and/or labor unrest in some emerging market countries. Many emerging market
countries have experienced strained international relations due to border
disputes, historical animosities or other defense concerns. These situations may
cause uncertainty in the markets and may adversely affect the performance of
these economies. Unanticipated political, social, and public health developments
may result in sudden and significant investment losses. Many emerging markets
may be underprepared for global health crises. For example, the rapid and global
spread of a highly contagious novel coronavirus respiratory disease, designated
COVID-19, has resulted in extreme volatility in the financial markets and severe
losses; reduced liquidity of many instruments; restrictions on international
and, in some cases, local travel; significant disruptions to business operations
(including business closures); strained healthcare systems; disruptions to
supply chains, consumer demand and employee availability; and widespread
uncertainty regarding the duration and long-term effects of this pandemic.
Investing in emerging market countries involves greater risk of loss due to
expropriation, nationalization, confiscation of assets and property or the
imposition of restrictions on foreign investments and on repatriation of capital
invested. As an example, in the past some Eastern European governments have
expropriated substantial amounts of private property, and many claims of the
property owners have never been fully settled. There is no assurance that
similar expropriations will not occur in other emerging market countries,
including China.
As
a result of heightened geopolitical tensions, various countries have imposed
economic sanctions, imposed non-trade barriers and renewed existing economic
sanctions on specific emerging markets and on issuers within those markets.
These non-trade barriers consist of prohibiting certain securities trades,
prohibiting certain private transactions in certain sectors and with respect to
certain companies, asset freezes, and prohibition of all business, against
certain individuals and companies. The United States and other nations or
international organizations may impose additional, broader economic sanctions or
take other actions that may adversely affect certain emerging markets in the
future. These actions, any future sanctions or other actions, or even the threat
of further sanctions or other actions, may negatively affect the value and
liquidity of the Fund’s investments. For example, the Fund may be prohibited
from investing in securities issued by companies subject to such sanctions. In
addition, sanctions may require the Fund to
freeze
its existing investments, prohibiting the Fund from buying, selling or otherwise
transacting in these investments. Also, if an affected security is included in
the Fund's Underlying Index, the Fund may, where practicable, seek to eliminate
its holdings of the affected security by employing or augmenting its
representative sampling strategy to seek to track the investment results of the
Underlying Index. The use of (or increased use of) a representative sampling
strategy may increase the Fund’s tracking error risk. Actions barring some or
all transactions with a specific company will likely have a substantial,
negative impact on the value of such company’s securities. These sanctions may
also lead to changes in the Fund’s Underlying Index. The Fund’s index provider
may remove securities from the Underlying Index or implement caps on the
securities of certain issuers that have been subject to recent economic
sanctions. In such an event, it is expected that the Fund will rebalance its
portfolio to bring it in line with its Underlying Index as a result of any such
changes, which may result in transaction costs and increased tracking error. The
Fund’s investment in emerging market countries may also be subject to
withholding or other taxes, which may be significant and may reduce the return
to the Fund from an investment in such countries.
Settlement
and clearance procedures in emerging market countries are frequently less
developed and reliable than those in the United States and may involve the
Fund’s delivery of securities before receipt of payment for their sale. In
addition, significant delays may occur in certain markets in registering the
transfer of securities. Settlement, clearance or registration problems may make
it more difficult for the Fund to value its portfolio securities and could cause
the Fund to miss attractive investment opportunities, to have a portion of its
assets uninvested or to incur losses due to the failure of a counterparty to pay
for securities the Fund has delivered or the Fund’s inability to complete its
contractual obligations because of theft or other reasons. In addition, local
agents and depositories are subject to local standards of care that may not be
as rigorous as developed countries. Governments and other groups may also
require local agents to hold securities in depositories that are not subject to
independent verification. The less developed a country’s securities market, the
greater the risk to the Fund.
The
creditworthiness of the local securities firms used by the Fund in emerging
market countries may not be as sound as the creditworthiness of firms used in
more developed countries. As a result, the Fund may be subject to a greater risk
of loss if a securities firm defaults in the performance of its
responsibilities.
The
Fund’s use of foreign currency management techniques in emerging market
countries may be limited. Due to the limited market for these instruments in
emerging market countries, all or a significant portion of the Fund's currency
exposure in emerging market countries may not be covered by such instruments.
Rising
interest rates, combined with widening credit spreads, could negatively impact
the value of emerging market debt and increase funding costs for foreign
issuers. In such a scenario, foreign issuers might not be able to service their
debt obligations, the market for emerging market debt could suffer from reduced
liquidity, and the Fund could lose money.
Certain
issuers in emerging market countries may utilize share blocking schemes. Share
blocking refers to a practice, in certain foreign markets, where voting rights
related to an issuer's securities are predicated on these securities being
blocked from trading at the custodian or sub-custodian level, for a period of
time around a shareholder meeting. These restrictions have the effect of barring
the purchase and sale of certain voting securities within a specified number of
days before and, in certain instances, after a shareholder meeting where a vote
of shareholders will be taken. Share blocking may prevent the Fund from buying
or selling securities for a period of time. During the time that shares are
blocked, trades in such securities will not settle. The blocking period can last
up to several weeks. The process for having a blocking restriction lifted can be
quite onerous with the particular requirements varying widely by country. In
addition, in certain countries, the block cannot be removed. As a result of the
ramifications of voting ballots in markets that allow share blocking, the
Adviser, on behalf of the Fund, reserves the right to abstain from voting
proxies in those markets.
Risk
of Investing in Frontier and Standalone Markets
Risk
of Investing in Frontier and Standalone Markets applies to the Global X MSCI
Argentina ETF, Global X MSCI Pakistan ETF, Global X MSCI Nigeria ETF, Global X
MSCI Vietnam ETF and Global X MSCI Next Emerging & Frontier ETF
Standalone
markets are those that do not meet the criteria for classification as frontier
markets or emerging markets. The index provider’s classification framework is
based on the three factors of economic development, size and liquidity, as well
as market accessibility. Standalone markets are classified as such due to severe
deficiencies in at least one of these three areas. Because standalone countries
often face highly unique circumstances that range from war to
liquidity
issues, investors should carefully assess each market and determine the reason
for standalone classification prior to making any investment. In some cases,
standalone markets may be subject to significant sanctions by the international
community and may abruptly lose foreign investors as a result. Generally,
frontier markets are classified as such by having extremely limited size and/or
liquidity, limited access to foreign ownership, limitations on capital
inflows/outflows and/or limited efficiency of operational framework. Frontier
countries generally have smaller economies or less developed capital markets
than traditional emerging markets, and, as a result, the risks of investing in
emerging market countries are magnified in frontier countries. The economies of
frontier countries are less correlated to global economic cycles than those of
their more developed counterparts and their markets have low trading volumes and
the potential for extreme price volatility and illiquidity. This volatility may
be further heightened by the actions of a few major investors. For example, a
substantial increase or decrease in cash flows of mutual funds investing in
these markets could significantly affect local stock prices and, therefore, the
price of Fund Shares. These factors make investing in standalone and frontier
countries significantly riskier than in other countries and any one of them
could cause the price of the Fund’s Shares to decline.
Governments
of many frontier countries in which the Fund may invest may exercise substantial
influence over many aspects of the private sector. In some cases, the
governments of such frontier countries may own or control certain companies.
Accordingly, government actions could have a significant effect on economic
conditions in a frontier country and on market conditions, prices and yields of
securities in the Fund’s portfolio. Moreover, the economies of frontier
countries may be heavily dependent upon international trade and, accordingly,
have been and may continue to be, adversely affected by trade barriers, exchange
controls, managed adjustments in relative currency values and other
protectionist measures imposed or negotiated by the countries with which they
trade. These economies also have been and may continue to be adversely affected
by economic conditions in the countries with which they trade. Likewise, many
frontier markets may be underprepared for global health crises. For example, the
rapid and global spread of a highly contagious novel coronavirus respiratory
disease, designated COVID-19, has resulted in extreme volatility in the
financial markets and severe losses; reduced liquidity of many instruments;
restrictions on international and, in some cases, local travel; significant
disruptions to business operations (including business closures); strained
healthcare systems; disruptions to supply chains, consumer demand and employee
availability; and widespread uncertainty regarding the duration and long-term
effects of this pandemic.
Certain
foreign governments in countries in which the Fund may invest levy withholding
or other taxes on dividend and interest income. Although in some countries a
portion of these taxes are recoverable, the non-recovered portion of foreign
withholding taxes will reduce the income received from investments in such
countries.
From
time to time, certain of the companies in which the Fund may invest may operate
in, or have dealings with, countries subject to sanctions or embargoes imposed
by the U.S. government and the United Nations and/or countries identified by the
U.S. government as state sponsors of terrorism. A company may suffer damage to
its reputation if it is identified as a company which operates in, or has
dealings with, countries subject to sanctions or embargoes imposed by the U.S.
government and the United Nations and/or countries identified by the U.S.
government as state sponsors of terrorism. As an investor in such companies, the
Fund will be indirectly subject to those risks.
Investment
in equity securities of issuers operating in certain frontier countries is
restricted or controlled to varying degrees. These restrictions or controls may
at times limit or preclude foreign investment in equity securities of issuers
operating in certain frontier countries and increase the costs and expenses of
the Fund. Certain frontier countries require governmental approval prior to
investments by foreign persons, limit the amount of investment by foreign
persons in a particular issuer, limit the investment by foreign persons only to
a specific class of securities of an issuer that may have less advantageous
rights than the classes available for purchase by domiciliaries of the countries
and/or impose additional taxes on foreign investors. Certain frontier countries
may also restrict investment opportunities in issuers in industries deemed
important to national interests.
Frontier
countries may require governmental approval for the repatriation of investment
income, capital or the proceeds of sales of securities by foreign investors,
such as the Fund. In addition, if deterioration occurs in a frontier country’s
balance of payments, the country could impose temporary restrictions on foreign
capital remittances. The Fund could be adversely affected by delays in, or a
refusal to grant, any required governmental approval for repatriation of
capital, as well as by the application to the Fund of any restrictions on
investments. Investing in local markets in frontier countries may require the
Fund to adopt special procedures, or seek local government approvals or take
other actions, each of which may involve additional costs to the Fund.
Risk
of Investing in Germany
Risk
of Investing in Germany applies to the Global X DAX Germany ETF
Investment
in German issuers subjects the Fund to legal, regulatory, political, currency,
security, and economic risks specific to Germany. Ongoing concerns in relation
to the economic health of the European Union (the “EU”) continue to constrain
the economic resilience of certain EU member states, including Germany. Germany
has a large export-reliant manufacturing and industrials sector and the German
economy is dependent to a significant extent on the economies of certain key
trading partners, including the Netherlands, China, the U.S., the U.K., France,
Italy and other European countries. Reduction in spending on German products and
services, or a decline in any of the economies may have an adverse impact on the
German economy. In addition, heavy regulation of labor, energy and product
markets in Germany may have an adverse impact on German issuers. Such
regulations may negatively impact economic growth or cause prolonged periods of
recession. Germany is particularly exposed to risks stemming from energy supply
disruptions because of its heavy reliance on Russia for gas. There is much
uncertainty over how Germany will re-establish its energy security.
Risk
of Investing in Greece
Risk
of Investing in Greece applies to the Global X MSCI Greece ETF
Greece’s
economy is heavily dependent on the services and tourism sector and industry and
has a large public sector. Key trading partners include the United Kingdom and
member states of the European Union ("EU"), most notably Germany, Spain and
Italy. Decreasing demand for Greek products and services, changes in
governmental regulations on trade, or a reduction in tourism and travel, may
have a significantly adverse effect on Greece’s economy. Greece and many of the
Western European developed nations are member states of the EU. As a result,
these member states are dependent upon one another economically and politically.
The Treaty of Lisbon has further heightened the degree of economic and political
inter-dependence. This and other political or economic developments could cause
market disruptions and affect adversely the values of securities held by the
Fund.
Greece
has experienced periods of high, persistent unemployment. Economic
competitiveness has also decreased in recent years, and structural weaknesses
exist that could hamper growth and reduce competitiveness further. The long-term
credit assessment is not favorable for Greece, and serious problems persist with
regard to public finances and excessive debt levels. During the early 2000s, the
Greek government consistently and deliberately misreported its financial
situation and economic statistics in order to maintain the appearance of falling
within the guidelines of the monetary union. This practice allowed the Greek
government to spend beyond their means while concealing the actual deficit
levels from the rest of the EU. Greece’s ability to repay its sovereign debt is
in question, and the possibility of default is not unlikely, which could affect
its ability to borrow in the future. Greece has been required to impose harsh
austerity measures on its population in order to receive financial aid from the
IMF and EU member countries. These austerity measures have also led to social
uprisings within Greece, as citizens have protested – at times violently – the
actions of their government. The success of political parties in Greece opposed
to austerity measures may increase the possibility that Greece would rescind
these austerity measures and consequently fail to receive further financial aid
from these institutions. The persistence of these factors may seriously reduce
the economic performance of Greece and pose serious risks for the country’s
economy in the future. There is the possibility that Greece may exit the
European Monetary Union, which would result in immediate devaluation of the
Greek currency and potential for default. If this were to occur, Greece would
face significant risks related to the process of full currency redenomination as
well as the resulting instability of the Euro zone in general, which would have
a severe adverse effect on the value of the securities held by the Fund.
Greece
applies foreign ownership limits in certain sectors, particularly with regard to
national strategically sensitive companies, such as those that administer
national infrastructure networks (e.g., telecommunications). Pre-approval from
an inter-ministerial committee is required if an investor is to raise its stake
in a national strategically sensitive company beyond 20 percent, a policy which
may continue in the future.
In
2015, subsequent to a negotiation period that led to the imposition of capital
controls and the closure of the Athens Exchange, Greece received funding from
the IMF and the Eurozone. This economic program required significant additional
financial austerity measures from the Greek government. Greece exited from the
IMF bailout program in 2018.
Greece
has begun to show signs of recovery and growth. However, political uncertainty
or fiscal instability, including budgetary constraints, elections, an uptick in
social upheaval, an armed conflict with Turkey, or a global slowdown in growth,
could threaten to stymie a domestic recovery. It remains possible that future
economic troubles in Greece may
result
in defaults by the Greek government, the implementation of additional or
extended capital controls (including the closure of the Athens Exchange for an
extended period of time), and the possibility that Greece may exit the European
Monetary Union, which would result in immediate devaluation of the Greek
currency. Furthermore, tensions between Greece and Turkey in the Eastern
Mediterranean Sea and Aegean Sea could possibly escalate and lead to some form
of violent conflict. Each of these scenarios has potential implications to the
markets and may negatively and materially affect the value of the Fund’s
investments.
The
closure, and any related suspension of clearance and settlement mechanisms, of
the Athens Exchange could prevent the Fund from buying, selling, or transferring
securities traded on the Athens Exchange. During any closure of the Athens
Exchange, the Fund will fair value its security holdings for which current
market valuations are not currently available using fair value pricing pursuant
to the pricing policy and procedures approved by the Fund’s Board of Trustees.
In such a situation, it is possible that the Fund’s market price could
significantly deviate from its NAV. In addition, any closure of the Athens
Exchange, and the related unavailability of current market quotations for
securities contained in the Underlying Index could cause the Fund’s NAV to have
increased tracking error with respect to the Fund’s Underlying Index and could
also affect the calculation of the Fund’s indicative optimized portfolio value.
Risk
of Investing in Hong Kong
Risk
of Investing in Hong Kong applies to the Global X MSCI China Communication
Services ETF, Global X MSCI China Consumer Discretionary ETF, Global X MSCI
China Consumer Staples ETF, Global X MSCI China Energy ETF, Global X MSCI China
Financials ETF, Global X MSCI China Health Care ETF, Global X MSCI China
Industrials ETF, Global X MSCI China Information Technology ETF, Global X MSCI
China Materials ETF, Global X MSCI China Real Estate ETF and Global X MSCI China
Utilities ETF
The
Fund’s investment in Hong Kong issuers may subject the Fund to legal,
regulatory, political, currency, security, and economic risk specific to Hong
Kong. China is Hong Kong’s largest trading partner, both in terms of exports and
imports. Any changes in the Chinese economy, trade regulations or currency
exchange rates may have an adverse impact on Hong Kong’s economy
Political
and Social Risk
Hong
Kong reverted to Chinese sovereignty on July 1, 1997 as a Special Administrative
Region of the People’s Republic of China under the principle of “one country,
two systems.” Although China is obligated, under the Sino-British Joint
Declaration it signed in 1984, to maintain the current capitalist economic and
social system of Hong Kong through June 30, 2047, the continuation of economic
and social freedoms enjoyed in Hong Kong is dependent on the government of
China. Since 1997, there have been tensions between the Chinese government and
many people in Hong Kong who perceive China as tightening its control over Hong
Kong’s semi-autonomous liberal political, economic, legal, and social framework.
Lingering dissatisfaction, particularly from the 2019 protest movement, could
reignite into another wave of mass protest and civil disobedience. The passing
of the National Security Law in June 2020 creates political risk for any
individual or company that expresses pro-independence sentiments. Due to the
interconnected nature of the Hong Kong and Chinese economies, this instability
in Hong Kong may cause uncertainty in the Hong Kong and Chinese markets.
Economic
Risk
The
economy of Hong Kong is closely tied to the economy of China. The Chinese
economy has grown rapidly during the past several years and there is no
assurance that this growth rate will be maintained. China may experience
substantial rates of inflation or economic recessions, causing a negative effect
on the economy and securities market. Delays in enterprise restructuring, slow
development of well-functioning financial markets and widespread corruption have
also hindered performance of the Chinese economy, and China continues to receive
substantial pressure from trading partners to liberalize official currency
exchange rates.
Risk
of Investing in Indonesia
Risk
of Investing in Indonesia applies to the Global X MSCI Next Emerging &
Frontier ETF and Global X FTSE Southeast Asia ETF
Investment
in Indonesian issuers involves risks that are specific to Indonesia, including
legal, regulatory, political, security and economic risks. The securities
markets of Indonesia are underdeveloped and are often considered to be less
correlated to global economic cycles than those markets located in more
developed countries. As a result,
securities
markets in Indonesia are subject to greater risks associated with market
volatility, lower market capitalization, lower trading volume, illiquidity,
inflation, greater price fluctuations, uncertainty regarding the existence of
trading markets, governmental control and heavy regulation of labor and
industry. Moreover, trading on securities markets may be suspended altogether.
The government in Indonesia may restrict or control to varying degrees the
ability of foreign investors to invest in securities of issuers located or
operating in Indonesia. These restrictions and/or controls may at times limit or
prevent foreign investment in securities of issuers located or operating in
Indonesia. These factors, among others, make investing in issuers located or
operating in Indonesia significantly riskier than investing in issuers located
or operating in more developed countries, and any one of them could cause a
decline in the value of the Fund’s Shares. The value of the Indonesian Rupiah
may be subject to a high degree of fluctuation. The Fund’s exposure to the
Indonesian Rupiah and changes in value of the Indonesian Rupiah versus the U.S.
dollar may result in reduced returns for the Fund. The Indonesian economy, among
other things, is dependent upon external trade with other economies,
specifically China, Japan, Singapore and the United States. In the past,
Indonesia has experienced acts of terrorism, predominantly targeted at
foreigners. Such acts of terrorism have had a negative impact on tourism, an
important sector of the Indonesian economy.
Risk
of Investing in Malaysia
Risk
of Investing in Malaysia applies to the Global X MSCI Next Emerging &
Frontier ETF and Global X FTSE Southeast Asia ETF
Investments
in Malaysian issuers involve risks that are specific to Malaysia, including,
legal, regulatory, political, currency and economic risks. The Malaysian
economy, among other things is dependent upon external trade with other
economies, including the United States, China, Japan and Singapore. As a result,
Malaysia is dependent on the economies of these other countries and any change
in the price or demand for Malaysian exports may have an adverse impact on the
Malaysian economy. In addition, the Malaysian economy is heavily focused on
export of electronic goods. As a result, Malaysia’s reliance on the electronics
sector makes it vulnerable to economic downturns in, among other sectors, the
technology sector. Volatility in the exchange rate of the Malaysian currency and
general economic deterioration has previously led to the imposition and then
reversal of stringent capital controls, a prohibition on repatriation of capital
and an indefinite prohibition on free transfers of securities. There can be no
assurance that a similar levy will not be reinstated by Malaysian authorities in
the future, to the possible detriment of the Fund and its shareholders.
Malaysian capital controls have been changed in significant ways since they were
adopted and without prior warning. There can be no assurance that Malaysian
capital controls will not be changed in the future in ways that adversely affect
the Fund and its shareholders.
Risk
of Investing in Mexico
Risk
of Investing in Mexico applies to the Global X MSCI Next Emerging & Frontier
ETF
Investment
in Mexican issuers involves risks that are specific to Mexico, including
regulatory, political, and economic risks. The Mexican economy is dependent upon
external trade with other economies, specifically with the United States and
certain Latin American countries. As a result, Mexico is dependent on, among
other things, the U.S. economy and any change in the price or demand for Mexican
exports may have an adverse impact on the Mexican economy. For example, lower
oil prices have negatively impacted Petróleos Mexicanos, the Mexican state-owned
petroleum company, which accounts for a significant percentage of the Mexican
government’s tax revenue. Mexico has experienced adverse economic impacts as a
result of earthquakes and hurricanes, as well as outbreaks of violence.
Incidents involving Mexico’s security may have an adverse effect on the Mexican
economy and cause uncertainty in its financial markets. In the past, Mexico has
experienced high interest rates, economic volatility and high unemployment
rates.
Political
and Social Risk
Mexico
has been destabilized by local insurrections, social upheavals, drug related
violence, and the public health crisis related to the COVID-19 outbreak.
Recurrence of these or similar conditions may adversely impact the Mexican
economy. Recently, Mexican elections have been contentious and have been very
closely decided. Changes in political parties or other Mexican political events
may affect the economy and cause instability.
Currency
Instability Risk
Historically,
Mexico has experienced substantial economic instability resulting from, among
other things, periods of very high inflation and significant devaluations of the
Mexican currency, the peso.
Relations
with the United States
Recent
political developments in the U.S. have raised potential implications for the
current trade arrangements between the U.S. and Mexico, which could negatively
affect the value of securities held by the Fund.
Risk
of Investing in Nigeria
Risk
of Investing in Nigeria applies to the Global X MSCI Nigeria ETF
The
Fund’s investments are significantly concentrated in companies in Nigeria and
are denominated in Naira, Nigeria’s currency. The economic development of
Nigeria has been significantly hindered by military rule, mismanagement,
corruption and ethnic conflict. The Nigerian economy is heavily dependent on oil
production and sales and prices of oil in global markets, and the industry makes
up a significant portion of Nigeria’s GDP. In recent years, the decline in oil
prices has put a significant strain on the Nigerian economy and government
finances and has led to the devaluation of Naira. The Nigerian government has
implemented capital controls restricting the free flow of capital to and from
international markets, which has led to bouts of speculative demand and elevated
arbitrage pressures. Specifically, the Nigerian government attempts to manage an
official exchange rate regime that precludes the purchase or sale of Naira
outside of official markets. In 2020, Nigeria experienced a depreciation of the
Naira, as remittances fell and the country grappled with the COVID-19 health
crisis. This steep depreciation also contributed to a sharp sell-off in Nigerian
equities over a relatively short period of time. Given that the uncertainties
leading to the currency depreciation and divergence and market selloff in 2020
have not wholly dissipated, it is possible that the depreciation of the Naira
and foreign portfolio outflows may continue.
Nigeria’s
foreign exchange policies have resulted in a sustained inability to convert
Naira to other currencies, including U.S. dollars, and in the rare and
infrequent instances when there is the ready ability to convert Naira to foreign
currencies, significant delays have occurred. Recently, the Naira has
depreciated significantly against the U.S. dollar. While the Naira experienced a
modest depreciation in the official exchange rate, unofficial exchange rates
experienced a far steeper depreciation, resulting in a large and sustained
divergence between official and unofficial exchange rates. As a result of this
divergence, fewer participants have expressed interest in converting U.S.
dollars to Naira at the official exchange rate, which has curtailed the ability
to convert Naira to U.S. dollars. The inability to (or a delay in the ability
to) convert or repatriate Naira will adversely affect the value of and/or
ability to convert the Fund’s investments denominated in Naira and may impede
the Fund’s ability to satisfy redemption requests in U.S. dollars in a timely
manner.
Because the holdings of the Fund are denominated in Naira, and
in light of the fact that the Fund is presently unable to readily convert Naira
to U.S. dollars, the Fund may be forced to borrow U.S. dollars in order to meet
certain obligations of the Fund, including related to qualification as a
regulated investment company (“RIC”) for purposes of the Internal Revenue Code
of 1986, as amended (the “Code”). Such borrowing may increase the Fund’s total
expense ratio. If the Fund experiences difficulty borrowing U.S. dollars in
order to meet these obligations, the Fund’s ability to qualify as a RIC may be
impacted.
As of the date of this Prospectus, because the Fund is unable
to readily convert Naira to U.S. dollars at the official Nigerian exchange rate,
the Fund has conveyed to Authorized Participants that the Fund will honor
requests for redemption principally by delivering Naira. The Fund has traded at
a steep discount for nearly three years as of the date of this Prospectus, and
to the extent that Authorized Participants are unwilling or unable to accept
redemption proceeds in Naira, the Fund may continue to trade at a steep
discount. The Fund could also seek to suspend redemptions of Creation Units in
certain limited circumstances, including in the event that an emergency exists
in which it is not reasonably practicable for the Fund to dispose of its
securities or to determine its NAV, which could also cause the Fund to trade at
a market price that is at a steep discount to its NAV. The Fund could also,
among other things, limit or suspend creations of Creation Units, in a manner
that is consistent with the provisions of the 1940 Act. During the period that
creations are affected, the Fund’s shares could trade at a premium to their NAV.
During a period in which creations are suspended, the Fund could experience
substantial redemptions, which may cause the Fund to experience increased
transaction costs and cause the Fund to make greater taxable distributions to
shareholders of the Fund.
When the Fund holds illiquid investments, its
portfolio may be harder to value. Unless and until the Fund is more
readily
able to convert Naira to U.S. dollars, the Fund will not convert U.S. dollars
into additional exposure to Naira-denominated investments, and will
opportunistically seek to repatriate U.S. dollars to shareholders through
dividends or other distributions to the extent possible. U.S. dollars received
by the Fund through creations and repatriations will be used to satisfy fund
expenses or will be distributed to shareholders as part of a distribution,
including, if necessary a return of capital. The Fund may, however, reposition
its portfolio of naira and naira-denominated securities.
Nigeria
has privatized, certain industries, which may lose money or be re-nationalized.
Religious and social conflict is present in Nigeria, often resulting in the
outbreak of violence, particularly in the Niger Delta, which is Nigeria’s main
oil-producing region. Nigeria also suffers from the prevalence of organized
crime and corruption, which makes it more difficult for citizens and companies
to do business in Nigeria and has significant impact on the Nigerian economy.
The persistence of organized crime and corruption may continue to drag on
economic growth in the country.
Religious
and social conflict is present in Nigeria, often resulting in the outbreak of
violence, particularly in the Niger Delta, which is Nigeria’s main oil-producing
region. Several petroleum operators in the region have sustained significant
attacks from rebels that target refineries and pipelines due to conflict over
the petroleum rights in the region. The Nigerian population is comprised of
diverse religious, linguistic and ethnic groups, and outlying provinces have,
from time to time, proved to be resistant of the central government’s control.
While the Nigerian government has imposed stricter penalties on religious
violence in many parts of the country, this is no guarantee that an outbreak of
violence or sustained conflict could not occur in the future.
Outbreaks
of communicable diseases in the region may impair Nigeria’s economic growth.
Outbreaks of communicable diseases in neighboring countries has adversely
impacted the Nigerian economy in the past and may do so again in the future.
Securities markets in Nigeria are subject to greater risks associated with
market volatility, lower market capitalization, lower trading volume,
illiquidity, inflation, greater price fluctuations and uncertainty regarding the
existence of trading markets. Moreover, trading on securities markets may be
suspended altogether. The governments might restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in Nigeria as well as the repatriation of investment
income, capital or the proceeds of sales of securities by foreign investors.
Foreign
investors may not purchase instruments on the Nigerian Stock Exchange (NSE)
“negative list” which includes companies prospecting in crude oil and companies
of a military and defense nature, nor government securities (treasury bills and
bonds) with a tenor of less than one year, a policy which may continue in the
future.
Risk
of Investing in Norway
Risk
of Investing in Norway applies to the Global X MSCI Norway ETF
Investments
in Norwegian issuers may subject the Fund to legal, regulatory, political,
currency, security, and economic risks specific to Norway. Norway is a major
producer of oil and gas, and Norway's economy is subject to the risk of
fluctuations on oil and gas prices. Norwegian oil and gas infrastructure,
particularly that which is linked to continental Europe, is at risk of being
sabotaged as a result of the Russia-Ukraine war. The high value of the Norwegian
krone as compared to other currencies could have a damaging effect on Norwegian
exports and investments. In recent years, labor costs in Norway have increased
faster than those of its major trading partners, eroding industrial
competitiveness.
Risk
of Investing in Pakistan
Risk
of Investing in Pakistan applies to the Global X MSCI Pakistan ETF
Pakistan’s
economy is heavily dependent on exports. The textile sector of the Pakistani
economy accounts for an outsized portion of exports, comprising two-thirds of
export income. Any changes in the sector could have an adverse impact on the
Pakistani economy. Pakistan’s key trading and foreign investment partner is the
United States. Reduction in spending on Pakistani products and services, or
changes in the U.S. economy, foreign policy, trade regulation or currency
exchange rate may adversely impact the Pakistani economy. Pakistan has
periodically received and currently receives financing and aid from other
countries and multilateral organizations. There is no guarantee that
international assistance will continue in the future, which could have a
materially adverse impact on the Pakistani economy. A growing national debt and
current-account deficit could also contribute to a slowdown in overall growth.
Since 2022, Pakistan is in an economic and fiscal crisis in which rising
inflation, depreciation of the Pakistani Rupee and falling foreign currency
reserves are contributing to a balance of payments crisis which is making
bankruptcy increasingly possible. If these problems are not addressed,
Pakistan’s solvency will depend on support from friendly
countries
and multilateral organizations, which is not guaranteed to materialize. Pakistan
has been struggling with dwindling foreign currency reserves, which means
Pakistan has less flexibility in influencing the value of its currency and a
decreased buffer against economic shocks. Austerity measures imposed by the
Pakistani government in response to the fiscal and economic crisis may result in
a popular backlash and mass protests, which would possibly impact political
stability. The urgent need to stabilize Pakistan’s fiscal condition may also
lead to the imposition of a super taxes large Pakistani corporations, such as
the February 2023 decision by government to charge a 4% super tax and the 2022
decision to charge a 10% super tax, which could impact profits of holdings in
the Fund.
Pakistan’s
economy is susceptible to a substantial degree to economic, political and social
instability. There remains the possibility that macroeconomic and structural
reforms can be slowed or reversed by political instability. Legitimacy of the
Pakistani government may be undermined if significant portions of the population
continue to believe it is supported by hostile foreign forces. The Pakistani
population is comprised of diverse religious, linguistic and ethnic groups, and
outlying provinces have, from time to time, proved to be resistant of the
central government’s control. Recently, acts of terrorism and armed clashes
between Pakistani troops, local tribesmen, the Taliban and foreign extremists in
the Swat Valley and the Waziristan area have resulted in substantial casualties,
population displacement and civil unrest. The takeover of neighboring
Afghanistan by the Taliban in August 2021 presents risks for Pakistan,
particularly if the Taliban regime collapses or if it chooses to support armed
groups operating in Pakistan. Pakistan, a nuclear power, also has a history of
hostility with neighboring countries, most notably with India, also a nuclear
power, including conflicts over the disputed Kashmir region. The tensions
between the two nations have spiked in the past in the form of armed conflict
between the national armies and non-state-sponsored acts of terrorism.
Unanticipated social, political and economic developments in the Pakistan could
result in substantial investment losses. There is also the possibility of
nationalization, expropriation or confiscatory taxation, political changes,
government regulation or diplomatic developments (including war or terrorist
attacks) which could affect adversely the economy of Pakistan or the value of
the Fund’s investments. In addition, recent political instability and protests
in North Africa and the Middle East have caused significant disruptions to many
industries. Continued political and social unrest in these areas may negatively
affect the value of your investment in the Fund.
Securities
markets in Pakistan are subject to greater risks associated with market
volatility, lower market capitalization, lower trading volume, illiquidity,
inflation, greater price fluctuations and uncertainty regarding the existence of
trading markets. For example, the Karachi Stock Exchange introduced new trading
rules and restrictions in June 2008 as the equity market was rapidly declining,
which created uncertainty among investors and was followed by further,
significant market declines. Moreover, trading on securities markets may be
suspended altogether. The governments might restrict or control to varying
degrees the ability of foreign investors to invest in securities of issuers
located or operating in Pakistan as well as the repatriation of investment
income, capital or the proceeds of sales of securities by foreign investors.
Capital gains from Pakistani securities may be subject to local taxation.
Many
Asian countries, including Pakistan, are prone to frequent typhoons, damaging
floods, earthquakes and/or other natural disasters, which may adversely impact
their economies. Recent flooding in Pakistan has had a damaging social and
economic effect on the country. Pakistan’s economy, in particular, is more
reliant on agriculture than the U.S. economy and is therefore more susceptible
to adverse changes in weather.
Political
tension between Pakistan and the U.S. has increased recently over the potential
harboring of terrorists and the effects of U.S. involvement in neighboring
countries such as Afghanistan. Any deterioration in the relationship between
Pakistan and the U.S. could have a negative effect on Pakistan’s economy.
Risk
of Investing in the Philippines
Risk
of Investing in the Philippines applies to the Global X MSCI Next Emerging &
Frontier ETF and Global X FTSE Southeast Asia ETF
The
Philippine economy, among other things, is dependent upon external trade with
other key trading partners, specifically China, Japan and the United States. As
a result, the Philippines is dependent on the economies of these other countries
and any change in the price or demand for Philippine exports may have an adverse
impact on its economy. In addition, the geopolitical conflict created by China’s
claims in the South China Sea has created diplomatic tension and may adversely
affect the Philippine economy. The Philippine economy is particularly dependent
on exports of electronics and semiconductor devices. The Philippines’ reliance
on these sectors makes it vulnerable to economic downturns in, among other
sectors, the technology sector. The purchase of shares of Philippine
corporations through the Philippine Stock Exchange is subject to a stock
transaction tax of one-half of 1% of gross selling price. If the listed shares
do not meet a minimum public float, a capital gains tax of up to 10% may apply
although
the Fund if it were to purchase such securities does not expect to be liable for
such capital gains tax under an applicable tax treaty. In-kind transfers of
stock may be subject to documentary stamp tax of .75 Philippine pesos per 200
Philippine pesos of par value.
Risk
of Investing in Poland
Risk
of Investing in Poland applies to the Global X MSCI Next Emerging & Frontier
ETF
Poland’s
economy, among other things, is dependent upon the export of raw materials and
consumer goods. As a result, Poland is dependent on trading relationships with
certain key trading partners, including Germany and other European Union
countries. Poland’s economy, like most other economies in Eastern Europe,
remains relatively underdeveloped and can be particularly sensitive to political
and economic developments.
Risk
of Investing in Portugal
Risk
of Investing in Portugal applies to the Global X MSCI Portugal ETF
Portugal
is a mixed economy but is heavily dependent on the services sector. Key trading
partners include the United Kingdom and member states of the EU, most notably
Germany, Spain and Italy. Decreasing demand for Portuguese products and services
or changes in governmental regulations on trade may have a significantly adverse
effect on Portugal’s economy. Portugal and many of the Western European
developed nations are member states of the EU. As a result, these member states
are dependent upon one another economically and politically. The Treaty of
Lisbon by EU has further heightened the degree of economic and political
inter-dependence. This and other political or economic developments could cause
market disruptions and affect adversely the values of securities held by the
Fund. Secessionist movements, such as the Catalan movement in Spain and the
independence movement in Scotland, may have an adverse effect on the Portuguese
economy.
Portugal
has experienced recent periods of high, persistent unemployment. Economic
competitiveness has also decreased in recent years, and structural weaknesses
exist that could hamper growth and reduce competitiveness further. The
long-term credit assessment is not favorable for Portugal, and serious problems
persist with regard to public finances and elevated debt levels. Portugal
has previously received financial assistance from the IMF and the European
Financial Stability Facility, demonstrating the severity of its public finance
issues. Persistently high debt or a need for continued financial
assistance from outside sources present potential risks for the Portuguese
economy.
Portugal
currently imposes a stamp duty tax on brokerage fees, a policy that may continue
in the future.
Risk
of Investing in Qatar
Risk
of Investing in Qatar applies to the Global X MSCI Next Emerging & Frontier
ETF
Qatar
is highly reliant on income from the sale of oil and natural gas and trade with
other countries involved in the sale of oil and natural gas, and its economy is
therefore vulnerable to changes in foreign currency values and the market for
oil and natural gas. As global demand for oil and natural gas fluctuates, Qatar
may be significantly impacted. As a host to U.S. regional military operations,
Qatar is susceptible to potential terrorist attacks. Qatar has periodically
deployed troops to other Gulf Cooperation Council Countries to support their
forces, which could lead to hostilities against Qatar. Political, economic and
social unrest could adversely affect the Qatari economy and could decrease the
value of the Fund’s investments.
Like
most Middle Eastern governments, the federal government of Qatar exercises
substantial influence over many aspects of the private sector. Although
liberalization in the wider economy is underway, in many areas it has lagged
significantly: restrictions on foreign ownership persist, and the government has
an ownership stake in many key industries. The situation is exacerbated by the
fact that Qatar is governed by a monarchic, emirate-type government.
Governmental actions in the future could have a significant effect on economic
conditions in Qatar, which could affect private sector companies and the Fund,
as well as the value of securities in the Fund’s portfolio.
Qatar’s
economy relies heavily on cheap, foreign labor, and changes in the availability
of this labor supply could have an adverse effect on the economy. Allegations of
human rights abuses against foreign laborers continue to surface and could
affect relationships with key trading partners.
Risk
of Investing in Saudi Arabia
Risk
of Investing in Saudi Arabia applies to the Global X MSCI Next Emerging &
Frontier ETF
The
ability of foreign investors (such as the Fund) to invest in Saudi Arabian
issuers is new and untested. Such ability could be restricted or revoked by the
Saudi Arabian government at any time, and unforeseen risks could materialize due
to foreign ownership in such securities. In addition, the Capital Markets
Authority ("CMA") places investment limitations on the ownership of Saudi
Arabian issuers by foreign investors, including a limitation on the Fund’s
ownership of any single issuer listed on the Saudi Arabian Stock Exchange, which
may prevent the Fund from investing in accordance with its strategy and
contribute to tracking error against the Underlying Index. Saudi Arabia is
highly reliant on income from the sale of petroleum and trade with other
countries involved in the sale of petroleum, and its economy is therefore
vulnerable to changes in foreign currency values and the market for petroleum.
As global demand for petroleum fluctuates, Saudi Arabia may be significantly
impacted. Like most Middle Eastern governments, the government of Saudi Arabia
exercises substantial influence over many aspects of the private sector.
Although liberalization in the wider economy is underway, in many areas it has
lagged significantly: restrictions on foreign ownership persists, and the
government has an ownership stake in many key industries. The situation is
exacerbated by the fact that Saudi Arabia is governed by an absolute monarchy.
Saudi Arabia has historically experienced strained relations with economic
partners worldwide, including other countries in the Middle East due to
geopolitical events. Governmental actions in the future could have a significant
effect on economic conditions in Saudi Arabia, which could affect private sector
companies and the value of securities in the Fund’s portfolio. Any economic
sanctions on Saudi Arabian individuals or Saudi Arabian corporate entities, or
even the threat of sanctions, may result in the decline of the value and
liquidity of Saudi Arabian securities, a weakening of the Saudi riyal or other
adverse consequences to the Saudi Arabian economy. In addition, Saudi Arabia’s
economy relies heavily on cheap, foreign labor, and changes in the availability
of this labor supply could have an adverse effect on the economy.
Investment
in securities of Saudi Arabian issuers involves risks not typically associated
with investments in securities of issuers in more developed countries that may
negatively affect the value of the Fund’s investments. Such heightened risks may
include, among others, expropriation and/or nationalization of assets,
restrictions on and government intervention in international trade, confiscatory
taxation, political instability, including authoritarian and/or military
involvement in governmental decision making, armed conflict, crime and
instability as a result of religious, ethnic and/or socioeconomic unrest.
Although the political situation in Saudi Arabia is largely stable, Saudi Arabia
has historically experienced political instability, and there remains the
possibility that instability in the larger Middle East region could adversely
impact the economy of Saudi Arabia. Political instability in the larger Middle
East region has caused significant disruptions to many industries. Continued
political and social unrest in these areas may negatively affect the value of
securities in the Fund’s portfolio.
Risk
of Investing in Singapore
Risk
of Investing in Singapore applies to the Global X FTSE Southeast Asia
ETF
Investments
in Singaporean issuers may subject the Fund to legal, regulatory, political,
currency and economic risks specific to Singapore. Specifically, political and
economic developments of its neighbors may have an adverse effect on Singapore’s
economy. In addition, because its economy is export driven, Singapore relies
heavily on its trading partners. China is a major purchaser of Singapore’s
exports and serves as a source of Singapore’s imports. Singapore derives a
significant portion of its foreign investments from China. Singapore is also
sensitive to the socio-political and economic developments of its neighbors,
Indonesia and Malaysia, relying on both as markets for Singapore’s service
industry and on Malaysia for its raw water supply. Singapore also has
substantial economic exposure to Hong Kong and the U.S. As a result, Singapore’s
economy is susceptible to fluctuations in the world economy. A downturn in the
economies of China, Malaysia, Indonesia, Hong Kong, or the U.S., among other
countries or regions, could adversely affect Singapore’s economy. In addition,
Singapore’s economy may be particularly vulnerable to external market changes
due to its smaller size. Rising labor costs and increasing environmental
consciousness have led some labor-intensive industries to relocate to countries
with cheaper work forces, and continued labor outsourcing may adversely affect
the Singaporean economy.
Risk
of Investing in South Africa
Risk
of Investing in South Africa applies to the Global X MSCI Next Emerging &
Frontier ETF
South
Africa’s two-tiered economy, with one rivaling developed countries and the other
exhibiting many characteristics of developing countries, is characterized by
uneven distribution of wealth and income and high rates of unemployment.
Although economic reforms have been enacted to promote growth and foreign
investments, there can be no assurance that these programs will achieve the
desired results. In addition, South Africa’s inadequate currency reserves have
left its currency vulnerable, at times, to devaluation. Despite significant
reform and privatization, the South African government continues to control a
large share of South African economic activity. Heavy regulation of labor and
product markets is pervasive and may stifle South African economic growth or
cause prolonged periods of recession. The agriculture and mining sectors of
South Africa’s economy account for a large portion of its exports, and thus the
South African economy is susceptible to fluctuations in these commodity markets.
In recent years, an unstable electricity supply in South Africa has stifled
economic growth, which may adversely affect the value of the Fund’s investments.
Risk
of Investing in Spain
Risk
of Investing in Spain applies to the Global X MSCI Portugal ETF
Investment
in Spanish issuers involves risks that are specific to Spain, including, legal,
regulatory, political, currency, security and economic risks. The Spanish
economy, along with certain other EU economies, experienced a significant
economic slowdown during the financial crisis that began in 2008. In reaction to
the crisis, the Spanish government introduced austerity reforms aimed at
reducing its fiscal deficit to sustainable levels. Austerity reforms included,
among other things, reduction in government employees’ salaries, freezing of
pension funds, and suspension of public work projects. Such austerity reforms,
while directed at stimulating the Spanish economy in the long-term, may have a
negative short-term effect on Spain’s financial markets. Due largely to
outstanding bad loans to construction companies and real estate developers,
Spanish banks underwent a series of mergers to increase liquidity and made
efforts to shift debt off of their balance sheets. However, reports indicate
that debt levels remain high, although bank lending has contracted. In addition,
unemployment rates remain high. These factors could adversely impact growth
potential of Spanish stocks in which the Fund invests. In addition, the Spanish
government is engaged in a long-running campaign against terrorism. Acts of
terrorism on Spanish soil or against Spanish interests abroad may cause
uncertainty in the Spanish financial markets and adversely affect the
performance of the issuers to which the Fund has exposure. Political tensions
and social conflict have escalated as a result of a referendum by Catalonia for
independence from Spain. The secessionist movement could have a negative impact
on the Spanish economy and a destabilizing effect on the country.
Risk
of Investing in Thailand
Risk
of Investing in Thailand applies to the Global X MSCI Next Emerging &
Frontier ETF and Global X FTSE Southeast Asia ETF
Investment
in Thai issuers involves risks that are specific to Thailand, including, legal,
regulatory, political, security and economic risks. Thailand’s economy is
export-dependent and relies heavily on trading relationships with certain key
trading partners, including the U.S., China, Japan and other Asian countries.
Political uncertainty and the military coup that occurred in 2014 weakened
Thailand’s economic growth by reducing domestic and international demand for
both goods and services. Future changes in the price or the demand for
Thailand’s exported products by the U.S., China, Japan or other Asian countries,
or changes in these countries’ economies, trade regulations or currency exchange
rates could adversely impact the Thai economy and the issuers to which the Fund
has exposure. Economic and political instability have contributed to high price
volatility in the Thai equity and currency markets, which could affect
investments in the Fund. The Thai economy has experienced periods of substantial
inflation, currency devaluations and economic recessions, any of which may have
a negative effect on the Thai economy and securities markets. Thailand has at
times been destabilized by frequent government turnover and significant
political changes, including military coups. Recurrence of these conditions,
unanticipated or sudden changes in the political structure or other Thai
political events may result in sudden and significant investment losses. In
addition, household debt levels, political uncertainty and an aging population
pose risks to Thailand’s economic growth.
Risk
of Investing in Togo
Risk
of Investing in Togo applies to the Global X MSCI Nigeria ETF
Togo’s
economy is underdeveloped, heavily reliant on agriculture and the export of
minerals such as phosphate, and subject to significant income inequality and
poverty. A significant portion of the population depends on subsistence
agriculture
in corn, rice, cocoa beans, coffee, and peanuts, and some of these crops
contribute to Togo’s exports. Unfavorable weather conditions that disrupt the
harvesting of these crops present a risk to Togo’s economy. Fluctuations in
demand and supply of phosphate, disruptions to the phosphate supply chain, or
the long-term risk of phosphate reserve depletion all have significant
implications for Togo. Furthermore, there are political risks that could
adversely affect the value of the fund’s investments. These include the lack of
term limits for the presidency, disputed election results and accusations of
electoral fraud, widespread protests by opposition parties and political
violence. Togo’s 2020 election resulted in the opposition candidate refusing to
concede and facing arrest. If discontent over the fairness of elections
escalates, Togo’s economy and political stability would be negatively impacted.
Political violence in Togo has already resulted in outflows of Togo refugees
into the neighboring countries of Benin and Ghana, and there is no guarantee
that such political violence will not occur again.
Risk
of Investing in Turkey
Risk
of Investing in Turkey applies to the Global X MSCI Next Emerging & Frontier
ETF
The
Turkish economy has certain significant economic weaknesses, such as its
relatively high current account deficit, which it may finance by borrowing
through volatile, short-term instruments. The Turkish lira has experienced and
may continue to experience extreme currency volatility. With few of its own
natural resources, the Turkish economy is import-dependent. Turkey’s main import
partners include Russia, Germany, China, the U.S. and Italy. The Turkish economy
is dependent upon exports to other economies, specifically to Germany, other
European Union countries, the U.S. and Iraq. As a result, Turkey is dependent on
these economies and any change in the price or demand for Turkish exports may
have an adverse impact on the Turkish economy. In February 2023, a severe
earthquake struck central and southern Turkey, causing tens of thousands of
fatalities, the collapse of buildings and infrastructure, disruption of supply
chains, and other forms of immense economic damage. Turkey has experienced
strained relations with certain economic partners, including the U.S. and
certain European Union countries over geopolitical matters. Any economic
sanctions on Turkish individuals or Turkish corporate entities, or even the
threat of sanctions, may result in the decline of the value and liquidity of
Turkish securities, a weakening of the Turkish lira or other adverse
consequences to the Turkish economy. Turkey has historically experienced acts of
terrorism and strained relations related to border disputes with certain
neighboring countries.
The
continuation of the conflict on the Turkish-Syrian border, for example, could
have an adverse impact on the Turkish economy.
Turkey
has also experienced strained relations with other countries in the Middle East,
including Saudi Arabia, due to geopolitical events. Historically, Turkey’s
national politics have been unpredictable and subject to influence by the
military, and its government may be subject to sudden change. Disparities of
wealth, the pace and success of democratization and capital market development
and religious and racial disaffection have also led to social and political
unrest. Unanticipated or sudden political or social developments may result in
sudden and significant investment losses. Such situations may cause uncertainty
in the Turkish market and as a result adversely affect issuers to which the Fund
has exposure.
Risk
of Investing in the United Arab Emirates
Risk
of Investing in the United Arab Emirates applies to the Global X MSCI Next
Emerging & Frontier ETF
The
economy of the United Arab Emirates (the "UAE") is dominated by petroleum
exports. A sustained decrease in commodity prices, particularly oil and natural
gas, could have a negative impact on all aspects of the UAE economy. The nonoil
UAE economy, which is concentrated in Dubai’s service sector, could be affected
by declines in tourism, real estate, banking and re-export trade. The UAE and
the governments of the individual emirates exercise substantial influence over
many aspects of the private sector. Governmental actions could have a
significant effect on economic conditions in the UAE, which could adversely
affect the value of the Fund. In addition, recent political instability and
protests in North Africa and the Middle East have caused significant disruptions
to many industries. Continued political and social unrest in these areas may
adversely affect the value of the Fund.
Risk
of Investing in Vietnam
Risk
of Investing in Vietnam applies to the Global X MSCI Vietnam ETF and Global X
MSCI Next Emerging & Frontier ETF
Vietnamese
companies face risks associated with expropriation and/or nationalization of
assets (including property and real estate), restrictions on and government
intervention in international trade, confiscatory taxation, political
instability, including authoritarian and/or military involvement in governmental
decision making, armed conflict, the impact on the economy as a result of civil
war, and social instability as a result of religious, ethnic and/or
socioeconomic
unrest. The Vietnamese government may exercise substantial influence over many
aspects of the private sector, and may own or control certain companies therein.
Accordingly, government actions could have a significant effect on economic
conditions in the country, and on market conditions, prices and yields of
securities in the Fund’s portfolio. Vietnam is dependent on trading
relationships with certain key trading partners, including the United States,
China and Japan, and as a result may be adversely affected if demand for
Vietnam’s exports in those nations decline. Vietnam has become a manufacturing
hub an important component of the global supply chains for many different
industries, in some cases benefiting from the changing economic and political
climate in other regional manufacturing hubs such as China. If this trend slows
or reverses, Vietnamese companies across all industries would be adversely
impacted. The Vietnamese government has undertaken reform of economic and market
practices in recent years, but issues such as foreign ownership limits and lack
of in-kind transfers remain. If deterioration occurs in Vietnam’s balance of
payments, it could impose temporary restrictions on foreign capital remittances.
The Fund could be adversely affected by delays in, or a refusal to grant, any
required governmental approval for repatriation of capital, as well as by the
application to the Fund of any restrictions on investments. Investing in Vietnam
may require the Fund to adopt special procedures, or seek local government
approvals or take other actions, each of which may involve additional costs to
the Fund. Vietnam may levy withholding or other taxes on dividend and interest
income received by the Fund. Although in some portion of these taxes may be
recoverable, the non-recovered portion of foreign withholding taxes will reduce
the income received from the Fund’s investments. The currencies of frontier
markets, such as Vietnam, may be subject to more significant fluctuations
greater likelihood for speculation than the currencies of more developed
markets. The economy of Vietnam is less developed and less correlated to global
economic cycles than those of its more developed counterparts and its markets
have low trading volumes and the potential for extreme price volatility and
illiquidity. This volatility may be further heightened by the actions of a few
major investors. For example, a substantial increase or decrease in cash flows
of mutual funds investing in these markets could significantly affect local
stock prices and, therefore, the price of Fund Shares. Vietnam may be
underprepared for global health crises. For example, the rapid and global spread
of a highly contagious novel coronavirus respiratory disease, designated
COVID-19, has resulted in extreme volatility in the financial markets and severe
losses; reduced liquidity of many instruments; restrictions on international
and, in some cases, local travel; significant disruptions to business operations
(including business closures); strained healthcare systems; disruptions to
supply chains, consumer demand and employee availability; and widespread
uncertainty regarding the duration and long-term effects of this pandemic. From
time to time, certain of the companies in which the Fund may invest may operate
in, or have dealings with, countries subject to sanctions or embargoes imposed
by the U.S. government and the United Nations and/or countries identified by the
U.S. government as state sponsors of terrorism. A company may suffer damage to
its reputation if it is identified as a company which operates in, or has
dealings with, countries subject to sanctions or embargoes imposed by the U.S.
government and the United Nations and/or countries identified by the U.S.
government as state sponsors of terrorism. As an investor in such companies, the
Fund will be indirectly subject to those risks. These factors make investing in
Vietnam significantly riskier than in other countries and any one of them could
cause the price of the Fund’s Shares to decline.
Geographic
Economic Exposure Risk
Geographic
Economic Exposure Risk applies to each Fund
The
constituents held by the Fund may have partners, suppliers and/or customers
located in various geographic regions, and the geographic regions in which Fund
constituents are located may have trading partners in other geographic regions.
As a result, an economic downturn in one or more of these regions may impact the
performance of the constituents in which the Fund invests, even if the Fund does
not invest directly in companies located in such region. The risks related to
such regions may include:
African
Economic Risk
The
economies of African countries are subject to risks not typically associated
with more developed economies, countries or geographic regions. Such heightened
risks include, among others, expropriation and/or nationalization of assets,
restrictions on and government intervention in international trade, confiscatory
taxation, political instability, including authoritarian and/or military
involvement in governmental decision making, armed conflict, civil war, and
social instability as a result of religious, ethnic and/or socioeconomic unrest.
The
securities markets in Africa are underdeveloped and are often considered to be
less correlated to global economic cycles than markets located in more developed
countries or geographic regions. Securities markets in Africa are subject to
greater risks associated with market volatility, lower market capitalization,
lower trading volume, illiquidity,
inflation,
greater price fluctuations, uncertainty regarding the existence of trading
markets, governmental control and heavy regulation of labor and industry.
Moreover, trading on securities markets may be suspended altogether.
Certain
governments in Africa may restrict or control to varying degrees the ability of
foreign investors to invest in securities of issuers located or operating in
those countries. These restrictions and/or controls may at times limit or
prevent foreign investment in securities of issuers located or operating in
countries in Africa. Moreover, certain countries in Africa may require
governmental approval or special licenses prior to investment by foreign
investors; may limit the amount of investment by foreign investors in a
particular industry and/or issuer; may limit such foreign investment to a
certain class of securities of an issuer that may have less advantageous rights
than the classes available for purchase by domestic investors of those
countries; and/or may impose additional taxes on foreign investors. These
factors, among others, make investing in issuers located or operating in
countries in Africa significantly riskier than investing in issuers located or
operating in more developed countries.
Asian
Economic Risk
Many
Asian economies have experienced rapid growth and industrialization in recent
years, but there is no assurance that this growth rate will be maintained. Other
Asian economies, however, have experienced high inflation, high unemployment,
currency devaluations and restrictions, and over-extension of credit.
Geopolitical hostility, political instability, as well as economic or
environmental events in any one Asian country may have a significant economic
effect on the entire Asian region, as well as on major trading partners outside
Asia. Any adverse event in the Asian markets may have a significant adverse
effect on some or all of the economies of the countries in which the Fund
invests. Many Asian countries are subject to political risk, including political
instability, corruption and regional conflict with neighboring countries. Hong
Kong is currently administered as a Special Administrative Region under the
sovereignty of the People’s Republic of China, but pro-independence sentiment
and political dissatisfaction towards China have resulted and may continue to
result in widespread protests. In 2020, China passed the National Security Law
in Hong Kong, which tightened political freedoms and heightens risk for any
businesses or individuals that express pro-independence views. North Korea and
South Korea each have substantial military capabilities, and historical tensions
between the two countries present the risk of war. Escalated tensions involving
the two countries and any outbreak of hostilities between the two countries, or
even the threat of an outbreak of hostilities, could have a severe adverse
effect on the entire Asian region. Maritime disputes in the South China Sea are
complex and involve conflicting claims by China, Brunei, Indonesia, Malaysia,
the Philippines, Taiwan and Vietnam, and there is a risk that these disputes
could escalate into armed conflict between any of the aforementioned countries.
Furthermore, there are numerous disputes over islands in East Asia that pose
security risks, including but not necessarily limited to the Liancourt Rocks
dispute between Japan and Korea, the Senkaku/Diaoyu Islands dispute between
China and Japan, and the Kuril Islands dispute between Japan and Russia.
Although Taiwan currently has a government that is separate from that of the
People’s Republic of China, the PRC lays claim to Taiwan and has enacted
legislation mandating military invasion should Taiwan’s government formally
declare independence. China may also choose to launch an invasion of Taiwan even
without the Taiwanese government formally declaring independence and there is a
high risk that such a conflict would draw in other actors such as the United
States and Japan. In response to the elevated risk of conflict in Taiwan, in
2022 the government of Japan moved to dramatically raise its defense budget and
lift longstanding restrictions on obtaining missiles with strike capabilities.
Certain Asian countries have also developed increasingly strained relationships
with the U.S., and if these relations were to worsen, they could adversely
affect Asian issuers that rely on the U.S. for trade. In addition, many Asian
countries are subject to social and labor risks associated with demands for
improved political, economic and social conditions.
Australasian
Economic Risk
The
economies of Australasia, which include Australia and New Zealand, are dependent
on exports from the agricultural and mining sectors. This makes Australasian
economies susceptible to fluctuations in the commodity markets. Australasian
economies are also increasingly dependent on their growing service industries.
Because the economies of Australasia are dependent on the economies of Asia,
Europe and the United States as key trading partners and investors, reduction in
spending by any of these trading partners on Australasian products and services,
or negative changes in any of these economies, may cause an adverse impact on
some or all of the Australasian economies.
European
Economic Risk
The
economies of Europe are highly dependent on each other, both as key trading
partners and, in many cases, as fellow members maintaining the euro. Decreasing
European imports, new trade regulations, changes in exchange rates,
a
recession in Europe, or a slowing of economic growth in this region could have
an adverse impact on the securities in which the Fund invests. Reduction in
trading activity among European countries may cause an adverse impact on each
nation’s individual economies. The Economic and Monetary Union of the European
Union (the “EU”) requires compliance with restrictions on inflation rates,
deficits, interest rates, debt levels and fiscal and monetary controls, each of
which may significantly affect every country in Europe, including those
countries that are not members of the EU. Decreasing imports or exports, changes
in governmental or EU regulations on trade, changes in the exchange rate of the
euro, the default or threat of default by an EU member country on its sovereign
debt, and recessions in an EU member country may have a significant adverse
effect on the economies of EU member countries and their trading partners. The
European financial markets have historically experienced volatility and adverse
trends due to concerns about economic downturns or rising government debt levels
in several European countries, including, but not limited to, Austria, Belgium,
Cyprus, France, Greece, Ireland, Italy, Portugal, Spain and Ukraine. These
events have adversely affected the exchange rate of the euro and may continue to
significantly affect European countries.
Latin
American Economic Risk
High
interest rates, inflation, government defaults and unemployment rates are
characteristics of the economies in some Latin American countries. Currency
devaluations in any Latin American country can have a significant effect on the
entire region. Because commodities such as oil and gas, minerals and metals can
represent a significant percentage of the region’s exports, the economies of
Latin American countries may be particularly sensitive to fluctuations in
commodity prices. As a result, the economies in many Latin American countries
could experience significant volatility. Political stability is also a concern
in Latin America, with the risk of contested election results, military coups,
and mass social disorder presenting complex risks.
Middle
East Economic Risk
Middle
Eastern governments have exercised and continue to exercise substantial
influence over many aspects of the private sector. Many economies in the Middle
East are highly reliant on income from the sale of oil or trade with countries
involved in the sale of oil, and their economies are therefore vulnerable to
changes in the market for oil and foreign currency values. As global demand for
oil fluctuates, many Middle Eastern economies may be significantly impacted. A
sustained decrease in commodity prices could have a significant negative impact
on all aspects of the economy in the region. Middle Eastern economies may be
subject to acts of terrorism, political strife, religious, ethnic or
socioeconomic unrest and sudden outbreaks of hostilities with neighboring
countries. Certain Middle Eastern countries have strained relations with other
Middle Eastern countries due to territorial disputes, historical animosities,
international alliances, religious tensions or defense concerns, which may
adversely affect the economies of these countries. Certain Middle Eastern
countries experience significant unemployment, as well as widespread
underemployment. Many Middle Eastern countries have little or no democratic
tradition. Many Middle Eastern countries periodically have experienced
political, economic and social unrest as protestors have called for widespread
reform. Some of these protests have resulted in a governmental regime change,
internal conflict or civil war. If further regime changes were to occur,
internal conflict were to intensify, or a civil war were to continue in any of
these countries, such instability could adversely affect the economies of Middle
Eastern countries.
North
American Economic Risk
A
decrease in imports or exports, changes in trade regulations or an economic
recession in any North American country can have a significant economic effect
on the entire North American region and on some or all of the North American
countries to which the Fund has economic exposure. The U.S. is Canada's and
Mexico's largest trading and investment partner. The Canadian and Mexican
economies are significantly affected by developments in the U.S. economy. Since
the implementation of the North American Free Trade Agreement (“NAFTA”) in 1994
among Canada, the U.S. and Mexico, total merchandise trade among the three
countries has increased. However, political developments in the U.S., including
the renegotiation of NAFTA and imposition of tariffs by the U.S., may have
implications for the trade arrangements among the U.S., Mexico and Canada, which
could negatively affect the value of securities held by the Fund. Policy and
legislative changes in any of the three countries may have a significant effect
on North American economies generally, as well as on the value of certain
securities held by the Fund.
Government
Debt Risk
Government
Debt Risk applies to the Global X MSCI Greece ETF, Global X MSCI Portugal ETF,
Global X MSCI Argentina ETF and Global X MSCI Pakistan ETF
Countries
with high levels of public debt and spending may experience stifled economic
growth. Such countries may face higher borrowing costs and, in some cases, may
implement austerity measures that could have an adverse effect on economic
growth. Such developments could contribute to prolonged periods of recession and
adversely impact investments in the Fund.
In-Kind
ETF Classification Risk
In-Kind
ETF Classification Risk applies to the Global X MSCI Nigeria ETF
The
Fund will deliver Naira in connection with redemption requests from Authorized
Participants. Consequently, the Fund has elected to be classified as an in-kind
ETF as defined in Rule 22e-4 of the 1940 Act, which means that it will meet
redemptions through in-kind transfers of securities, positions and assets other
than a de minimis amount of U.S. dollars. As a result, for so long as the Fund
retains this designation, the Fund will not meet redemption requests from
Authorized Participants by delivering principally U.S. dollars, but rather will
deliver Naira. To the extent that Authorized Participants are unwilling or
unable to accept redemption proceeds in Naira, the Fund may trade at a steep
discount.
International
Closed Market Trading Risk
International
Closed Market Trading Risk applies to each Fund
To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other ETFs.
Investable
Universe of Companies Risk
Investable
Universe of Companies Risk applies to the Global X MSCI China Communication
Services ETF, Global X MSCI China Energy ETF, Global X MSCI China Real Estate
ETF, Global X MSCI China Utilities ETF, Global X MSCI Greece ETF, Global X MSCI
Portugal ETF, Global X MSCI Colombia ETF, Global X MSCI Argentina ETF, Global X
MSCI Pakistan ETF and Global X MSCI Nigeria ETF
The
investable universe of companies in which the Fund may invest may be limited. If
a company no longer meets the Index Provider’s criteria for inclusion in the
Underlying Index, the Fund may need to reduce or eliminate its holdings in that
company. The reduction or elimination of the Fund’s holdings in the company may
have an adverse impact on the liquidity of the Fund’s overall portfolio holdings
and on Fund performance.
Issuer
Risk
Issuer
Risk applies to each Fund
Issuer
risk is the risk that any of the individual companies that the Fund invests in
may perform badly, causing the value of its securities to decline. Poor
performance may be caused by poor management decisions, competitive pressures,
changes in technology, disruptions in supply, labor problems or shortages,
corporate restructurings, fraudulent disclosures or other factors. Issuers may,
in times of distress or on their own discretion, decide to reduce or eliminate
dividends, which would also cause their stock prices to decline.
Liquidity
Risk
Liquidity
Risk applies to the Global X MSCI Nigeria ETF
Liquidity
risk exists when particular investments are difficult to purchase or sell. This
can reduce the Fund's returns because the Fund may be unable to transact at
advantageous times or prices. Decreased liquidity may result in the Fund’s
shares declining in value, which will result in lower returns. In addition,
transactions in illiquid investments may entail transaction costs that are
higher than those for transactions in liquid investments. In addition to
liquidity risk, the Fund’s investments are denominated in Naira and any sale of
Naira-denominated securities will result in the Fund holding Naira, which the
Fund is unable to readily repatriate in light of capital controls imposed by the
Nigerian government. (See "SUMMARY
OF PRINCIPAL RISKS – Currency Risk".)
Market
Risk
Market
Risk applies to each Fund
Market
risk is the risk that the value of the securities in which the Fund invests may
go up or down in response to the prospects of individual issuers and/or general
economic conditions. Turbulence in the financial markets and reduced liquidity
may negatively affect issuers, which could have an adverse effect on the Fund.
If the securities held by the Fund experience poor liquidity, the Fund may be
unable to transact at advantageous times or prices, which may decrease the
Fund’s returns. In addition, there is a risk that policy changes by central
governments and governmental agencies, including the Federal Reserve or the
European Central Bank, which could include increasing interest rates, could
cause increased volatility in financial markets and lead to higher levels of
Fund redemptions from Authorized Participants, which could have a negative
impact on the Fund. Furthermore, local, regional or global events such as war,
acts of terrorism, the spread of infectious illness or other public health
issues, recessions, or other events could have a significant impact on the Fund
and its investments and trading of its Shares. For example, at the start of
2023, central banks had already increased interest rates at the fastest rate on
record, the unknown is the length of time they remain restrictive and when
inflation returns to target levels. This increases the risk that monetary policy
may provide less support should economic growth slow. Additionally, China’s
shift away from their zero-COVID policy creates both opportunities and risks,
establishing China as the wildcard for global economic growth. Market risk
factors may result in increased volatility and/or decreased liquidity in the
securities markets. The Fund’s NAV could decline over short periods due to
short-term market movements and over longer periods during market downturns.
Non-Diversification
Risk
Non-Diversification
Risk applies to the Global X MSCI China Communication Services ETF, Global X
MSCI China Consumer Discretionary ETF, Global X MSCI China Consumer Staples ETF,
Global X MSCI China Energy ETF, Global X MSCI China Financials ETF, Global X
MSCI China Health Care ETF, Global X MSCI China Industrials ETF, Global X MSCI
China Information Technology ETF, Global X MSCI China Materials ETF, Global X
MSCI China Real Estate ETF, Global X MSCI China Utilities ETF, Global X MSCI
Greece ETF, Global X MSCI Norway ETF, Global X DAX Germany ETF, Global X MSCI
Portugal ETF, Global X MSCI Colombia ETF, Global X MSCI Argentina ETF, Global X
MSCI Pakistan ETF, Global X MSCI Nigeria ETF, Global X MSCI Vietnam ETF and
Global X FTSE Southeast Asia ETF
The
Fund is classified as a “non-diversified” investment company under the 1940 Act.
This means that the Fund may invest most of its assets in securities issued by
or representing a small number of companies. As a result, the Fund may be more
susceptible to the risks associated with these particular companies, or to a
single economic, political or regulatory occurrence affecting these companies.
Operational
Risk
Operational
Risk applies to each Fund
The
Fund is exposed to operational risk arising from a number of factors, including
but not limited to human error, processing and communication errors, errors of
the Fund's service providers, counterparties or other third-parties, failed or
inadequate processes and technology or systems failures.
With
the increased use of technologies such as the internet to conduct business, the
Fund, Authorized Participants, service providers and the relevant listing
exchange are susceptible to operational, information security and related
“cyber” risks both directly and through their service providers. Similar types
of cyber security risks are also present for issuers of securities in which the
Fund invests, which could result in material adverse consequences for such
issuers and may cause the Fund’s investment in such portfolio companies to lose
value. Unlike many other types of risks faced by the Fund, these risks typically
are not covered by insurance. In general, cyber incidents can result from
deliberate attacks or unintentional events. Cyber incidents include, but are not
limited to, gaining unauthorized access to digital systems (e.g., through
“hacking” or malicious software coding) for purposes of misappropriating assets
or sensitive information, corrupting data, or causing operational disruption.
Cyber-attacks may also be carried out in a manner that does not require gaining
unauthorized access, such as causing denial-of-service attacks on websites
(i.e., efforts to make network services unavailable to intended users).
Recently, geopolitical tensions may have increased the scale and sophistication
of deliberate attacks, particularly those from nation-states or from entities
with nation-state backing. Cyber security failures by or breaches of the systems
of the Adviser and the Fund’s distributor and other service providers
(including, but not limited to, the Index Provider, fund accountants,
custodians, transfer agents and administrators), market makers, Authorized
Participants, or the issuers of securities in which the Fund invests, have the
ability to cause disruptions and impact business operations, potentially
resulting in: financial losses, interference with the Fund’s ability to
calculate its NAV, disclosure of confidential trading information, impediments
to trading, submission of
erroneous
trades or erroneous creation or redemption orders, the inability of the Fund or
its service providers to transact business, violations of applicable privacy and
other laws, regulatory fines, penalties, reputational damage, reimbursement or
other compensation costs, or additional compliance costs. In addition,
cyber-attacks may render records of Fund assets and transactions, shareholder
ownership of Fund Shares, and other data integral to the functioning of the Fund
inaccessible or inaccurate or incomplete. Substantial costs may be incurred by
the Fund in order to resolve or prevent cyber incidents in the future. While the
Fund has established business continuity plans in the event of, and risk
management systems to prevent, such cyber-attacks, there are inherent
limitations in such plans and systems, including the possibility that certain
risks have not been identified and that prevention and remediation efforts will
not be successful. Furthermore, the Fund cannot control the cyber security plans
and systems put in place by service providers to the Fund, issuers in which the
Fund invests, the Index Provider, market makers or Authorized Participants.
The Fund and its shareholders could be negatively impacted as a result.
The
Fund and the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate for those risks that they are intended to address.
Passive
Investment Risk
Passive
Investment Risk applies to each Fund
The
Fund is not actively managed and may be affected by a general decline in market
segments relating to the Underlying Index. The Fund invests in securities
included in, or representative of, the Underlying Index regardless of their
investment merits, and the Adviser does not otherwise attempt to take defensive
positions in declining markets. Unlike many investment companies, the Fund does
not seek to outperform its Underlying Index. Therefore, the Fund would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk
Index-Related
Risk applies to each Fund
There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk
Management
Risk applies to each Fund
The
Fund may not fully replicate its Underlying Index and may hold securities not
included in its Underlying Index. Therefore, the Fund is subject to management
risk. That is, the Adviser’s investment strategy, the implementation of which is
subject to a number of constraints, may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. While the Fund is passively managed,
implementation of the Fund’s principal investment strategy may result in
tracking error risk, which is described below. The ability of the Adviser to
successfully implement the Fund’s investment strategies will influence the
Fund’s performance significantly.
Tracking
Error Risk
Tracking
Error Risk applies to each Fund except for the Global X MSCI Nigeria
ETF
Tracking
error is the divergence of the Fund's performance from that of the Underlying
Index. Tracking error may occur because of differences between the securities
and other instruments held in the Fund's portfolio and those included in the
Underlying Index, pricing differences (including differences between a
security's price at the local market close and the Fund's valuation of a
security at the time of calculation of the Fund's NAV), transaction costs
incurred
by the Fund, the Fund's holding of uninvested cash, differences in timing of the
accrual of or the valuation of dividends or interest, tax gains or losses,
changes to the Underlying Index or the costs to the Fund of complying with
various new or existing regulatory requirements. 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
the Underlying Index does not. ETFs that track indices with significant weight
in emerging markets issuers may experience higher tracking error than other ETFs
that do not track such indices.
Tracking
Error Risk
Tracking
Error Risk applies to the Global X MSCI Nigeria ETF
Tracking
error may occur because of differences between the instruments held in the
Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash (including foreign currency), size of the Fund, differences in
timing of the accrual of or the valuation of dividends or interest, tax gains or
losses, changes to the Underlying Index or the costs to the Fund of complying
with various new or existing regulatory requirements. This risk is particularly
heightened for the Fund in light of the Naira repatriation issues. Specifically,
for the past three years, the Fund has typically held a significant portion of
its assets Naira while such Naira is pending repatriation, to U.S. dollars. As a
result, the Fund has had a substantially greater allocation to uninvested
foreign currency during this period than would typically be expected. Because of
the current Naira repatriation issues, the Fund does not anticipate that it
would reinvest at this time any U.S. dollars received into Naira or
Naira-denominated securities, which may further increase tracking error between
the Fund and the Underlying Index. Additionally, because the Fund seeks to
qualify as a RIC, the Fund may be required to reallocate positions at the end of
each fiscal quarter in order to comply with certain diversification
requirements, which may cause the weights of the Fund’s investments to diverge
from the weights of the securities in the Underlying Index. In addition, during
times of increased market volatility or other unusual market conditions tracking
error is exacerbated. Tracking error also may result because the Fund incurs
fees and expenses, while the Underlying Index does not. ETFs that track indices
with significant weight in emerging markets issuers may experience higher
tracking error than other ETFs that do not track such indices.
Redemption
Proceeds Risk
Redemption
Proceeds Risk applies to the Global X MSCI Nigeria ETF
Unlike
most exchange-traded funds ("ETFs"), the Fund will effect all or a significant
portion of creations and redemptions by selling securities and delivering
proceeds in Naira, rather than delivering securities in-kind. As a result, an
investment in the Fund may be less tax-efficient than an investment in a more
conventional ETF. Moreover, these transactions may have to be carried out over
several days if the securities market is relatively illiquid and may involve
considerable brokerage fees and taxes. These factors may result in wider spreads
between the bid and the offered prices of the Fund’s Shares than for more
conventional ETFs.
Reliance
on Trading Partners Risk
Reliance
on Trading Partners Risk applies to each Fund
The
Fund may invest in economies that are heavily dependent upon trading with key
partners. Any reduction in this trading, institution of tariffs or other trade
barriers or a slowdown in the economies of any of its key trading partners may
cause an adverse impact on the economies of the markets in which the Fund
invests.
Risks
Associated with Exchange-Traded Funds
Risks
Associated with Exchange-Traded Funds applies to each Fund
As
an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk
Authorized
Participants Concentration Risk applies to each Fund except for the Global X
MSCI Nigeria ETF
The
Fund has a limited number of financial institutions that may act as Authorized
Participants. Only Authorized Participants who have entered into agreements with
the Fund's distributor may engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, and no other
Authorized Participant is able to step forward to create and redeem in either of
those cases, Shares may trade like closed-end fund shares at a discount to NAV
and/or at wider intraday bid-ask spreads, and may possibly face trading halts
and/or delisting from the Exchange.
Authorized
Participants Concentration Risk
Authorized
Participants Concentration Risk applies to the Global X MSCI Nigeria
ETF
The
Fund has a limited number of financial institutions that may act as Authorized
Participants and engage in creation or redemption transactions directly with the
Fund, and none of those Authorized Participants is obligated to engage in
creation and/or redemption transactions. Moreover, in light of the fact that the
Fund will deliver Naira in connection with redemption transactions, to the
extent that Authorized Participants are unwilling or unable to accept redemption
proceeds in Naira, the Fund may trade at a steep discount. To the extent that
those Authorized Participants exit the business or are unable to process
creation and/or redemption orders, such as in times of market stress, Shares may
be more likely to trade at a premium or discount to NAV and/or at wider intraday
bid-ask spreads, and possibly face trading halts and/or delisting from an
exchange. Authorized Participants Concentration Risk may be heightened because
the Fund invests in non-U.S. securities.
Large
Shareholder Risk
Large
Shareholder Risk
applies
to each Fund
Certain
shareholders, including an Authorized Participant, the Adviser or an affiliate
of the Adviser, may own a substantial amount of the Fund’s Shares. Additionally,
from time to time an Authorized Participant, a third-party investor, the
Adviser, or an affiliate of the Adviser may invest in the Fund and hold its
investment for a specific period of time in order to facilitate commencement of
the Fund’s operations or to allow the Fund to achieve size or scale.
Redemptions by large shareholders could have a significant negative impact on
the Fund. If a large shareholder were to redeem all, or a large portion, of its
Shares, there is no guarantee that the Fund will be able to maintain sufficient
assets to continue operations in which case the Board of Trustees may determine
to liquidate the Fund. In addition, transactions by large shareholders may
account for a large percentage of the trading volume on the Exchange and may,
therefore, have a material upward or downward effect on the market price of the
Shares.
Listing
Standards Risk
Listing
Standards Risk
applies
to each Fund
The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks
Market
Trading Risks and Premium/Discount Risks applies to each Fund except for the
Global X MSCI Nigeria ETF
Absence
of Active Market
Although
Shares of the Fund are or will be listed for trading on a U.S. exchange and may
be listed on certain foreign exchanges, there can be no assurance that an active
trading market for the Shares will develop or be maintained.
Risks
of Secondary Listings
The
Fund's Shares may be listed or traded on U.S. and non-U.S. exchanges other than
the U.S. exchange where the Fund’s primary listing is maintained. There can be
no assurance that the Fund’s Shares will continue to trade on any such 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 others, and investors are subject to the execution and
settlement risks and market standards of the market where they or their brokers
direct their trades for execution. Certain information available to investors
who trade Shares on a U.S. exchange during regular U.S. market hours may not be
available to investors who trade in other markets, which may result in secondary
market prices in such markets being less efficient.
Secondary
Market Trading Risk
Only
Authorized Participants who have entered into agreements with the Fund’s
distributor may engage in creation or redemption transactions directly with the
Fund. Shares of the Fund may trade in the secondary market on days when the Fund
does not accept orders to purchase or redeem Shares from Authorized
Participants. On such days, Shares may trade in the secondary market with more
significant premiums or discounts than might be experienced on days when the
Fund accepts purchase and redemption orders.
Secondary
market trading in Fund Shares may be halted by a stock exchange because of
market conditions or other reasons. In addition, trading in Fund Shares on a
stock exchange or in any market may be subject to trading halts caused by
extraordinary market volatility pursuant to "circuit breaker" rules on the stock
exchange or market. There can be no assurance that the requirements necessary to
maintain the listing or trading of Fund Shares will continue to be met or will
remain unchanged.
Shares
of the Fund May Trade at Prices Other Than NAV
Shares
of the Fund may trade at, above or below NAV. The per share NAV of the Fund will
fluctuate with changes in the market value of the Fund’s holdings. The trading
prices of Shares will fluctuate in accordance with changes in the Fund's NAV as
well as market supply and demand. The trading prices of the Fund's Shares may
deviate significantly from NAV during periods of market volatility or when the
Fund has relatively few assets or experiences a lower trading volume. In
stressed market conditions, the market for the Shares may become less liquid in
response to the deteriorating liquidity of the Fund’s portfolio. Any of these
factors may lead to the Fund's Shares trading at a premium or discount to NAV.
While the creation/redemption feature is designed to make it likely that Shares
normally will trade close to the Fund’s NAV, market prices are not expected to
correlate exactly with the Fund's NAV due to timing reasons as well as market
supply and demand factors. In addition, disruptions to creations and redemptions
or the existence of extreme market volatility may result in trading prices that
differ significantly from NAV. If a shareholder purchases at a time when the
market price is at a premium to the NAV or sells at a time when the market price
is at a discount to the NAV, the shareholder may sustain losses.
Since
foreign exchanges may be open on days when the Fund does not price Shares, the
value of the securities in the Fund’s portfolio may change on days when
shareholders will not be able to purchase or sell Shares.
Costs
of Buying or Selling Fund Shares
Buying
or selling Fund Shares involves two types of costs that apply to all securities
transactions. When buying or selling Shares of the Fund through a broker, you
will likely incur a brokerage commission or other charges imposed by brokers as
determined by that broker. In addition, you may incur the cost of the "spread" -
that is, the difference between what professional investors are willing to pay
for Fund Shares (the "bid" price) and the market price at which they are willing
to sell Fund Shares (the "ask" price). Because of the costs inherent in buying
or selling Fund Shares, frequent trading may detract significantly from
investment results and an investment in Fund Shares may not be advisable for
investors who anticipate regularly making small investments.
Market
Trading Risks and Premium/Discount Risks
Market
Trading Risks and Premium/Discount Risks applies to the Global X MSCI Nigeria
ETF
Shares
of the Fund are publicly traded on a national securities exchange, which may
subject shareholders to numerous market trading risks. As a result of the
repatriation issues experienced by the Fund and the inability for Authorized
Participants to transact with the Fund other than in Naira, the market for the
Shares is less liquid and the Fund has traded at a steep discount for nearly
three years as of the date of this Prospectus. Consequently, if a shareholder
sells Shares at during this time when the market price is at a discount to the
NAV, the shareholder may sustain significant losses. The NAV of the Fund is
calculated at the end of each business day and fluctuates with changes in the
market
value
of the Fund’s holdings. The trading price of the Fund’s shares fluctuates, in
some cases materially, throughout trading hours in response to changes in the
Fund’s NAV.
Risks
Related to Stock Connect Programs
Risks
Related to Stock Connect Programs applies to the Global X MSCI China
Communication Services ETF, Global X MSCI China Consumer Discretionary ETF,
Global X MSCI China Consumer Staples ETF, Global X MSCI China Energy ETF, Global
X MSCI China Financials ETF, Global X MSCI China Health Care ETF, Global X MSCI
China Industrials ETF, Global X MSCI China Information Technology ETF, Global X
MSCI China Materials ETF, Global X MSCI China Real Estate ETF and Global X MSCI
China Utilities ETF
Investing
in securities through Stock Connect Programs is subject to trading, clearance,
settlement and other procedures, which could pose risks to the Fund. The Stock
Connect Programs are subject to daily and aggregate quota limitations, which
limit the maximum daily net purchases on any particular day by Hong Kong
investors (and foreign investors trading through Hong Kong) trading mainland
Chinese listed securities and mainland Chinese investors trading Hong Kong
listed securities trading through the relevant Stock Connect Program. The daily
quota is not specific to the Fund and is utilized on a first-come-first-serve
basis. As such, buy orders via the Stock Connect Programs could be rejected once
the daily quota is exceeded. The daily quota may thereby restrict the Fund’s
ability to invest through Stock Connect Programs on a timely basis, which could
affect the Fund’s ability to effectively pursue its investment strategy. The
daily quota is also subject to change. It is possible for securities eligible to
be purchased via the Stock Connect Programs to lose such designation, which
could impact the Fund's ability to pursue its investment strategy.
In
order to comply with applicable local market rules and to facilitate orderly
operations of the Fund, including the timely settlement of Stock Connect Program
trades placed by or on behalf of the Fund, the Fund utilizes an operating model
that may reduce the risks of trade failures; however, it will also allow Stock
Connect Program trades to be settled without the prior verification by the Fund.
Accordingly, this operating model may subject the Fund to additional risks,
including an increased risk of inadvertently exceeding certain trade or other
restrictions or limits placed on the Fund and/or its affiliates, and a
heightened risk of erroneous trades, which may negatively impact the Fund.
Additionally, the Shenzen and Shanghai markets may operate when the Stock
Connect Programs are not active, and consequently the prices of shares held via
Stock Connect Programs may fluctuate at times when the Fund is unable to add to
or exit its positions.
The
Stock Connect Programs are new, and the effect of the introduction of large
numbers of foreign investors on the market for trading Chinese-listed securities
is not well understood. Regulations, such as limitations on redemptions or
suspension of trading, may adversely impact the value of the Fund’s investments.
The Fund's investments in A-Shares though the Stock Connect Program are held by
its custodian in accounts in Central Clearing and Settlement System ("CCASS")
maintained by the Hong Kong Securities Clearing Company Limited ("HKSCC"), which
in turn holds the A-Shares, as the nominee holder, through an omnibus securities
account in its name registered with the CSDCC. The precise nature and rights of
the Fund as the beneficial owner of the SSE Securities or SZSE Securities
through HKSCC as nominee is not well defined under Chinese law. There is no
guarantee that the Shenzen, Shanghai, and Hong Kong Stock Exchanges will
continue to support the Stock Connect Programs in the future. The securities
regimes and legal systems of China and Hong Kong differ significantly, and
issues may arise based on these differences. Different fees, costs and taxes are
imposed on foreign investors acquiring securities through Stock Connect
Programs, and these fees, costs and taxes may be higher than comparable fees,
costs and taxes imposed on owners of other Chinese securities providing similar
investment exposure.
Securities
Lending Risk
Securities
Lending Risk applies to the Global X MSCI China Communication Services ETF,
Global X MSCI China Consumer Discretionary ETF, Global X MSCI China Financials
ETF, Global X MSCI China Information Technology ETF, Global X MSCI Greece ETF,
Global X MSCI Norway ETF, Global X MSCI Portugal ETF, Global X MSCI Colombia
ETF, Global X MSCI Argentina ETF and Global X FTSE Southeast Asia
ETF
The
Fund may engage in lending its portfolio securities. The Fund may lend its
portfolio securities to the extent noted under Fund Summaries-Principal
Investment Strategies. In connection with such loans, the Fund receives liquid
collateral equal to at least 102% of the value of domestic equity securities and
ADRs and 105% of the value of the foreign equity securities (other than ADRs)
being lent. This collateral is marked-to-market on a daily basis. Although the
Fund will receive collateral in connection with all loans of its securities
holdings, the Fund would be exposed to a risk of loss should a borrower default
on its obligation to return the borrowed securities (e.g., the loaned securities
may have appreciated beyond the value of the collateral held by the Fund). In
addition, the Fund will bear the risk of loss of any cash collateral that it
invests. Also, as securities on loan
may
not be voted by the Fund, there is a risk that the Fund may not be able to
recall the securities in sufficient time to vote on material proxy matters.
Security
Risk
Security
Risk applies to the Global X MSCI Colombia ETF, Global X MSCI Pakistan ETF and
Global X MSCI Next Emerging & Frontier ETF
Countries
in which the Fund invests have experienced security concerns. Incidents
involving a country's or region's security may cause uncertainty in the
country's markets and may adversely affect its economies and the Fund's
investments.
Structural
Risk
Structural
Risk applies to the Global X MSCI Colombia ETF, Global X MSCI Argentina ETF,
Global X MSCI Pakistan ETF and Global X MSCI Next Emerging & Frontier
ETF
The
countries in which the Fund invests may be subject to considerable degrees of
political, social, economic, legal and currency risks.
Political
and Social Risk.
Disparities of wealth, the pace and success of democratization and ethnic,
religious and racial disaffection, among other factors, may exacerbate social
unrest, violence and labor unrest in some of the countries in which the Fund may
invest. Unanticipated or sudden political or social developments may result in
sudden and significant investment losses.
Economic
Risk.
Some countries in which the Fund may invest may experience economic instability,
including instability resulting from substantial rates of inflation or
significant devaluations of their currency, or economic recessions, which would
have a negative effect on the economies and securities markets of their
economies. Some of these countries may also impose restrictions on the exchange
or export of currency or adverse currency exchange rates and may be
characterized by a lack of available currency hedging instruments.
Expropriation
Risk.
Investments in certain countries in which the Fund may invest may be subject to
loss due to expropriation or nationalization of assets and property or the
imposition of restrictions on foreign investments and repatriation of capital.
Large
Government Debt Risk.
Chronic structural public-sector deficits in some countries in which the Fund
may invest may adversely impact securities held by the Fund.
Trading
Halt Risk
Trading
Halt Risk applies to each Fund
An
exchange or market may close or issue trading halts on specific securities, or
the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Turnover
Risk
Turnover
Risk applies to the Global X MSCI China Energy ETF, Global X MSCI China
Industrials ETF and Global X MSCI China Materials ETF
The
Fund may engage in frequent and active trading, which may significantly increase
the Fund’s portfolio turnover rate. At times, the Fund may have a portfolio
turnover rate substantially greater than 100%. For example, a portfolio turnover
rate of 300% is equivalent to the Fund buying and selling all of its securities
three times during the course of a year. A high portfolio turnover rate would
result in high brokerage costs for the Fund, may result in higher taxes when
shares are held in a taxable account and lower Fund performance.
Valuation
Risk
Valuation
Risk applies to each Fund except for the Global X MSCI Nigeria ETF
The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). Because non-U.S. exchanges may be open on days when the Fund does not
price its Shares, the value of the securities in the Fund's portfolio may change
on days when shareholders will not be able to purchase or sell the Fund's
Shares.
Valuation
Risk
Valuation
Risk applies to the Global X MSCI Nigeria ETF
The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security and may differ from the value used by the Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). Monetary policies enacted by the government agencies in Nigeria,
limiting its local currency’s repatriation to safeguard U.S. dollar reserves and
exchange rates, significantly impacts the ability of the Fund to convert local
denominated investments to U.S. dollars using quoted immediate currency
settlement rates. The Fund’s investments denominated in Naira are translated
using the Nigerian Autonomous Foreign Exchange Rate Fixing rate. The use of an
alternative exchange rate would impact the effect of currency translation and
the results of operations. The value of the securities in the Fund's portfolio
may change on days when shareholders will not be able to purchase or sell the
Fund's Shares.
A
FURTHER DISCUSSION OF OTHER RISKS
Each
Fund may also be subject to certain other risks associated with its investments
and investment strategies.
Exclusion
from the Definition of a Commodity Pool Operator Risk
With
respect to the Fund, the Adviser has claimed an exclusion from the definition of
“commodity pool operator” (“CPO”) under the Commodity Exchange Act, as amended
(“CEA”), and the rules of the Commodity Futures Trading Commission (“CFTC”) and,
therefore, is not subject to CFTC registration or regulation as a CPO. In
addition, the Adviser is relying upon a related exclusion from the definition of
“commodity trading advisor” (“CTA”) under the CEA and the rules of the CFTC. The
terms of the CPO exclusion require the Fund, among other things, to adhere to
certain limits on its investments in “commodity interests.” Commodity interests
include commodity futures, commodity options and swaps. Because the Adviser and
the Fund intend to comply with the terms of the CPO exclusion, the Fund may, in
the future, need to adjust its investment strategies, consistent with its
investment objective, to limit its investments in these types of instruments.
The Fund is not intended as a vehicle for trading in the commodity futures,
commodity options or swaps markets. The CFTC has neither reviewed nor approved
the Adviser’s reliance on these exclusions, or the Fund, its investment
strategies or this Prospectus.
Leverage
Risk
Under
the 1940 Act, the Fund is permitted to borrow from a bank up to 33 1/3% of its
net assets for short term or emergency purposes. The Fund may borrow money at
fiscal quarter end to maintain the required level of diversification to qualify
as a regulated investment company ("RIC") for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"). As a result, the Fund may be exposed to
the risks of leverage, which may be considered a speculative investment
technique. Leverage magnifies the potential for gain and loss on amounts
invested and therefore increases the risks associated with investing in the
Fund. If the value of the Fund's assets increases, then leveraging would cause
the Fund's NAV to increase more sharply than it would have had the Fund not
leveraged. Conversely, if the value of the Fund's assets decreases, leveraging
would cause the Fund's NAV to decline more sharply than it otherwise would have
had the Fund not leveraged. The Fund may incur additional expenses in connection
with borrowings.
Qualification
as a Regulated Investment Company Risk
The
Fund must meet a number of diversification requirements to qualify as a RIC
under Section 851 of the Code and, if qualified, to continue to qualify. If the
Fund experiences difficulty in meeting those requirements for any fiscal
quarter, it might enter into borrowings in order to increase the portion of the
Fund’s total assets represented by cash, cash items, and U.S. government
securities shortly thereafter and, as of the close of the following fiscal
quarter, to attempt to meet the requirements. However, the Fund may incur
additional expenses in connection with any such borrowings, and increased
investments by the
Fund
in cash, cash items, and U.S. government securities (whether the Fund makes such
investments from borrowings) are likely to reduce the Fund’s return to
investors.
Tax
Treaty Reclaims Uncertainty
When
the Fund receives dividend and interest income (if any) from issuers in certain
countries, such distributions may be subject to partial withholding by local tax
authorities in order to satisfy potential local tax obligations. The Fund may
file claims to recover such withholding tax in jurisdictions where withholding
tax reclaim is possible, which may be the case as a result of bilateral treaties
between the United States and local governments. Whether or when the Fund will
receive a withholding tax refund in the future is within the control of the tax
authorities in such countries. Where the Fund expects to recover withholding tax
based on a continuous assessment of probability of recovery, the NAV of the Fund
generally includes accruals for such tax refunds. The Fund continues to evaluate
tax developments for potential impact to the probability of recovery. If the
likelihood of receiving refunds materially decreases, for example due to a
change in tax regulation or approach, accruals in the Fund’s NAV for such
refunds may need to be written down partially or in full, which will adversely
affect that Fund’s NAV. Investors in the Fund at the time an accrual is written
down will bear the impact of any resulting reduction in NAV regardless of
whether they were investors during the accrual period. Conversely, if the Fund
receives a tax refund that has not been previously accrued, investors in the
Fund at the time the claim is successful will benefit from any resulting
increase in the Fund’s NAV. Investors who sold their shares prior to such time
will not benefit from such NAV increase.
PORTFOLIO
HOLDINGS INFORMATION
A
description of the policies and procedures of Global X Funds®
(the "Trust") with respect to the disclosure of the Funds’ portfolio securities
is available in the Funds’ combined Statement of Additional Information (“SAI”).
The top holdings of each Fund and Fund Fact Sheets providing information
regarding each Fund’s top holdings can be found at
www.globalxetfs.com/explore/(click on the name of your Fund) and may be
requested by calling 1-888-493-8631.
FUND
MANAGEMENT
Investment
Adviser
Global
X Management Company LLC (the "Adviser") serves as the investment adviser and
the administrator for the Funds. Subject to the supervision of the Trust's Board
of Trustees, the Adviser is responsible for managing the investment activities
of the Funds and the Funds' business affairs and other administrative matters.
The Adviser has been a registered investment adviser since 2008. The Adviser is
a Delaware limited liability company with its principal offices located at 605
3rd Avenue, 43rd Floor, New York, New York 10158. As of February 1, 2023,
the Adviser provided investment advisory services for assets of approximately
$40 billion.
Pursuant
to a Supervision and Administration Agreement and subject to the general
supervision of the Board of Trustees, the Adviser provides, or causes to be
furnished, all supervisory, administrative and other services reasonably
necessary for the operation of the Funds and also bears the costs of various
third-party services required by the Funds, including audit, certain custody,
portfolio accounting, legal, transfer agency and printing costs. The Supervision
and Administration Agreement also requires the Adviser to provide investment
advisory services to the Funds pursuant to an Investment Advisory Agreement.
Each
Fund pays the Adviser a fee (“Management Fee”) in return for providing
investment advisory, supervisory and administrative services under an all-in fee
structure. For the fiscal year ended October 31, 2022, the Funds paid a monthly
Management Fee to the Adviser at the following annual rates (stated as a
percentage of the average daily net assets of each Fund taken separately):
|
|
|
|
|
|
Fund |
Management
Fee |
Global
X MSCI Colombia ETF |
0.61% |
Global
X MSCI China Consumer Discretionary ETF |
0.65% |
Global
X MSCI China Industrials ETF |
0.65% |
Global
X MSCI China Communication Services ETF |
0.65% |
Global
X MSCI China Financials ETF |
0.65% |
Global
X MSCI China Energy ETF |
0.65% |
Global
X MSCI China Materials ETF |
0.65% |
Global
X MSCI Norway ETF |
0.50% |
Global
X FTSE Southeast Asia ETF |
0.65% |
Global
X MSCI Argentina ETF |
0.59% |
Global
X MSCI Greece ETF |
0.55% |
Global
X MSCI Nigeria ETF |
0.68% |
Global
X MSCI Next Emerging & Frontier ETF |
0.49% |
Global
X MSCI Portugal ETF |
0.55% |
Global
X DAX Germany ETF |
0.20% |
Global
X MSCI Pakistan ETF |
0.68% |
Global
X MSCI China Consumer Staples ETF |
0.65% |
Global
X MSCI China Health Care ETF |
0.65% |
Global
X MSCI China Information Technology ETF |
0.65% |
Global
X MSCI China Real Estate ETF |
0.65% |
Global
X MSCI China Utilities ETF |
0.65% |
Global
X MSCI Vietnam ETF |
0.50% |
In
addition, each Fund bears other fees and expenses that are not covered by the
Supervision and Administration Agreement, which may vary and will affect the
total expense ratio of a Fund, such as taxes, brokerage fees, commissions and
other transaction expenses, interest and extraordinary expenses (such as
litigation and indemnification expenses). In addition, the Global X MSCI Greece
ETF, Global X MSCI Nigeria ETF, Global X MSCI Next Emerging & Frontier ETF,
Global X MSCI Portugal ETF and Global X MSCI Pakistan ETF may pay asset-based
custodial fees that are not covered by the Supervision and Administration
Agreement. The Adviser may earn a profit on the Management Fee paid by the
Funds. Also, the Adviser, and not shareholders of the Funds, would benefit from
any price decreases in third-party services, including decreases resulting from
an increase in net assets.
The
Adviser or its affiliates may pay compensation, out of profits derived from the
Adviser’s Management Fee or other resources and not as an additional charge to
the Funds, to certain financial institutions (which may include banks,
securities dealers and other industry professionals) for the sale and/or
distribution of Fund Shares or the retention and/or servicing of Fund investors
and Fund Shares (“revenue sharing”). These payments are in addition to any other
fees described in the fee table or elsewhere in the Prospectus or SAI. Examples
of “revenue sharing” payments include, but are not limited to, payments to
financial institutions for “shelf space” or access to a third party platform or
fund offering list or other marketing programs, including, but not limited to,
inclusion of the Funds on preferred or recommended sales lists, mutual fund
“supermarket” platforms and other formal sales programs; granting the Adviser
access to the financial institution’s sales force; granting the Adviser access
to the financial institution’s conferences and meetings; assistance in training
and educating the financial institution’s personnel; and obtaining other forms
of marketing support. The level of revenue sharing payments made to financial
institutions may be a fixed fee or based upon one or more of the following
factors: gross sales, current assets and/or number of accounts of a Fund
attributable to the financial institution, or other factors as agreed to by the
Adviser and the financial institution or any combination thereof. The amount of
these revenue sharing payments is determined at the discretion of the Adviser
from time to time, may be substantial, and may be different for different
financial institutions depending upon the services provided by the financial
institution. Such payments may provide an incentive for the financial
institution to make Shares of the Funds available to its customers and may allow
the Funds greater access to the financial institution’s customers.
Approval
of Advisory Agreement
Discussions
regarding the basis for the Board of Trustees' approval of the Supervision and
Administration Agreement and the related Investment Advisory Agreement for each
Fund are available in the Funds' Semi-Annual Report to Shareholders for the
fiscal half-year ended April 30 and/or Annual Report to Shareholders for the
fiscal year ended October 31.
Portfolio
Management
The
Portfolio Managers who are currently responsible for the day-to-day management
of each Fund's portfolio are Nam To, Wayne Xie, Kimberly Chan, Vanessa Yang and
Sandy Lu.
Nam
To:
Nam To, CFA, Portfolio Manager, joined the Adviser in July 2017. Prior to that,
Mr. To was a Global Economics Research Analyst at Bunge Limited from 2014 to
2017. Mr. To received his Bachelor of Arts in Philosophy and Economics from
Cornell University in 2014.
Wayne
Xie:
Wayne Xie, Director of Portfolio Management, joined the Adviser in July 2018 as
a Portfolio Management Associate. Previously, Mr. Xie was an Analyst at VanEck
Associates on the Equity ETF Investment Management team from 2010 to 2018 and a
Portfolio Administrator at VanEck Associates from 2007 to 2010. Mr. Xie received
his Bachelor of Science from the State University of New York at Buffalo in
2002.
Kimberly
Chan:
Kimberly Chan, Portfolio Manager, joined the Adviser in June 2018. Previously,
Ms. Chan was a U.S. Associate Trader at Credit Agricole from 2016 to 2018, and
an Investment Analyst at MetLife Investments from 2015 to 2016. Ms. Chan
received her Bachelor of Science from New York University in 2015.
Vanessa
Yang:
Vanessa Yang, Portfolio Manager, joined the Adviser in 2016 as a Portfolio
Administrator. She was appointed to the portfolio management team in June 2019.
Previously, Ms. Yang was a Portfolio Administrator at VanEck Associates from
2011 to 2014. Ms. Yang received her MS in Financial Engineering from Drucker
School of Management in 2010 and her BS in Economics from Guangdong University
of Foreign Studies in 2008.
Sandy
Lu:
Sandy Lu, CFA, Portfolio Manager, joined the Adviser in September 2021.
Previously, Mr. Lu was a Portfolio Analyst and Junior Portfolio Manager at PGIM
Fixed Income from 2014 to 2021, and a Fixed Income Portfolio Analyst at Lincoln
Financial Group from 2010 to 2014. Mr. Lu received his Bachelor of Science in
Economics from the Wharton School of the University of Pennsylvania. He earned
his CFA designation in September 2015, and holds the Series 3
license.
The
SAI provides additional information about the Portfolio Managers’ compensation
structure, other accounts managed by the Portfolio Managers, and the Portfolio
Managers' ownership of Shares of the Funds.
DISTRIBUTOR
SEI
Investments Distribution Co. ("Distributor") distributes Creation Units for the
Funds on an agency basis. The Distributor does not maintain a secondary market
in Shares. The Distributor has no role in determining the policies of the Funds
or the securities that are purchased or sold by each Fund. The Distributor’s
principal address is One Freedom Valley Drive, Oaks, PA 19456. The Distributor
is not affiliated with the Adviser.
BUYING
AND SELLING FUND SHARES
Shares
of the Funds trade on a national securities exchange and in the secondary market
during the trading day. Shares can be bought and sold throughout the trading day
like other shares of publicly-traded securities. There is no minimum investment
for purchases made on a national securities exchange. When buying or selling
Shares through a broker, you will incur customary brokerage commissions and
charges. In addition, you will also incur the cost of the “spread,” which is the
difference between what professional investors are willing to pay for Shares
(the “bid” price) and the price at which they are willing to sell Shares (the
“ask” price). The commission is frequently a fixed amount and may be a
significant proportional cost for investors seeking to buy or sell small amounts
of Shares. The spread with respect to Shares varies over time based on a Fund’s
trading volume and market liquidity and is generally lower if a Fund has
significant trading volume and market liquidity and higher if a Fund has little
trading volume and market liquidity. Because of the costs of buying and selling
Shares, frequent trading may reduce investment returns.
Shares
of a Fund may be acquired or redeemed directly from the Fund only by Authorized
Participants (as defined in the SAI) and only in Creation Units or multiples
thereof, as discussed in the "Creations and Redemptions" section in the SAI.
Shares
generally trade in the secondary market in amounts less than a Creation Unit.
Shares of the Funds trade under the trading symbol listed for each Fund in the
Fund Summaries section of the Prospectus.
The
Funds are listed on a national securities exchange, which is open for trading
Monday through Friday and is closed on weekends and the following holidays, as
observed: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good
Friday, Memorial Day, Juneteenth National Independence Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Book
Entry
Shares
of the Funds are held in book-entry form, which means that no stock certificates
are issued. The Depository Trust Company (“DTC”) or its nominee is the record
owner of all outstanding Shares and is recognized as the owner of all Shares for
all purposes.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares.
Participants include DTC, securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
Shares, you are not entitled to receive physical delivery of stock certificates
or to have Shares registered in your name, and you are not considered a
registered owner of Shares. Therefore, to exercise any rights as an owner of
Shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any securities that you hold in
book entry or “street name” form.
FREQUENT
TRADING
Unlike
frequent trading of shares of a traditional open-end mutual fund (i.e., not
exchange-traded shares), frequent trading of Shares on the secondary market does
not disrupt portfolio management, increase a Fund's trading costs, lead to
realization of capital gains, or otherwise harm Fund shareholders because these
trades do not involve a Fund directly. A few institutional investors are
authorized to purchase and redeem the Funds' Shares directly with the Funds.
When these trades are effected in-kind (i.e.,
for securities, and not for cash), they do not cause any of the harmful effects
(noted above) that may result from frequent cash trades. Moreover, each Fund
imposes transaction fees on in-kind purchases and redemptions of the Fund
intended to cover the custodial and other costs incurred by the Fund in
effecting in-kind trades. These fees increase if an investor substitutes cash in
part or in whole for securities, reflecting the fact that a Fund’s trading costs
increase in those circumstances, although transaction fees are subject to
certain limits and therefore may not cover all related costs incurred by a Fund.
For these reasons, the Board of Trustees has determined that it is not necessary
to adopt policies and procedures to detect and deter frequent trading and
market-timing in Shares of the Funds.
DISTRIBUTION
AND SERVICE PLAN
The
Board of Trustees of the Trust has adopted a Distribution and Services Plan
(“Plan”) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, each Fund is
authorized to pay distribution fees in connection with the sale and distribution
of its Shares and pay service fees in connection with the provision of ongoing
services to shareholders of each class and the maintenance of shareholder
accounts in an amount up to 0.25% of its average daily net assets each year.
No
Rule 12b-1 fees are currently paid by a Fund, and there are no current plans to
impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because these fees are paid out of each Fund’s assets on an ongoing
basis, these fees will increase the cost of your investment in a Fund. By
purchasing Shares subject to distribution fees and service fees, you may pay
more over time than you would by purchasing Shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the rules of
FINRA. The net income attributable to Shares will be reduced by the amount of
distribution fees and service fees and other expenses of a Fund.
DIVIDENDS
AND DISTRIBUTIONS
Dividends
from net investment income, including any net foreign currency gains, generally
are declared and paid at least annually and any net realized capital gains are
distributed at least annually. In order to improve tracking error or comply with
the distribution requirements of the Code, dividends may be declared and paid
more frequently than annually for a Fund.
Dividends
and other distributions on Shares are distributed on a pro rata basis to
beneficial owners of such Shares. Dividend payments are made through DTC
participants to beneficial owners then of record with proceeds received from a
Fund. Dividends and security gain distributions are distributed in U.S. dollars
and cannot be automatically reinvested in additional Shares.
No
dividend reinvestment service is provided by the Trust. Broker-dealers may make
available the DTC book-entry Dividend Reinvestment Service for use by beneficial
owners of a Fund for reinvestment of their dividend distributions. Beneficial
owners should contact their broker to determine the availability and costs of
the service and the details of participation therein. Brokers may require
beneficial owners to adhere to specific procedures and timetables. If this
service is available and used, dividend distributions of both income and
realized gains will be automatically reinvested in additional whole Shares
purchased in the secondary market.
TAXES
The
following is a summary of certain tax considerations that may be relevant to an
investor in a Fund. Except where otherwise indicated, the discussion relates to
investors who are individual United States citizens or residents and is based on
current tax law. You should consult your tax advisor for further information
regarding federal, state, local and/or foreign tax consequences relevant to your
specific situation.
Distributions.
Each Fund receives income and gains on its investments. The income, less
expenses incurred in the operation of a Fund, constitutes the Fund's net
investment income from which dividends may be paid to you. Each Fund has elected
and intends to qualify as a RIC under the Code for federal tax purposes and to
distribute to shareholders substantially all of its net investment income and
net capital gain each year. Except as otherwise noted below, you will generally
be subject to federal income tax on a Fund’s distributions you receive. For
federal income tax purposes, Fund distributions attributable to short-term
capital gains and net investment income are taxable to you as ordinary income.
Distributions attributable to net capital gains (the excess of net long- term
capital gains over net short-term capital losses) of a Fund generally are
taxable to you as long-term capital gains. This is true no matter how long you
own your Shares or whether you take distributions in cash or additional Shares.
The maximum long-term capital gain rate applicable to individuals is 20%.
Distributions
of “qualifying dividends” will also generally be taxable to you at long-term
capital gain rates as long as certain requirements are met. In general, if 95%
or more of the gross income of a Fund (other than net capital gain) consists of
dividends received from domestic corporations or “qualified” foreign
corporations (“qualifying dividends”), then all distributions received by
individual shareholders of a Fund will be treated as qualifying dividends. But
if less than 95% of the gross income of a Fund (other than net capital gain)
consists of qualifying dividends, then distributions received by individual
shareholders of a Fund will be qualifying dividends only to the extent they are
derived from qualifying dividends earned by such Fund. For the lower rates to
apply, you must have owned your Shares for at least 61 days during the 121-day
period beginning on the date that is 60 days before such Fund’s ex-dividend date
(and such Fund will need to have met a similar holding period requirement with
respect to the Shares of the corporation paying the qualifying dividend). The
amount of a Fund’s distributions that qualify for this favorable treatment may
be reduced as a result of such Fund’s securities lending activities (if any), a
high portfolio turnover rate or investments in debt securities or
“non-qualified” foreign corporations. In addition, whether distributions
received from foreign corporations are qualifying dividends will depend on
several factors including the country of residence of the corporation making the
distribution. Accordingly, distributions from many of the Funds’ holdings may
not be qualifying dividends.
A
portion of distributions paid to shareholders that are corporations may also
qualify for the dividends-received deduction for corporations, subject to
certain holding period requirements and debt financing limitations. The amount
of the dividends qualifying for this deduction may, however, be reduced as a
result of such Fund’s securities lending activities, by a high portfolio
turnover rate or by investments in debt securities or foreign corporations.
Distributions
from a Fund will generally be taxable to you in the year in which they are paid,
with one exception. Dividends and distributions declared by a Fund in October,
November or December and paid in January of the following year are taxed as
though they were paid on December 31.
You
should note that if you buy Shares of a Fund shortly before it makes a
distribution, the distribution will be fully taxable to you even though, as an
economic matter, it simply represents a return of a portion of your investment.
This adverse tax result is known as “buying into a dividend.”
You
will be informed of the amount of your ordinary income dividends, qualifying
dividend income, and capital gain distributions at the time they are paid, and
you will be advised of the tax status for federal income tax purposes shortly
after the
close
of each calendar year. If you have not held Shares for a full year, a Fund may
designate and distribute to you, as ordinary income or capital gain, a
percentage of income that is not equal to the actual amount of such income
earned during the period of your investment in such Fund.
A
Fund’s investments in partnerships, including in partnerships defined as
Qualified Publicly Traded Partnerships for tax purposes, may result in such Fund
being subject to state, local or foreign income, franchise or withholding tax
liabilities.
Excise
Tax Distribution Requirements.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
RIC’s “required distribution” for the calendar year ending within the RIC’s
taxable year over the “distributed amount” for such calendar year. The term
“required distribution” means the sum of (a) 98% of ordinary income (generally
net investment income) for the calendar year, (b) 98.2% of capital gain (both
long-term and short-term) for the one-year period ending on October 31 (or
December 31, if a Fund so elects), and (c) the sum of any untaxed, undistributed
net investment income and net capital gains of the RIC for prior periods. The
term “distributed amount” generally means the sum of (a) amounts actually
distributed by a Fund from its current year’s ordinary income and capital gain
net income and (b) any amount on which a Fund pays income tax for the taxable
year ending in the calendar year. Although each Fund intends to distribute its
net investment income and net capital gains so as to avoid excise tax liability,
a Fund may determine that it is in the interest of shareholders to distribute a
lesser amount. The Funds intend to declare and pay these amounts in December (or
in January, which must be treated by you as received in December) to avoid these
excise taxes but can give no assurances that their distributions will be
sufficient to eliminate all such taxes.
Foreign
Currencies.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time a Fund accrues interest or other receivables or
accrues expenses or other liabilities denominated in a foreign currency, and the
time such Fund actually collects such receivables or pays such liabilities, are
treated as ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies, from the disposition of debt securities
denominated in a foreign currency, or from the disposition of a forward foreign
currency contract which are attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the asset and the date of
disposition also are treated as ordinary income or loss. These gains or losses,
referred to under the Code as “section 988” gains or losses, increase or
decrease the amount of a Fund’s investment company taxable income available to
be distributed to its shareholders as ordinary income, rather than increasing or
decreasing the amount of such Fund’s net capital gain.
Foreign
Taxes.
Each Fund will be subject to foreign withholding taxes with respect to certain
payments received from sources in foreign countries. If at the close of the
taxable year more than 50% in value of a Fund’s assets consists of stock in
foreign corporations, such Fund will be eligible to make an election to treat a
proportionate amount of those taxes as constituting a distribution to each
shareholder, which would allow you either (subject to certain limitations) (1)
to credit that proportionate amount of taxes against your U.S. Federal income
tax liability as a foreign tax credit or (2) to take that amount as an itemized
deduction. If a Fund is not eligible or chooses not to make this election, it
will be entitled to deduct such taxes in computing the amounts it is required to
distribute.
Sales
and Exchanges.
The sale of Shares is a taxable event on which a gain or loss is recognized. The
amount of gain or loss is based on the difference between your tax basis in
Shares and the amount you receive for them upon disposition. Generally, you will
recognize long-term capital gain or loss if you have held your Shares for over
one year at the time you sell or exchange them. Gains and losses on Shares held
for one year or less will generally constitute short-term capital gains, except
that a loss on Shares held six months or less will be re-characterized as a
long-term capital loss to the extent of any long-term capital gain distributions
that you have received on the Shares. A loss realized on a sale or exchange of
Shares may be disallowed under the so-called “wash sale” rules to the extent the
Shares disposed of are replaced with other Shares of that same Fund within a
period of 61 days beginning 30 days before and ending 30 days after the Shares
are disposed of, such as pursuant to a dividend reinvestment in Shares of a
Fund. If disallowed, the loss will be reflected in an adjustment to the basis of
the Shares acquired.
Taxes
on Purchase and Redemption of Creation Units. An
Authorized Participant who exchanges equity securities for Creation Units
generally will recognize a gain or a loss. The gain or loss will be equal to the
difference between the market value of the Creation Units at the time of
purchase (plus any cash received by the Authorized Participant as part of the
issue) and the Authorized Participant’s aggregate basis in the securities
surrendered (plus any cash paid by the Authorized Participant as part of the
issue). An Authorized Participant who exchanges Creation Units for equity
securities generally will recognize a gain or loss equal to the difference
between the Authorized Participant’s basis in the Creation Units (plus any cash
paid by the Authorized Participant as part of the redemption) and the aggregate
market value of the securities received (plus any cash received by the
Authorized Participant as part of the redemption). The Internal Revenue Service
(the “IRS”), however, may assert that a loss realized upon an exchange of
securities for Creation Units cannot be deducted currently under the rules
governing “wash sales,” or on the basis that there has been no significant
change in economic position. Persons exchanging securities should consult their
own tax advisor with respect to whether the wash sale rules apply and when a
loss might be
deductible.
Under current federal tax laws, any capital gain or loss realized upon
redemption of Creation Units is generally treated as long-term capital gain or
loss if the Shares have been held for more than one year and as a short-term
capital gain or loss if the Shares have been held for one year or less, assuming
such Creation Units are held as a capital asset.
IRAs
and Other Tax-Qualified Plans.
The one major exception to the preceding tax principles is that distributions
on, and sales, exchanges and redemptions of, Shares held in an IRA or other
tax-qualified plan are not currently taxable but may be taxable when funds are
withdrawn from the tax qualified plan, unless the Shares were purchased with
borrowed funds.
Medicare
Tax. An
additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from a
Fund and net gains from redemptions or other taxable dispositions of Fund
Shares) of U.S. individuals, estates and trusts to the extent that such person’s
“modified adjusted gross income” (in the case of an individual) or “adjusted
gross income” (in the case of an estate or trust) exceeds a threshold amount.
This Medicare tax, if applicable, is reported by you on, and paid with, your
federal income tax return.
Backup
Withholding.
Each Fund will be required in certain cases to withhold and remit to the U.S.
Treasury backup withholding at the applicable rate on dividends and gross sales
proceeds paid to any shareholder (i) who has either provided an incorrect tax
identification number or no number at all, (ii) who is subject to backup
withholding by the IRS, or (iii) who has failed to certify to a Fund, when
required to do so, that he or she is not subject to backup withholding or is an
“exempt recipient.”
Cost
Basis Reporting. Federal
law requires that shareholders' cost basis, gain/loss, and holding period be
reported to the IRS and to shareholders on the Consolidated Form 1099s when
“covered” securities are sold. Covered securities are any RIC and/or dividend
reinvestment plan shares acquired on or after January 1, 2012.
For
those securities defined as "covered" under current IRS cost basis tax reporting
regulations, accurate cost basis and tax lot information must be maintained for
tax reporting purposes. This information is not required for Shares that are not
"covered." The Funds and their service providers do not provide tax advice. You
should consult independent sources, which may include a tax professional, with
respect to any decisions you may make with respect to choosing a tax lot
identification method. Shareholders should contact their financial
intermediaries with respect to reporting of cost basis and available elections
for their accounts.
State
and Local Taxes.
You may also be subject to state and local taxes on income and gain attributable
to your ownership of Shares. You should consult your tax advisor regarding the
tax status of distributions in your state and locality.
U.S.
Tax Treatment of Foreign Shareholders.
A non-U.S. shareholder generally will not be subject to U.S. withholding tax on
gain from the redemption of Shares or on capital gain dividends (i.e., dividends
attributable to long-term capital gains of a Fund) unless, in the case of a
shareholder who is a non-resident alien individual, the shareholder is present
in the United States for 183 days or more during the taxable year and certain
other conditions are met. Non-U.S. shareholders generally will be subject to
U.S. withholding tax at a rate of 30% (or a lower treaty rate, if applicable) on
distributions by a Fund of net investment income, other ordinary income, and the
excess, if any, of net short-term capital gain over net long-term capital loss
for the year, unless the distributions are effectively connected with a U.S.
trade or business of the shareholder. Exemptions from U.S. withholding tax are
provided for certain capital gain dividends paid by a Fund from net long-term
capital gains, if any, interest-related dividends paid by the Fund from its
qualified net interest income from U.S. sources and short-term capital gain
dividends, if such amounts are reported by the Fund. Non-U.S. shareholders are
subject to special U.S. tax certification requirements to avoid backup
withholding and claim any treaty benefits. Non-U.S. shareholders should consult
their tax advisors regarding the U.S. and foreign tax consequences of investing
in a Fund.
Other
Reporting and Withholding Requirements. Under
the Foreign Account Tax Compliance Act (“FATCA”), a 30% withholding tax is
imposed on income dividends paid by a Fund to certain foreign entities, referred
to as foreign financial institutions or nonfinancial foreign entities, that fail
to comply (or be deemed compliant) with extensive reporting and withholding
requirements designed to inform the U.S. Department of the Treasury of
U.S.-owned foreign investment accounts. After December 31, 2018, FATCA
withholding also would have applied to certain capital gain distributions,
return of capital distributions and the proceeds arising from the sale of Fund
Shares; however, based on proposed regulations issued by the IRS, which may be
relied upon currently, such withholding is no longer required unless final
regulations provide otherwise (which is not expected). Information about a
shareholder in a Fund may be disclosed to the IRS, non-U.S. taxing authorities
or other parties as necessary to comply with FATCA. Withholding also may be
required if a foreign entity that is a shareholder of a Fund fails to provide
the appropriate certifications or other documentation concerning its status
under FATCA.
Consult
Your Tax Professional.
Your investment in a Fund could have additional tax consequences. You should
consult your tax professional for information regarding all tax consequences
applicable to your investments in a Fund. More tax information relating to the
Funds is also provided in the SAI. This short summary is not intended as a
substitute for careful tax planning.
DETERMINATION
OF NET ASSET VALUE
Each
Fund calculates its NAV as of the regularly scheduled close of business of the
New York Stock Exchange (“NYSE”) (normally 4:00 p.m. Eastern time) on each day
that the NYSE is open for business, based on prices at the time of closing,
provided that any assets or liabilities denominated in currencies other than the
U.S. dollar shall be translated into U.S. dollars at the prevailing market rates
on the date of valuation as quoted by one or more major banks or dealers that
make a two-way market in such currencies (or a data service provider based on
quotations received from such banks or dealers). The NAV of each Fund is
calculated by dividing the value of the net assets of such Fund (i.e., the value
of its total assets less total liabilities) by the total number of outstanding
Shares, generally rounded to the nearest cent. The price of Fund Shares is based
on market price, and because ETF shares trade at market prices rather than NAV,
Shares may trade at a price greater than NAV (a premium) or less than NAV (a
discount).
In
calculating a Fund’s NAV, the Fund’s investments are generally valued using
market valuations. A market valuation generally means a valuation (i) obtained
from an exchange or a major market maker (or dealer), (ii) based on a price
quotation or other equivalent indication of value supplied by an exchange, a
pricing service, or a major market maker (or dealer), or (iii) based on
amortized cost, provided the amortized cost is approximately the value on
current sale of the security. In the case of shares of funds that are not traded
on an exchange, a market valuation means such fund’s published NAV per share. A
Fund may use various pricing services or discontinue the use of any pricing
service.
In
the event that current market valuations are not readily available or such
valuations do not reflect current market values, the affected investments will
be valued using fair value pricing pursuant to the pricing policy and procedures
approved by the Board of Trustees. A price obtained from a pricing service based
on such pricing service's valuation matrix may be used to fair value a security.
The frequency with which a Fund’s investments are valued using fair value
pricing is primarily a function of the types of securities and other assets in
which the Fund invests pursuant to its investment objective, strategies and
limitations.
Investments
that may be valued using fair value pricing include, but are not limited to: (i)
an unlisted security related to corporate actions; (ii) a restricted security
(i.e., one that may not be publicly sold without registration under the
Securities Act of 1933, as amended (the “Securities Act”)); (iii) a security
whose trading has been suspended or which has been de-listed from its primary
trading exchange; (iv) a security that is thinly traded; (v) a security in
default or bankruptcy proceedings for which there is no current market
quotation; (vi) a security affected by currency controls or restrictions; and
(vii) a security affected by a significant event (i.e., an event that occurs
after the close of the markets on which the security is traded but before the
time as of which the Fund’s NAV is computed and that may materially affect the
value of the Fund’s investments). Examples of events that may be “significant
events” are government actions, natural disasters, armed conflict, acts of
terrorism, and significant market fluctuations.
Valuing
a Fund’s investments using fair value pricing will result in using prices for
those investments that may differ from current market valuations. Use of fair
value prices and certain current market valuations could result in a difference
between the prices used to calculate a Fund’s NAV and the prices used by the
Fund’s Underlying Index, which, in turn, could result in a difference between
the Fund’s performance and the performance of the Fund’s Underlying Index.
Because
foreign markets may be open on different days than the days during which a
shareholder may purchase Shares, the value of a Fund’s investments may change on
days when shareholders are not able to purchase Shares. Additionally, due to
varying holiday schedules, redemption requests made on certain dates may result
in a settlement period exceeding seven calendar days.
The
value of assets denominated in foreign currencies is converted into U.S. dollars
using exchange rates deemed appropriate by the Adviser. Any use of a different
rate from the rates used by each Index Provider may adversely affect a Fund’s
ability to track its Underlying Index.
The
right of redemption may be suspended or the date of payment postponed with
respect to a Fund (1) for any period during which the NYSE or listing exchange
is closed (other than customary weekend and holiday closings), (2) for any
period during which trading on the NYSE or listing exchange is suspended or
restricted, (3) for any period during which an emergency exists as a result of
which disposal of the Fund’s portfolio securities or determination of its NAV is
not reasonably practicable, or (4) in such other circumstances as the SEC
permits.
Subject
to oversight by the Board of Trustees, the Adviser, as “valuation designee,”
performs fair value determinations of Fund investments. In addition, the
Adviser, as the valuation designee, is responsible for periodically assessing
any material risks associated with the determination of the fair value of a
Fund's investments; establishing and applying fair value methodologies; testing
the appropriateness of fair value methodologies; and overseeing and evaluating
third-party pricing services. The Adviser has established a fair value committee
to assist with its designated responsibilities as valuation
designee.
PREMIUM/DISCOUNT
AND SHARE INFORMATION
Once
available, information regarding how often the Shares of each Fund traded on the
national securities exchanges at a price above (i.e., at a premium to) or below
(i.e., at a discount to) the NAV of the Fund, the Fund's per share NAV, and the
median bid-ask spread of the Shares can be found at www.globalxetfs.com.
TOTAL
RETURN INFORMATION
Each
Fund had commenced operations as of the most recent fiscal year
end.
The
tables that follow present information about the total returns of each Fund's
Underlying Index and the total returns of each such Fund. The information
presented for each Fund is as of its fiscal year ended October 31,
2022.
“Annualized
Total Returns” or "Cumulative Total Returns" represent the total change in value
of an investment over the periods indicated.
Each
Fund’s per share NAV is the value of one share of the Fund as calculated in
accordance with the standard formula for valuing mutual fund Shares. The NAV
return is based on the NAV of each Fund and the market return is based on the
market prices of the Fund. The price used to calculate market prices is
determined by using the midpoint between the bid and the ask on the primary
stock exchange on which Shares of the Fund are listed for trading, as of the
time that the Fund’s NAV is calculated. Market and NAV returns assume that
dividends and capital gain distributions have been reinvested in the Fund at
market prices and NAV, respectively.
An
index is a statistical composite that tracks a specified financial market or
sector. Unlike a Fund, an Underlying Index does not actually hold a portfolio of
securities and therefore does not incur the expenses incurred by the Fund. These
expenses negatively impact the performance of a Fund. Also, market returns do
not include brokerage commissions that may be payable on secondary market
transactions. If brokerage commissions were included, market returns would be
lower. The returns shown in the tables below do not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption or
sale of Fund Shares. The investment return and principal value of Shares of a
Fund will vary with changes in market conditions. Shares of a Fund may be worth
more or less than their original cost when they are redeemed or sold in the
market. A Fund’s past performance is no guarantee of future results.
Annualized
Total Returns
Inception
to 10/31/22
|
|
|
|
|
|
|
|
|
|
|
|
|
NAV |
MARKET |
UNDERLYING
INDEX |
Global
X MSCI Colombia ETF 1* |
-0.33% |
-0.46% |
0.42% |
Global
X MSCI China Consumer Discretionary ETF 2** |
0.72% |
0.71% |
1.29% |
Global
X MSCI China Industrials ETF
3*** |
-1.20% |
-1.17% |
-0.67% |
Global
X MSCI China Communication Services ETF 4**** |
-2.25% |
-2.27% |
-1.55% |
Global
X MSCI China Financials ETF 5***** |
-0.87% |
-0.91% |
-0.30% |
Global
X MSCI China Energy ETF 6****** |
1.79% |
1.82% |
2.69% |
Global
X MSCI China Materials ETF 7******* |
-3.39% |
-3.39% |
-2.97% |
Global
X MSCI Norway ETF (formerly known as Global X FTSE Nordic Region ETF)
8******** |
1.30% |
1.30% |
1.82% |
Global
X FTSE Southeast Asia ETF 9 |
2.17% |
2.25% |
2.84% |
Global
X MSCI Argentina ETF 10********* |
1.37% |
1.37% |
1.93% |
Global
X MSCI Greece ETF 11********** |
-4.18% |
-4.23% |
-3.39% |
Global
X MSCI Nigeria ETF 12*********** |
-11.91% |
-16.43% |
-9.90% |
Global
X MSCI Next Emerging & Frontier ETF 13************ |
-1.28% |
-1.21% |
-0.56% |
Global
X MSCI Portugal ETF 14************* |
-1.88% |
-1.90% |
-1.74% |
Global
X DAX Germany ETF 15 |
1.07% |
1.05% |
1.83% |
Global
X MSCI Pakistan ETF 16 |
-11.69% |
-11.75% |
-10.10% |
Global
X MSCI China Consumer Staples ETF 17 |
6.18% |
5.91% |
6.89% |
Global
X MSCI China Health Care ETF 18 |
-2.49% |
-2.64% |
-1.80% |
Global
X MSCI China Information Technology ETF 19 |
0.98% |
0.91% |
1.90% |
Global
X MSCI China Real Estate ETF 20 |
-22.56% |
-22.64% |
-22.84% |
Global
X MSCI China Utilities ETF 21 |
-2.97% |
-2.96% |
-2.15% |
Global
X MSCI Vietnam ETF22 |
N/A |
N/A |
N/A |
1
For the period since inception on 02/05/09 to 10/31/22
2
For the period since inception on 11/30/09 to 10/31/22
3
For the period since inception on 11/30/09 to 10/31/22
4
For the period since inception on 12/08/09 to 10/31/22
5
For the period since inception on 12/10/09 to 10/31/22
6
For the period since inception on 12/15/09 to
10/31/22
7
For the period since inception on 01/12/10 to 10/31/22
8
For the period since inception on 11/09/10 to 10/31/22
Performance includes the performance of the Global X MSCI Norway ETF, the
predecessor fund.
9
For the period since inception on 02/16/11 to
10/31/22
10
For the period since inception on 03/02/11 to
10/31/22
11
For the period since inception on 12/07/11 to
10/31/22
12 For
the period since inception on 04/02/13 to 10/31/22
13
For the period since inception on 11/06/13 to 10/31/22
14
For the period since inception on 11/12/13 to 10/31/22
15 For
the period since inception on 10/22/14 to 10/31/22. Performance includes the
performance of the Horizons DAX Germany ETF, the predecessor fund.
16
For the period since inception on 04/22/15 to 10/31/22
17
For the period since inception on 12/07/18 to 10/31/22
18 For
the period since inception on 12/07/18 to 10/31/22
19 For
the period since inception on 12/07/18 to 10/31/22
20 For
the period since inception on 12/07/18 to 10/31/22
21
For the period since inception on 12/07/18 to 10/31/22
22
For the period since inception on 12/07/21 to 10/31/22
*
Hybrid
index performance reflects the performance of the FTSE Colombia 20 Index through
July 14, 2014, the MSCI All Colombia Capped Index through August 30, 2016 and
the MSCI All Colombia Select 25/50 Index thereafter.
**
Hybrid
index performance reflects the performance of the Solactive China Consumer Total
Return Index through December 5, 2018, and the MSCI China Consumer Discretionary
10/50 Index thereafter.
***
Hybrid
index performance reflects the performance of the Solactive China Industrials
Total Return Index through December 5, 2018, and the MSCI China Industrials
10/50 Index thereafter.
****
Hybrid
Index performance reflects the performance of the Solactive China Technology
Index through December 13, 2011, the NASDAQ OMX China Technology Index through
December 5, 2018, and the MSCI China Communication Services 10/50 Index
thereafter.
*****
Hybrid
index performance reflects the performance of the Solactive China Financials
Total Return Index through December 5, 2018, and the MSCI China Financials 10/50
Index thereafter.
******
Hybrid
index performance reflects the performance of the Solactive China Energy Total
Return Index through December 5, 2018, and the MSCI China Energy IMI Plus 10/50
Index thereafter.
*******
Hybrid
index performance reflects the performance of the Solactive China Materials
Total Return Index through December 5, 2018, and the MSCI China Materials 10/50
Index thereafter.
********
Hybrid
index performance reflects the performance of the FTSE Norway 30 Index through
July 14, 2014 and the MSCI Norway IMI 25/50 Index thereafter.
*********
Hybrid
index performance reflects the performance of the FTSE Argentina 20 Index
through August 14, 2014 and the MSCI All Argentina 25/50 Index
thereafter.
**********
Hybrid
index performance reflects the performance of the FTSE/ATHEX Custom Capped Index
through February 29, 2016 and the MSCI All Greece Select 25/50 Index
thereafter.
***********
Hybrid
index performance reflects the performance of the Solactive Nigeria Index
through August 14, 2014 and the MSCI All Nigeria Select 25/50 Index
thereafter.
************
Hybrid
index performance reflects the performance of the Solactive Next Emerging &
Frontier Index through January 15, 2019, and the MSCI Select Emerging and
Frontier Markets Access Index thereafter.
*************
Hybrid
index performance reflects the performance of the FTSE Portugal 20 Index through
December 5, 2016, and the MSCI All Portugal Plus 25/50 Index
thereafter.
Cumulative
Total Returns
Inception
to 10/31/22
|
|
|
|
|
|
|
|
|
|
|
|
|
NAV |
MARKET |
UNDERLYING
INDEX |
Global
X MSCI Colombia ETF 1* |
-4.39% |
-6.19% |
5.95% |
Global
X MSCI China Consumer Discretionary ETF 2** |
9.71% |
9.60% |
17.98% |
Global
X MSCI China Industrials ETF 3*** |
-14.42% |
-14.16% |
-8.36% |
Global
X MSCI China Communication Services ETF 4**** |
-25.46% |
-25.64% |
-18.23% |
Global
X MSCI China Financials ETF 5***** |
-10.70% |
-11.07% |
-3.76% |
Global
X MSCI China Energy ETF 6****** |
25.65% |
26.21% |
40.82% |
Global
X MSCI China Materials ETF 7******* |
-35.70% |
-35.71% |
-32.06% |
Global
X MSCI Norway ETF (formerly known as Global X FTSE Nordic Region ETF)
8******** |
16.78% |
16.73% |
24.12% |
Global
X FTSE Southeast Asia ETF 9 |
28.63% |
29.78% |
38.80% |
Global
X MSCI Argentina ETF 10********* |
17.24% |
17.16% |
25.05% |
Global
X MSCI Greece ETF 11********** |
-37.24% |
-37.58% |
-31.35% |
Global
X MSCI Nigeria ETF 12*********** |
-70.34% |
-82.11% |
-63.18% |
Global
X MSCI Next Emerging & Frontier ETF 13************ |
-10.90% |
-10.38% |
-4.90% |
Global
X MSCI Portugal ETF 14************* |
-15.65% |
-15.79% |
-14.60% |
Global
X DAX Germany ETF 15 |
8.96% |
8.79% |
15.68% |
Global
X MSCI Pakistan ETF 16 |
-60.80% |
-60.99% |
-55.14% |
Global
X MSCI China Consumer Staples ETF 17 |
26.35% |
25.12% |
29.67% |
Global
X MSCI China Health Care ETF 18 |
-9.36% |
-9.90% |
-6.82% |
Global
X MSCI China Information Technology ETF 19 |
3.86% |
3.60% |
7.63% |
Global
X MSCI China Real Estate ETF 20 |
-63.12% |
-63.27% |
-63.63% |
Global
X MSCI China Utilities ETF 21 |
-11.09% |
-11.05% |
-8.14% |
Global
X MSCI Vietnam ETF22 |
-42.60% |
-41.82% |
-42.33% |
1
For the period since inception on 02/05/09 to 10/31/22
2
For the period since inception on 11/30/09 to 10/31/22
3
For the period since inception on 11/30/09 to 10/31/22
4
For the period since inception on 12/08/09 to 10/31/22
5
For the period since inception on 12/10/09 to 10/31/22
6 For
the period since inception on 12/15/09 to 10/31/22
7
For the period since inception on 01/12/10 to
10/31/22
8
For the period since inception on 11/09/10 to 10/31/22
Performance includes the performance of the Global X MSCI Norway ETF, the
predecessor fund.
9
For the period since inception on 02/16/11 to
10/31/22
10 For
the period since inception on 03/02/11 to 10/31/22
11
For the period since inception on 12/07/11 to
10/31/22
12 For
the period since inception on 04/02/13 to 10/31/22
13
For the period since inception on 11/06/13 to 10/31/22
14
For the period since inception on 11/12/13 to 10/31/22
15 For
the period since inception on 10/22/14 to 10/31/22.
Performance
includes the performance of the Horizons DAX Germany ETF, the predecessor
fund.
16
For the period since inception on 04/22/15 to 10/31/22
17
For the period since inception on 12/07/18 to 10/31/22
18 For
the period since inception on 12/07/18 to 10/31/22
19 For
the period since inception on 12/07/18 to 10/31/22
20 For
the period since inception on 12/07/18 to 10/31/22
21
For the period since inception on 12/07/18 to 10/31/22
22
For the period since inception on 12/07/21 to 10/31/22
*
Hybrid
index performance reflects the performance of the FTSE Colombia 20 Index through
July 14, 2014, the MSCI All Colombia Capped Index through August 30, 2016 and
the MSCI All Colombia Select 25/50 Index thereafter.
**
Hybrid
index performance reflects the performance of the Solactive China Consumer Total
Return Index through December 5, 2018, and the MSCI China Consumer Discretionary
10/50 Index thereafter.
***
Hybrid
index performance reflects the performance of the Solactive China Industrials
Total Return Index through December 5, 2018, and the MSCI China Industrials
10/50 Index thereafter.
****
Hybrid
Index performance reflects the performance of the Solactive China Technology
Index through December 13, 2011, the NASDAQ OMX China Technology Index through
December 5, 2018, and the MSCI China Communication Services 10/50 Index
thereafter.
*****
Hybrid
index performance reflects the performance of the Solactive China Financials
Total Return Index through December 5, 2018, and the MSCI China Financials 10/50
Index thereafter.
******
Hybrid
index performance reflects the performance of the Solactive China Energy Total
Return Index through December 5, 2018, and the MSCI China Energy IMI Plus 10/50
Index thereafter.
*******
Hybrid
index performance reflects the performance of the Solactive China Materials
Total Return Index through December 5, 2018, and the MSCI China Materials 10/50
Index thereafter.
********
Hybrid
index performance reflects the performance of the FTSE Norway 30 Index through
July 14, 2014 and the MSCI Norway IMI 25/50 Index thereafter.
*********
Hybrid
index performance reflects the performance of the FTSE Argentina 20 Index
through August 14, 2014 and the MSCI All Argentina 25/50 Index
thereafter.
**********
Hybrid
index performance reflects the performance of the FTSE/ATHEX Custom Capped Index
through February 29, 2016 and the MSCI All Greece Select 25/50 Index
thereafter.
***********
Hybrid
index performance reflects the performance of the Solactive Nigeria Index
through August 14, 2014 and the MSCI All Nigeria Select 25/50 Index
thereafter.
************
Hybrid
index performance reflects the performance of the Solactive Next Emerging &
Frontier Index through January 15, 2019, and the MSCI Select Emerging and
Frontier Markets Access Index thereafter.
*************
Hybrid
index performance reflects the performance of the FTSE Portugal 20 Index through
December 5, 2016, and the MSCI All Portugal Plus 25/50 Index
thereafter.
INFORMATION
REGARDING THE INDICES AND THE INDEX PROVIDERS
MSCI
All Colombia Select 25/50 Index
The
MSCI All Colombia Select 25/50 Index applies additional liquidity screens on the
MSCI All Colombia Index, which is designed to represent the performance of the
broad Colombia equity universe. The broad Colombia equity universe includes
securities that are classified in Colombia according to the MSCI Global
Investable Market Index Methodology, together with companies that are
headquartered or listed in Colombia and carry out the majority of their
operations in Colombia. A specific capping methodology is applied to facilitate
compliance with the rules governing the listing of financial products on
exchanges in the United States. The index targets a minimum of 25 securities and
20 issuers at construction. The index is designed to take into account the 25%
and 50% concentration constraints required for a fund to qualify as a RIC in the
United States under the Code. At each quarterly rebalance, no single index
constituent may exceed 25% of the index weight, and the sum of all constituents
with index weights greater than 5% may not exceed 50%. The index is maintained
by MSCI.
MSCI
China Consumer Discretionary 10/50 Index
The
MSCI China Consumer Discretionary 10/50 Index tracks the performance of
companies in the MSCI China Index (the "Parent Index") that are classified as
engaged in the consumer discretionary sector, as defined by MSCI, Inc., the
provider of the MSCI China Consumer Discretionary 10/50 Index. The Parent Index
is a free float-adjusted market capitalization-weighted index designed to
measure the performance of securities that are classified as operating in China
according to the MSCI Global Investable Markets Index Methodology, and that
satisfy minimum market capitalization and liquidity thresholds. The securities
eligible for inclusion in the MSCI China Consumer Discretionary 10/50 Index
include H-Shares (securities of companies incorporated in China that are
denominated in Hong Kong Dollars and listed on the Hong Kong Stock Exchange (the
"HKSE")), B-Shares (securities of companies denominated in U.S. dollars or Hong
Kong dollars and listed on Shanghai Stock Exchange (the "SSE") or Shenzen Stock
Exchange (the "SZSE")), Red Chips (securities of companies with a majority of
their business operations in mainland China and that are controlled by the
national government or local governments of China, traded on the HKSE in Hong
Kong dollars), P-Chips (securities of companies with the majority of their
business operations in mainland China and controlled by individuals in China,
but that are incorporated outside of China), A-Shares (securities of companies
incorporated in mainland China that trade on Chinese exchanges in renminbi) that
are accessible through the Shanghai-Hong Kong Stock Connect program ("Shanghai
Connect") or the Shenzhen-Hong Kong Stock Connect program ("Shenzhen Connect",
and together with Shanghai Connect, "Stock Connect Programs"), and foreign
listings such as American Depository Receipts ("ADRs"). From time to time, other
stock exchanges in China may participate in Stock Connect, and A-shares listed
and traded on such other stock exchanges and accessible through Stock Connect
may be added to the MSCI China Consumer Discretionary 10/50 Index, as determined
by MSCI.
The
MSCI China Consumer Discretionary 10/50 Index follows a rules-based methodology
that is designed to select constituents of the Parent Index that are classified
in the consumer discretionary sector under the Global Industry Classification
System (GICS). The MSCI China Consumer Discretionary 10/50 Index is weighted
according to each component's free-float adjusted market capitalization, but is
modified so that, as of the rebalance date, no group entity (defined by the
Index Provider as companies with a controlling stake owned by one entity)
constitutes more than 10% of the MSCI China Consumer Discretionary 10/50 Index
and so that, in the aggregate, the individual group entities that would
represent more than 5% of the MSCI China Consumer Discretionary 10/50 Index
represent no more than 50% of the MSCI China Consumer Discretionary 10/50 Index
("10/50 Cap"). The MSCI China Consumer Discretionary 10/50 Index is
reconstituted and re-weighted quarterly. The MSCI China Consumer Discretionary
10/50 Index may include large- and mid-capitalization companies. As of
December 31, 2022, the MSCI China Consumer Discretionary 10/50 Index had 73
constituents.
MSCI
China Industrials 10/50 Index
The
MSCI China Industrials 10/50 Index tracks the performance of companies in the
MSCI China Index (the "Parent Index") that are classified as engaged in the
industrials sector, as defined by MSCI, Inc., the provider of the MSCI China
Industrials 10/50 Index. The Parent Index is a free float-adjusted market
capitalization-weighted index designed to measure the performance of securities
that are classified as operating in China according to the MSCI Global
Investable Markets Index Methodology, and that satisfy minimum market
capitalization and liquidity thresholds. The securities eligible for inclusion
in the MSCI China Industrials 10/50 Index include H-Shares (securities of
companies incorporated in China that are denominated in Hong Kong Dollars and
listed on the Hong Kong Stock Exchange (the "HKSE")), B-Shares (securities of
companies denominated in U.S. dollars or Hong Kong dollars and listed on
Shanghai Stock Exchange (the "SSE") or Shenzen Stock Exchange (the "SZSE")), Red
Chips (securities of companies with a majority of their business operations in
mainland China and that are controlled by the national government or local
governments of China, traded on the HKSE in Hong Kong dollars), P-Chips
(securities of companies with the majority of their business operations in
mainland China and controlled by individuals
in
China, but that are incorporated outside of China), A-Shares (securities of
companies incorporated in mainland China that trade on Chinese exchanges in
renminbi) that are accessible through the Shanghai-Hong Kong Stock Connect
program ("Shanghai Connect") or the Shenzhen-Hong Kong Stock Connect program
("Shenzhen Connect", and together with Shanghai Connect, "Stock Connect
Programs"), and foreign listings such as American Depository Receipts ("ADRs").
From time to time, other stock exchanges in China may participate in Stock
Connect, and A-shares listed and traded on such other stock exchanges and
accessible through Stock Connect may be added to the MSCI China Industrials
10/50 Index, as determined by MSCI.
The
MSCI China Industrials 10/50 Index follows a rules-based methodology that is
designed to select constituents of the Parent Index that are classified in the
industrials sector under the Global Industry Classification System (GICS). The
MSCI China Industrials 10/50 Index is weighted according to each component's
free-float adjusted market capitalization, but is modified so that, as of the
rebalance date, no group entity (defined by the Index Provider as companies with
a controlling stake owned by one entity) constitutes more than 10% of the MSCI
China Industrials 10/50 Index and so that, in the aggregate, the individual
group entities that would represent more than 5% of the MSCI China Industrials
10/50 Index represent no more than 50% of the MSCI China Industrials 10/50 Index
("10/50 Cap"). The MSCI China Industrials 10/50 Index is reconstituted and
re-weighted quarterly. The MSCI China Industrials 10/50 Index may include large-
and mid-capitalization companies. As of December 31, 2022, the MSCI China
Industrials 10/50 Index had 111 constituents.
MSCI
China Communication Services 10/50 Index
The
MSCI China Communication Services 10/50 Index tracks the performance of
companies in the MSCI China Index (the "Parent Index") that are classified in
the communication services sector, as defined by MSCI, Inc., the provider of the
MSCI China Communication Services 10/50 Index. The Parent Index is a free
float-adjusted market capitalization-weighted index designed to measure the
performance of securities that are classified as operating in China according to
the MSCI Global Investable Markets Index Methodology, and that satisfy minimum
market capitalization and liquidity thresholds. The securities eligible for
inclusion in the MSCI China Communication Services 10/50 Index include H-Shares
(securities of companies incorporated in China that are denominated in Hong Kong
Dollars and listed on the Hong Kong Stock Exchange (the "HKSE")), B-Shares
(securities of companies denominated in U.S. dollars or Hong Kong dollars and
listed on Shanghai Stock Exchange (the "SSE") or Shenzen Stock Exchange (the
"SZSE")), Red Chips (securities of companies with a majority of their business
operations in mainland China and that are controlled by the national government
or local governments of China, traded on the HKSE in Hong Kong dollars), P-Chips
(securities of companies with the majority of their business operations in
mainland China and controlled by individuals in China, but that are incorporated
outside of China), A-Shares (securities of companies incorporated in mainland
China that trade on Chinese exchanges in renminbi) that are accessible through
the Shanghai-Hong Kong Stock Connect program ("Shanghai Connect") or the
Shenzhen-Hong Kong Stock Connect program ("Shenzhen Connect", and together with
Shanghai Connect, "Stock Connect Programs"), and foreign listings such as
American Depository Receipts ("ADRs"). From time to time, other stock exchanges
in China may participate in Stock Connect, and A-shares listed and traded on
such other stock exchanges and accessible through Stock Connect may be added to
the MSCI China Communication Services 10/50 Index, as determined by
MSCI.
The
MSCI China Communication Services 10/50 Index follows a rules-based methodology
that is designed to select constituents of the Parent Index that are classified
as engaged in the communication services sector under the Global Industry
Classification System (GICS). The MSCI China Communication Services 10/50 Index
is weighted according to each component's free-float adjusted market
capitalization, but is modified so that, as of the rebalance date, no group
entity (defined by the Index Provider as companies with a controlling stake
owned by one entity) constitutes more than 10% of the MSCI China Communication
Services 10/50 Index and so that, in the aggregate, the individual group
entities that would represent more than 5% of the MSCI China Communication
Services 10/50 Index represent no more than 50% of the MSCI China Communication
Services 10/50 Index ("10/50 Cap"). The MSCI China Communication Services 10/50
Index is reconstituted and re-weighted quarterly. The MSCI China Communication
Services 10/50 Index may include large- and mid-capitalization companies. As of
December 31, 2022, the MSCI China Communication Services 10/50 Index had 23
constituents.
MSCI
China Financials 10/50 Index
The
MSCI China Financials 10/50 Index tracks the performance of companies in the
MSCI China Index (the "Parent Index") that are classified as engaged in the
financials sector, as defined by MSCI, Inc., the provider of the MSCI China
Financials 10/50 Index. The Parent Index is a free float-adjusted market
capitalization-weighted index designed to measure the performance of securities
that are classified as operating in China according to the MSCI Global
Investable Markets Index Methodology, and that satisfy minimum market
capitalization and liquidity thresholds. The securities eligible for inclusion
in the MSCI China Financials 10/50 Index include H-Shares (securities of
companies incorporated in China that are denominated in Hong Kong Dollars and
listed on the Hong Kong Stock Exchange (the "HKSE")), B-Shares (securities of
companies
denominated
in U.S. dollars or Hong Kong dollars and listed on Shanghai Stock Exchange (the
"SSE") or Shenzen Stock Exchange (the "SZSE")), Red Chips (securities of
companies with a majority of their business operations in mainland China and
that are controlled by the national government or local governments of China,
traded on the HKSE in Hong Kong dollars), P-Chips (securities of companies with
the majority of their business operations in mainland China and controlled by
individuals in China, but that are incorporated outside of China), A-Shares
(securities of companies incorporated in mainland China that trade on Chinese
exchanges in renminbi) that are accessible through the Shanghai-Hong Kong Stock
Connect program ("Shanghai Connect") or the Shenzhen-Hong Kong Stock Connect
program ("Shenzhen Connect", and together with Shanghai Connect, "Stock Connect
Programs"), and foreign listings such as American Depository Receipts ("ADRs").
From time to time, other stock exchanges in China may participate in Stock
Connect, and A-shares listed and traded on such other stock exchanges and
accessible through Stock Connect may be added to the MSCI China Financials 10/50
Index, as determined by MSCI.
The
MSCI China Financials 10/50 Index follows a rules-based methodology that is
designed to select constituents of the Parent Index that are classified in the
financials sector under the Global Industry Classification System (GICS). The
MSCI China Financials 10/50 Index is weighted according to each component's
free-float adjusted market capitalization, but is modified so that, as of the
rebalance date, no group entity (defined by the Index Provider as companies with
a controlling stake owned by one entity) constitutes more than 10% of the MSCI
China Financials 10/50 Index and so that, in the aggregate, the individual group
entities that would represent more than 5% of the MSCI China Financials 10/50
Index represent no more than 50% of the MSCI China Financials 10/50 Index
("10/50 Cap"). The MSCI China Financials 10/50 Index is reconstituted and
re-weighted quarterly. The MSCI China Financials 10/50 Index may include large-
and mid-capitalization companies. As of December 31, 2022, the MSCI China
Financials 10/50 Index had 92 constituents.
MSCI
China Energy IMI Plus 10/50 Index
The
MSCI China Energy IMI Plus 10/50 Index tracks the performance of companies in
the MSCI China Investable Market Index (the "Parent Index") that are classified
as engaged in the energy sector, as defined by MSCI, Inc., the provider of the
MSCI China Energy IMI Plus 10/50 Index. The Parent Index is a free
float-adjusted market capitalization-weighted index designed to measure the
performance of securities that are classified as operating in China according to
the MSCI Global Investable Markets Index Methodology, and that satisfy minimum
market capitalization and liquidity thresholds. The securities eligible for
inclusion in the MSCI China Energy IMI Plus 10/50 Index include H-Shares
(securities of companies incorporated in China that are denominated in Hong Kong
Dollars and listed on the Hong Kong Stock Exchange (the "HKSE")), B-Shares
(securities of companies denominated in U.S. dollars or Hong Kong dollars and
listed on Shanghai Stock Exchange (the "SSE") or Shenzen Stock Exchange (the
"SZSE")), Red Chips (securities of companies with a majority of their business
operations in mainland China and that are controlled by the national government
or local governments of China, traded on the HKSE in Hong Kong dollars), P-Chips
(securities of companies with the majority of their business operations in
mainland China and controlled by individuals in China, but that are incorporated
outside of China), A-Shares (securities of companies incorporated in mainland
China that trade on Chinese exchanges in renminbi) that are accessible through
the Shanghai-Hong Kong Stock Connect program ("Shanghai Connect") or the
Shenzhen-Hong Kong Stock Connect program ("Shenzhen Connect", and together with
Shanghai Connect, "Stock Connect Programs"), and foreign listings such as
American Depository Receipts ("ADRs"). From time to time, other stock exchanges
in China may participate in Stock Connect, and A-shares listed and traded on
such other stock exchanges and accessible through Stock Connect may be added to
the MSCI China Energy IMI Plus 10/50 Index, as determined by MSCI.
The
MSCI China Energy IMI Plus 10/50 Index follows a rules-based methodology that is
designed to select constituents of the Parent Index that are classified in the
energy sector under the Global Industry Classification System (GICS). The MSCI
China Energy IMI Plus 10/50 Index is weighted according to each component's
free-float adjusted market capitalization, but is modified so that, as of the
rebalance date, no issuer constitutes more than 10% of the MSCI China Energy IMI
Plus 10/50 Index and so that, in the aggregate, the issuers that would represent
more than 5% of the MSCI China Energy IMI Plus 10/50 Index represent no more
than 50% of the MSCI China Energy IMI Plus 10/50 Index ("10/50 Cap"). The MSCI
China Energy IMI Plus 10/50 Index is reconstituted and re-weighted quarterly.
The MSCI China Energy IMI Plus 10/50 Index may include large-, mid-and
small-capitalization companies. As of December 31, 2022, the MSCI China
Energy IMI Plus 10/50 Index had 28 constituents.
MSCI
China Materials 10/50 Index
The
MSCI China Materials 10/50 Index tracks the performance of companies in the MSCI
China Index (the "Parent Index") that are classified as engaged in the materials
sector, as defined by MSCI, Inc., the provider of the MSCI China Materials 10/50
Index. The Parent Index is a free float-adjusted market capitalization-weighted
index designed to measure the performance of securities that are classified as
operating in China according to the MSCI Global Investable Markets Index
Methodology, and
that
satisfy minimum market capitalization and liquidity thresholds. The securities
eligible for inclusion in the MSCI China Materials 10/50 Index include H-Shares
(securities of companies incorporated in China that are denominated in Hong Kong
Dollars and listed on the Hong Kong Stock Exchange (the "HKSE")), B-Shares
(securities of companies denominated in U.S. dollars or Hong Kong dollars and
listed on Shanghai Stock Exchange (the "SSE") or Shenzen Stock Exchange (the
"SZSE")), Red Chips (securities of companies with a majority of their business
operations in mainland China and that are controlled by the national government
or local governments of China, traded on the HKSE in Hong Kong dollars), P-Chips
(securities of companies with the majority of their business operations in
mainland China and controlled by individuals in China, but that are incorporated
outside of China), A-Shares (securities of companies incorporated in mainland
China that trade on Chinese exchanges in renminbi) that are accessible through
the Shanghai-Hong Kong Stock Connect program ("Shanghai Connect") or the
Shenzhen-Hong Kong Stock Connect program ("Shenzhen Connect", and together with
Shanghai Connect, "Stock Connect Programs"), and foreign listings such as
American Depository Receipts ("ADRs"). From time to time, other stock exchanges
in China may participate in Stock Connect, and A-shares listed and traded on
such other stock exchanges and accessible through Stock Connect may be added to
the MSCI China Materials 10/50 Index, as determined by MSCI.
The
MSCI China Materials 10/50 Index follows a rules-based methodology that is
designed to select constituents of the Parent Index that are classified in the
materials sector under the Global Industry Classification System (GICS). The
MSCI China Materials 10/50 Index is weighted according to each component's
free-float adjusted market capitalization, but is modified so that, as of the
rebalance date, no group entity (defined by the Index Provider as companies with
a controlling stake owned by one entity) constitutes more than 10% of the MSCI
China Materials 10/50 Index and so that, in the aggregate, the individual group
entities that would represent more than 5% of the MSCI China Materials 10/50
Index represent no more than 50% of the MSCI China Materials 10/50 Index ("10/50
Cap"). The MSCI China Materials 10/50 Index is reconstituted and re-weighted
quarterly. The MSCI China Materials 10/50 Index may include large- and
mid-capitalization companies. As of December 31, 2022, the MSCI China
Materials 10/50 Index had 105 constituents.
MSCI
Norway IMI 25/50 Index
The
MSCI Norway IMI 25/50 Index is designed to measure the performance of the large,
mid and small cap segments of the Norwegian market. It applies certain
investment limits that are imposed on RICs, under the Code. With 69 constituents
as of December 31, 2022, the index covers approximately 99% of the free
float-adjusted market capitalization in Norway. The index is maintained by
MSCI.
FTSE/ASEAN
40 Index
The
FTSE/ASEAN 40 Index tracks the equity performance of the 40 largest companies in
the five ASEAN regions: Singapore, Malaysia, Indonesia, Thailand and
Philippines. The index is free-float adjusted and weighted by modified market
capitalization and designed using eligible stocks within the FTSE All-World
universe. Stocks are liquidity screened to ensure that the index is tradable.
The index is maintained by FTSE.
MSCI
All Argentina 25/50 Index
The
MSCI All Argentina 25/50 Index is designed to represent the performance of the
broad Argentina equity universe, while including a minimum number of
constituents. The broad Argentina equity universe includes securities that are
classified in Argentina according to the MSCI Global Investable Market Index
Methodology, together with companies that are headquartered or listed in
Argentina and carry out the majority of their operations in Argentina. The index
targets a minimum of 25 securities and 20 issuers at construction. The index is
designed to take into account the 25% and 50% concentration constraints required
for a fund to qualify as a RIC in the United States under the Code. At each
quarterly rebalance, no single index constituent may exceed 25% of the index
weight, and the sum of all constituents with index weights greater than 5% may
not exceed 50%. The index is maintained by MSCI.
MSCI
All Greece Select 25/50 Index
The
MSCI All Greece Select 25/50 Index is designed to represent the performance of
the Broad Greece Equity Universe, while including constituents with minimum
levels of liquidity. The Broad Greece Equity Universe includes securities that
are classified in Greece according to the MSCI Global Investable Market Index
Methodology, companies that are headquartered or listed in Greece and carry out
the majority of their operations in Greece, and companies with economic exposure
greater than 20% to Greece, as defined in the MSCI Economic Exposure Data
Methodology. A specific capping methodology is applied to facilitate compliance
with the rules governing the listing of financial products on exchanges in the
United States. The index is maintained by MSCI.
MSCI
All Nigeria Select 25/50 Index
The
MSCI All Nigeria Select 25/50 Index is designed to represent the performance of
the broad Nigeria equity universe, while including a minimum number of
constituents. The broad Nigeria equity universe includes securities that are
classified in Nigeria according to the MSCI Global Investable Market Index
Methodology, together with companies that are headquartered or listed in Nigeria
and carry out the majority of their operations in Nigeria. Further, the Index
only includes securities with a minimum liquidity threshold of USD$100,000
average daily traded value, subject to 20 constituents being included in the
index. If not, securities are added in the decreasing order of average daily
traded value until 20 securities are selected. The index targets a minimum of 20
securities at construction. The Index is maintained by MSCI.
MSCI
Select Emerging and Frontier Markets Access Index
The
MSCI Select Emerging and Frontier Markets Access Index is designed to reflect
equity performance of select emerging markets and frontier markets companies
while maintaining diversification across individual countries, sectors and
issuers. The index is constructed from the MSCI EFM ex BRICKT (Brazil, Russia,
India, China, South Korea & Taiwan) Index (the "Parent
Index").
Securities from the Parent Index are classified into emerging markets countries
and frontier markets countries based on the market classification approach of
MSCI, the provider of the index. Constituents within the emerging markets
countries classification are weighted by free-float adjusted market
capitalization and constituents within the frontier markets countries
classification are weighted by their double free-float adjusted market
capitalization, in each case, subject
to
applicable country, sector, and issuer capping constraints. As of
December 31, 2022, the index consisted of issuers in the following
countries: Indonesia, Malaysia, Mexico, Philippines, Poland, Qatar, Saudi
Arabia, South Africa, Thailand, Turkey, United Arab Emirates and Vietnam. The
index is maintained by MSCI.
MSCI
All Portugal Plus 25/50 Index
The
MSCI All Portugal Plus 25/50 Index is designed to represent the performance of
the Broad Portugal Equity Universe, while including constituents with minimum
levels of liquidity. The Broad Portugal Equity Universe includes securities that
are classified in Portugal according to the MSCI Global Investable Market Index
Methodology, together with companies that are headquartered or listed in
Portugal and carry out the majority of their operations in Portugal. A specific
capping methodology is applied to facilitate compliance with the rules governing
the listing of financial products on exchanges in the United States. The index
is maintained by MSCI.
DAX
Index
The
DAX Index tracks the segment of the largest and most actively traded companies -
known as blue chips - on the German equities market. It contains the shares of
the 30 largest and most liquid companies admitted to the Frankfurt Stock
Exchange in the Prime Standard segment. The DAX Index represents about 80% of
the free-float market capitalization authorized in Germany.
MSCI
All Pakistan Select 25/50 Index
The
MSCI All Pakistan Select 25/50 Index is designed to represent the performance of
the broad Pakistan equity universe, while including a minimum number of
constituents. The broad Pakistan equity universe includes securities that are
classified in Pakistan according to the MSCI Global Investable Market Index
Methodology, together with companies that are headquartered or listed in
Pakistan and carry out the majority of their operations in Pakistan. The index
targets a minimum of 25 securities and 20 issuers at construction. The index is
designed to take into account the 25% and 50% concentration constraints required
for a fund to qualify as a RIC in the United States under the Code. At each
quarterly rebalance, no single index constituent may exceed 25% of the index
weight, and the sum of all constituents with index weights greater than 5% may
not exceed 50%. The index is maintained by MSCI.
MSCI
China Consumer Staples 10/50 Index
The
MSCI China Consumer Staples 10/50 Index tracks the performance of companies in
the MSCI China Index (the "Parent Index") that are classified as engaged in the
consumer staples sector, as defined by MSCI, Inc., the provider of the MSCI
China Consumer Staples 10/50 Index. The Parent Index is a free float-adjusted
market capitalization-weighted index designed to measure the performance of
securities that are classified as operating in China according to the MSCI
Global Investable Markets Index Methodology, and that satisfy minimum market
capitalization and liquidity thresholds. The securities eligible for inclusion
in the MSCI China Consumer Staples 10/50 Index include H-Shares (securities of
companies incorporated in China that are denominated in Hong Kong Dollars and
listed on the Hong Kong Stock Exchange (the "HKSE")), B-Shares (securities
of
companies denominated in U.S. dollars or Hong Kong dollars and listed on
Shanghai Stock Exchange (the "SSE") or Shenzen Stock Exchange (the "SZSE")), Red
Chips (securities of companies with a majority of their business operations in
mainland China and that are controlled by the national government or local
governments of China, traded on the HKSE in Hong Kong dollars), P-Chips
(securities of companies with the majority of their business operations in
mainland China and controlled by individuals in China, but that are incorporated
outside of China), A-Shares (securities of companies incorporated in mainland
China that trade on Chinese exchanges in renminbi) that are accessible through
the Shanghai-Hong Kong Stock Connect program ("Shanghai Connect") or the
Shenzhen-Hong Kong Stock Connect program ("Shenzhen Connect", and together with
Shanghai Connect, "Stock Connect Programs"), and foreign listings such as
American Depository Receipts ("ADRs"). From time to time, other stock exchanges
in China may participate in Stock Connect, and A-shares listed and traded on
such other stock exchanges and accessible through Stock Connect may be added to
the MSCI China Consumer Staples 10/50 Index, as determined by MSCI.
The
MSCI China Consumer Staples 10/50 Index follows a rules-based methodology that
is designed to select constituents of the Parent Index that are classified in
the consumer staples sector under the Global Industry Classification System
(GICS). The MSCI China Consumer Staples 10/50 Index is weighted according to
each component's free-float adjusted market capitalization, but is modified so
that, as of the rebalance date, no group entity (defined by the Index Provider
as companies with a controlling stake owned by one entity) constitutes more than
10% of the MSCI China Consumer Staples 10/50 Index and so that, in the
aggregate, the individual group entities that would represent more than 5% of
the MSCI China Consumer Staples 10/50 Index represent no more than 50% of the
MSCI China Consumer Staples 10/50 Index ("10/50 Cap"). The MSCI China Consumer
Staples 10/50 Index is reconstituted and re-weighted quarterly. The MSCI China
Consumer Staples 10/50 Index may include large- and mid-capitalization
companies. As of December 31, 2022, the MSCI China Consumer Staples 10/50
Index had 54 constituents.
MSCI
China Health Care 10/50 Index
The
MSCI China Health Care 10/50 Index tracks the performance of companies in the
MSCI China Index (the "Parent Index") that are classified as engaged in the
health care sector, as defined by MSCI, Inc., the provider of the MSCI China
Health Care 10/50 Index. The Parent Index is a free float-adjusted market
capitalization-weighted index designed to measure the performance of securities
that are classified as operating in China according to the MSCI Global
Investable Markets Index Methodology, and that satisfy minimum market
capitalization and liquidity thresholds. The securities eligible for inclusion
in the MSCI China Health Care 10/50 Index include H-Shares (securities of
companies incorporated in China that are denominated in Hong Kong Dollars and
listed on the Hong Kong Stock Exchange (the "HKSE")), B-Shares (securities of
companies denominated in U.S. dollars or Hong Kong dollars and listed on
Shanghai Stock Exchange (the "SSE") or Shenzen Stock Exchange (the "SZSE")), Red
Chips (securities of companies with a majority of their business operations in
mainland China and that are controlled by the national government or local
governments of China, traded on the HKSE in Hong Kong dollars), P-Chips
(securities of companies with the majority of their business operations in
mainland China and controlled by individuals in China, but that are incorporated
outside of China), A-Shares (securities of companies incorporated in mainland
China that trade on Chinese exchanges in renminbi) that are accessible through
the Shanghai-Hong Kong Stock Connect program ("Shanghai Connect") or the
Shenzhen-Hong Kong Stock Connect program ("Shenzhen Connect", and together with
Shanghai Connect, "Stock Connect Programs"), and foreign listings such as
American Depository Receipts ("ADRs"). From time to time, other stock exchanges
in China may participate in Stock Connect, and A-shares listed and traded on
such other stock exchanges and accessible through Stock Connect may be added to
the MSCI China Health Care 10/50 Index, as determined by MSCI.
The
MSCI China Health Care 10/50 Index follows a rules-based methodology that is
designed to select constituents of the Parent Index that are classified in the
health care sector under the Global Industry Classification System (GICS). The
MSCI China Health Care 10/50 Index is weighted according to each component's
free-float adjusted market capitalization, but is modified so that, as of the
rebalance date, no group entity (defined by the Index Provider as companies with
a controlling stake owned by one entity) constitutes more than 10% of the MSCI
China Health Care 10/50 Index and so that, in the aggregate, the individual
group entities that would represent more than 5% of the MSCI China Health Care
10/50 Index represent no more than 50% of the MSCI China Health Care 10/50 Index
("10/50 Cap"). The MSCI China Health Care 10/50 Index is reconstituted and
re-weighted quarterly. The MSCI China Health Care 10/50 Index may include large-
and mid-capitalization companies. As of December 31, 2022, the MSCI China
Health Care 10/50 Index had 79 constituents.
MSCI
China Information Technology 10/50 Index
The
MSCI China Information Technology 10/50 Index tracks the performance of
companies in the MSCI China Index (the "Parent Index") that are classified as
engaged in the information technology sector, as defined by MSCI, Inc., the
provider of the MSCI China Information Technology 10/50 Index. The Parent Index
is a free float-adjusted market capitalization-weighted
index
designed to measure the performance of securities that are classified as
operating in China according to the MSCI Global Investable Markets Index
Methodology, and that satisfy minimum market capitalization and liquidity
thresholds. The securities eligible for inclusion in the MSCI China Information
Technology 10/50 Index include H-Shares (securities of companies incorporated in
China that are denominated in Hong Kong Dollars and listed on the Hong Kong
Stock Exchange (the "HKSE")), B-Shares (securities of companies denominated in
U.S. dollars or Hong Kong dollars and listed on Shanghai Stock Exchange (the
"SSE") or Shenzen Stock Exchange (the "SZSE")), Red Chips (securities of
companies with a majority of their business operations in mainland China and
that are controlled by the national government or local governments of China,
traded on the HKSE in Hong Kong dollars), P-Chips (securities of companies with
the majority of their business operations in mainland China and controlled by
individuals in China, but that are incorporated outside of China), A-Shares
(securities of companies incorporated in mainland China that trade on Chinese
exchanges in renminbi) that are accessible through the Shanghai-Hong Kong Stock
Connect program ("Shanghai Connect") or the Shenzhen-Hong Kong Stock Connect
program ("Shenzhen Connect", and together with Shanghai Connect, "Stock Connect
Programs"), and foreign listings such as American Depository Receipts ("ADRs").
From time to time, other stock exchanges in China may participate in Stock
Connect, and A-shares listed and traded on such other stock exchanges and
accessible through Stock Connect may be added to the MSCI China Information
Technology 10/50 Index, as determined by MSCI.
The
MSCI China Information Technology 10/50 Index follows a rules-based methodology
that is designed to select constituents of the Parent Index that are classified
in the information technology sector under the Global Industry Classification
System (GICS). The MSCI China Information Technology 10/50 Index is weighted
according to each component's free-float adjusted market capitalization, but is
modified so that, as of the rebalance date, no group entity (defined by the
Index Provider as companies with a controlling stake owned by one entity)
constitutes more than 10% of the MSCI China Information Technology 10/50 Index
and so that, in the aggregate, the individual group entities that would
represent more than 5% of the MSCI China Information Technology 10/50 Index
represent no more than 50% of the MSCI China Information Technology 10/50 Index
("10/50 Cap"). The MSCI China Information Technology 10/50 Index is
reconstituted and re-weighted quarterly. The MSCI China Information Technology
10/50 Index may include large- and mid-capitalization companies. As of
December 31, 2022, the MSCI China Information Technology 10/50 Index had
105 constituents.
MSCI
China Real Estate 10/50 Index
The
MSCI China Real Estate 10/50 Index tracks the performance of companies in the
MSCI China Index (the "Parent Index") that are classified as engaged in the real
estate sector, as defined by MSCI, Inc., the provider of the MSCI China Real
Estate 10/50 Index. The Parent Index is a free float-adjusted market
capitalization-weighted index designed to measure the performance of securities
that are classified as operating in China according to the MSCI Global
Investable Markets Index Methodology, and that satisfy minimum market
capitalization and liquidity thresholds. The securities eligible for inclusion
in the MSCI China Real Estate 10/50 Index include H-Shares (securities of
companies incorporated in China that are denominated in Hong Kong Dollars and
listed on the Hong Kong Stock Exchange (the "HKSE")), B-Shares (securities of
companies denominated in U.S. dollars or Hong Kong dollars and listed on
Shanghai Stock Exchange (the "SSE") or Shenzen Stock Exchange (the "SZSE")), Red
Chips (securities of companies with a majority of their business operations in
mainland China and that are controlled by the national government or local
governments of China, traded on the HKSE in Hong Kong dollars), P-Chips
(securities of companies with the majority of their business operations in
mainland China and controlled by individuals in China, but that are incorporated
outside of China), A-Shares (securities of companies incorporated in mainland
China that trade on Chinese exchanges in renminbi) that are accessible through
the Shanghai-Hong Kong Stock Connect program ("Shanghai Connect") or the
Shenzhen-Hong Kong Stock Connect program ("Shenzhen Connect", and together with
Shanghai Connect, "Stock Connect Programs"), and foreign listings such as
American Depository Receipts ("ADRs"). From time to time, other stock exchanges
in China may participate in Stock Connect, and A-shares listed and traded on
such other stock exchanges and accessible through Stock Connect may be added to
the MSCI China Real Estate 10/50 Index, as determined by MSCI.
The
MSCI China Real Estate 10/50 Index follows a rules-based methodology that is
designed to select constituents of the Parent Index that are classified in the
real estate sector under the Global Industry Classification System (GICS). The
MSCI China Real Estate 10/50 Index is weighted according to each component's
free-float adjusted market capitalization, but is modified so that, as of the
rebalance date, no group entity (defined by the Index Provider as companies with
a controlling stake owned by one entity) constitutes more than 10% of the MSCI
China Real Estate 10/50 Index and so that, in the aggregate, the individual
group entities that would represent more than 5% of the MSCI China Real Estate
10/50 Index represent no more than 50% of the MSCI China Real Estate 10/50 Index
("10/50 Cap"). The MSCI China Real Estate 10/50 Index is reconstituted and
re-weighted quarterly. The MSCI China Real Estate 10/50 Index may include large-
and mid-capitalization companies. As of December 31, 2022, the MSCI China
Real Estate 10/50 Index had 24 constituents.
MSCI
China Utilities 10/50 Index
The
MSCI China Utilities 10/50 Index tracks the performance of companies in the MSCI
China Index (the "Parent Index") that are classified as engaged in the utilities
sector, as defined by MSCI, Inc., the provider of the MSCI China Utilities 10/50
Index. The Parent Index is a free float-adjusted market capitalization-weighted
index designed to measure the performance of securities that are classified as
operating in China according to the MSCI Global Investable Markets Index
Methodology, and that satisfy minimum market capitalization and liquidity
thresholds. The securities eligible for inclusion in the MSCI China Utilities
10/50 Index include H-Shares (securities of companies incorporated in China that
are denominated in Hong Kong Dollars and listed on the Hong Kong Stock Exchange
(the "HKSE")), B-Shares (securities of companies denominated in U.S. dollars or
Hong Kong dollars and listed on Shanghai Stock Exchange (the "SSE") or Shenzen
Stock Exchange (the "SZSE")), Red Chips (securities of companies with a majority
of their business operations in mainland China and that are controlled by the
national government or local governments of China, traded on the HKSE in Hong
Kong dollars), P-Chips (securities of companies with the majority of their
business operations in mainland China and controlled by individuals in China,
but that are incorporated outside of China), A-Shares (securities of companies
incorporated in mainland China that trade on Chinese exchanges in renminbi) that
are accessible through the Shanghai-Hong Kong Stock Connect program ("Shanghai
Connect") or the Shenzhen-Hong Kong Stock Connect program ("Shenzhen Connect",
and together with Shanghai Connect, "Stock Connect Programs"), and foreign
listings such as American Depository Receipts ("ADRs"). From time to time, other
stock exchanges in China may participate in Stock Connect, and A-shares listed
and traded on such other stock exchanges and accessible through Stock Connect
may be added to the MSCI China Utilities 10/50 Index, as determined by
MSCI.
The
MSCI China Utilities 10/50 Index follows a rules-based methodology that is
designed to select all constituents of the Parent Index that are classified in
the utilities sector under the Global Industry Classification System (GICS). The
MSCI China Utilities 10/50 Index is weighted according to each component's
free-float adjusted market capitalization, but is modified so that, as of the
rebalance date, no group entity (defined by the Index Provider as companies with
a controlling stake owned by one entity) constitutes more than 10% of the MSCI
China Utilities 10/50 Index and so that, in the aggregate, the individual group
entities that would represent more than 5% of the MSCI China Utilities 10/50
Index represent no more than 50% of the MSCI China Utilities 10/50 Index ("10/50
Cap"). The MSCI China Utilities 10/50 Index is reconstituted and re-weighted
quarterly. The MSCI China Utilities 10/50 Index may include large- and
mid-capitalization companies. As of December 31, 2022, the MSCI China
Utilities 10/50 Index had 25 constituents.
MSCI
Vietnam IMI Select 25/50 Index
The
MSCI Vietnam IMI Select 25/50 Index is designed to represent the performance of
the broad Vietnam equity universe, while including a minimum number of
constituents, as defined by MSCI, Inc. ("MSCI"), the provider of the MSCI
Vietnam IMI Select 25/50 Index. The broad Vietnam equity universe includes
securities that are classified in Vietnam according to the MSCI Global
Investable Market Index Methodology, together with companies that are
headquartered or listed in Vietnam and carry out the majority of their
operations in Vietnam, as determined solely by MSCI. The country classification
of a company is generally determined by MSCI using the company’s country of
incorporation and the primary listing of its securities. MSCI will classify a
company in the country of incorporation if its securities have a primary listing
in that country. In such cases where a company’s securities have a primary
listing outside of the country of incorporation, additional criteria such as the
location of the company’s headquarters and the geographic distribution of its
operations (e.g. assets and revenues), management, and shareholder base are
considered by the Index Provider for classification purposes. The MSCI Vietnam
IMI Select 25/50 Index follows a rules-based methodology that is designed to
select all securities that satisfy the above criteria and which have a market
capitalization greater than or equal to the 99th
percentile of listed developed market securities, have an annual traded value
ratio (a measure of liquidity calculated by MSCI) greater than or equal to 15%,
and have traded on greater than or equal to 50% of trading days over the past
twelve months.
The
MSCI Vietnam IMI Select 25/50 Index is weighted according to each component's
free-float adjusted market capitalization. Free-float adjusted market
capitalization measures a company’s market capitalization discounted by the
percentage of its shares readily available to be traded by the general public in
the open market (“free float”). In addition, a liquidity discount factor based
on the security’s annual traded value ratio (“ATVR”) is applied. ATVR is a
liquidity metric calculated by MSCI. The liquidity discount factor is applied to
each company’s free float market capitalization for the purposes of calculating
the allocated index weight to each constituent, such that the allocated index
weight is lower for less liquid securities (and higher for more liquid
securities) than it would otherwise be. The weights are further modified for
diversification purposes, so that, as of the rebalance date, no group entity
(defined by MSCI as companies that are jointly controlled by a single parent
company) constitutes more than 25% of the MSCI Vietnam IMI Select 25/50 Index
and so that, in the aggregate, the individual group entities that would
represent more than 5% of the MSCI Vietnam IMI Select 25/50 Index represent no
more than 50% of the MSCI Vietnam IMI Select 25/50 Index ("25/50 Cap"). The MSCI
Vietnam IMI Select 25/50 Index and the Fund are reconstituted and re-weighted
quarterly. The MSCI Vietnam IMI Select 25/50 Index may include large-, mid- and
small-capitalization
companies, and components primarily include real estate companies. As of
December 31, 2022, the MSCI Vietnam IMI Select 25/50 Index had 62
constituents.
Disclaimers
FTSE
is a world-leader in the creation and management of over 100,000 equity, bond
and hedge fund indices. With offices in Beijing, London, Frankfurt, Hong Kong,
Boston, Shanghai, Madrid, Paris, New York, San Francisco, Sydney and Tokyo, FTSE
Group services clients in 77 countries worldwide. FTSE is an independent company
owned by the Financial Times and the London Stock Exchange. FTSE does not give
financial advice to clients, which allows for the provision of truly objective
market information. FTSE indices are used extensively by investors world-wide
such as consultants, asset owners, asset managers, investment banks, stock
exchanges and brokers.
NO
FUND IS SPONSORED, ENDORSED, SOLD OR PROMOTED BY MSCI INC. ("MSCI"), ANY OF ITS
AFFILIATES, ANY OF ITS INFORMATION PROVIDERS OR ANY OTHER THIRD PARTY INVOLVED
IN, OR RELATED TO, COMPILING, COMPUTING OR CREATING ANY MSCI INDEX
(COLLECTIVELY, THE ''MSCI PARTIES"). THE MSCI INDEXES ARE THE EXCLUSIVE PROPERTY
OF MSCI. MSCI AND THE MSCI INDEX NAMES ARE SERVICE MARK (S) OF MSCI OR ITS
AFFILIATES AND HAVE BEEN LICENSED FOR USE FOR CERTAIN PURPOSES BY THE ADVISER.
NONE OF THE MSCI PARTIES MAKES ANY REPRESENTATION OR WARRANTY, EXPRESS OR
IMPLIED, TO THE ISSUER OR OWNERS OF THIS FUND OR ANY OTHER PERSON OR ENTITY
REGARDING THE ADVISABILITY OF INVESTING IN FUNDS GENERALLY OR IN THIS FUND
PARTICULARLY OR THE ABILITY OF ANY MSCI INDEX TO TRACK CORRESPONDING STOCK
MARKET PERFORMANCE. MSCI OR ITS AFFILIATES ARE THE LICENSORS OF CERTAIN
TRADEMARKS, SERVICE MARKS AND TRADE NAMES AND OF THE MSCI INDEXES WHICH ARE
DETERMINED, COMPOSED AND CALCULATED BY MSCI WITHOUT REGARD TO THIS FUND OR THE
ISSUER OR OWNERS OF THIS FUND OR ANY OTHER PERSON OR ENTITY. NONE OF THE MSCI
PARTIES HAS ANY OBLIGATION TO TAKE THE NEEDS OF THE ISSUER OR OWNERS OF THIS
FUND OR ANY OTHER PERSON OR ENTITY INTO CONSIDERATION IN DETERMINING, COMPOSING
OR CALCULATING THE MSCI INDEXES. NONE OF THE MSCI PARTIES IS RESPONSIBLE FOR OR
HAS PARTICIPATED IN THE DETERMINATION OF THE TIMING OF, PRICES AT, OR QUANTITIES
OF THIS FUND TO BE ISSUED OR IN THE DETERMINATION OR CALCULATION OF THE EQUATION
BY OR THE CONSIDERATION INTO WHICH THIS FUND IS REDEEMABLE. FURTHER, NONE OF THE
MSCI PARTIES HAS ANY OBLIGATION OR LIABILITY TO THE ISSUER OR OWNERS OF THIS
FUND OR ANY OTHER PERSON OR ENTITY IN CONNECTION WITH THE ADMINISTRATION,
MARKETING OR OFFERING OF THIS FUND. ALTHOUGH MSCI SHALL OBTAIN INFORMATION FOR
INCLUSION IN OR FOR USE IN THE CALCULATION OF THE MSCI INDEXES FROM SOURCES THAT
MSCI CONSIDERS RELIABLE, NONE OF THE MSCI PARTIES WARRANTS OR GUARANTEES THE
ORIGINALITY, ACCURACY AND/OR THE COMPLETENESS OF ANY MSCI INDEX OR ANY DATA
INCLUDED THEREIN. NONE OF THE MSCI PARTIES MAKES ANY WARRANTY, EXPRESS OR
IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ISSUER OF THE FUND. OWNERS OF THE
FUND, OR ANY OTHER PERSON OR ENTITY, FROM THE USE OF ANY MSCI INDEX OR ANY DATA
INCLUDED THEREIN. NONE OF THE MSCI PARTIES SHALL HAVE ANY LIABILITY FOR ANY
ERRORS, OMISSIONS OR INTERRUPTIONS OF OR IN CONNECTION WITH ANY MSCI INDEX OR
ANY DATA INCLUDED THEREIN. FURTHER, NONE OF THE MSCI PARTIES MAKES ANY EXPRESS
OR IMPLIED WARRANTIES OF ANY KIND. AND THE MSCI PARTIES HEREBY EXPRESSLY
DISCLAIM ALL WARRANTIES OF MERCHANTABILITY AND FITNESS FOR A PARTICULAR PURPOSE,
WITH RESPECT TO EACH MSCI INDEX AND ANY DATA INCLUDED THERE IN. WITHOUT LIMITING
ANY OF THE FOREGOING, IN NO EVENT SHALL ANY OF THE MSCI PARTIES HAVE ANY LIAB I
LITY FOR ANY DIRECT, INDIRECT, SPECIAL, PUNITIVE, CONSEQUENTIAL OR ANY OTHER
DAMAGES (INCLUDING LOST PROFITS) EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH
DAMAGES.
No
purchaser, seller or holder of this Fund, or any other person or entity, should
use or refer to any MSCI trade name, trademark or service mark to sponsor,
endorse, market or promote this Fund without first contacting MSCI to determine
whether MSCI's permission is required. Under no circumstances may any person or
entity claim any affiliation with MSCI without the prior written permission of
MSCI.
The
Adviser has entered into a license agreement with Deutsche Börse AG ("DBA") to
use the DAX Index. The Global X DAX Germany ETF is permitted to use the DAX
Index pursuant to a sublicense agreement with the Adviser. This financial
instrument is neither sponsored nor promoted, distributed or in any other manner
supported by DBA. DBA does not give any explicit or implicit warranty or
representation, neither regarding the results deriving from the use of the DAX
Index and/or the DAX Index Trademark nor regarding the DAX Index value at a
certain point in time or on a certain date nor in any other respect. The DAX
Index is calculated and published by the DBA. Nevertheless, as far as admissible
under statutory law DBA will not be liable vis-à-vis third parties for potential
errors in the DAX Index. Moreover, there is no obligation for DBA
vis-à-
vis
third parties, including investors, to point out potential errors in the DAX
Index. Neither the publication of the DAX Index by DBA nor the granting of a
license regarding the DAX Index as well as the DAX Index Trademark for the
utilization in connection with the financial instrument or other securities or
financial products, which derived from the DAX Index, represents a
recommendation by DBA for a capital investment or contains in any manner a
warranty or opinion by DBA with respect to the attractiveness on an investment
in this product. In its capacity as sole owner of all rights to the DAX Index
and the DAX Index Trademark DBA has solely licensed to the issuer of the
financial instrument the utilization of the DAX Index and the DAX Index
Trademark as well as any reference to the DAX Index and the DAX Index Trademark
in connection with the financial instrument.
OTHER
SERVICE PROVIDERS
SEI
Investments Global Funds Services is the sub-administrator for each Fund.
Brown
Brothers Harriman & Co. is the custodian and transfer agent for each Fund.
Stradley
Ronon Stevens & Young, LLP serves as counsel for the Trust and the Trust's
Independent Trustees.
PricewaterhouseCoopers
LLP serves as the Funds' independent registered public accounting firm and has
audited the financial statements for the Funds for the fiscal years ended
October 31, 2018, 2019, 2020, 2021 and 2022. PricewaterhouseCoopers LLP did not
serve as the independent registered public accounting firm for the Horizons DAX
Germany ETF, the predecessor fund for the Global X DAX Germany ETF or audit the
financial statements of the Horizons DAX Germany ETF, including during the
fiscal year ended October 31, 2018.
ADDITIONAL
INFORMATION
The
Trust enters into contractual arrangements with various parties, including among
others, the Funds’ Adviser, sub-adviser(s) (as applicable), custodian(s), and
transfer agent(s) who provide services to the Funds. Shareholders are not
parties to any such contractual arrangements and are not intended beneficiaries
of those contractual arrangements, and those contractual arrangements are not
intended to create in any shareholder 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 Trust.
This
Prospectus provides information concerning the Funds that investors should
consider in determining whether to purchase Fund Shares. Neither this Prospectus
nor the SAI is intended, or should be read, to be or give rise to an agreement
or contract between the Trust or the Funds 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 that may not be waived.
FINANCIAL
HIGHLIGHTS
Each
Fund had commenced operations and has financial highlights for the fiscal year
ended October 31, 2022. The financial highlights tables are intended to help
investors understand a Fund's financial performance since the Fund's inception.
Certain information reflects financial results for a single Share of a Fund. The
total returns in the tables represent the rate that an investor would have
earned (or lost) on an investment in a Fund, assuming reinvestment of all
dividends and distributions.
PricewaterhouseCoopers
LLP serves as the Funds' independent registered public accounting firm and has
audited the financial statements of the Funds for the fiscal years ended October
31, 2018, 2019, 2020, 2021 and 2022. The Funds' financial statements are
available without charge upon request. As discussed above,
PricewaterhouseCoopers LLP did not serve as the Horizons DAX Germany ETF's
independent registered public accounting firm or audit the financial statements
of the Horizons DAX Germany ETF Fund, including during the fiscal year ended
October 31, 2018.
The
Global X DAX Germany ETF assumed the performance and accounting history of
Horizons DAX Germany ETF as a result of the Global X DAX Germany ETF's
acquisition of the assets and assumption of liabilities of the Horizons DAX
Germany ETF on December 24, 2018. Accordingly, the performance information shown
below for the Global X DAX Germany ETF for the fiscal year ended October 31,
2018 is that of Horizons DAX Germany ETF, its predecessor fund. The Horizons DAX
Germany ETF's former independent registered public accounting firm audited the
financial statements of the Horizons DAX Germany ETF for the fiscal year ended
October 31, 2018.
The
Global X MSCI Norway ETF (formerly known as the Global X FTSE Nordic Region ETF)
assumed the performance and accounting history of its predecessor fund, the
Global X MSCI Norway ETF as a result of the reorganization of the latter on
October
29, 2021. Accordingly, the performance information shown below for the Global X
MSCI Norway ETF for the fiscal years ended October 31, 2018, 2019 and 2020 is
that of the predecessor fund.
Selected
Per Share Data & Ratios
For
a Share Outstanding Throughout the Period
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Net
Asset Value, Beginning of Period ($) |
Net
Investment Income ($)* |
Net
Realized and Unrealized Gain (Loss) on Investments ($) |
Total
from Operations ($) |
Distribution
from Net Investment Income ($) |
Distribution
from Capital Gains ($) |
Return
of Capital ($) |
Total
from Distributions ($) |
Net Asset
Value, End of Period ($) |
Total
Return (%)** |
Net
Assets End of Period ($)(000) |
Ratio
of Expenses to Average Net Assets (%) |
Ratio
of Net Investment Income to Average Net Assets (%) |
Portfolio
Turnover (%)†† |
Global
X MSCI Colombia ETF |
2022 |
30.76 |
2.26 |
(11.49) |
(9.23) |
(1.85) |
— |
— |
(1.85) |
19.68 |
(31.39) |
20,857 |
0.62 |
8.01 |
50.35 |
2021 |
23.26 |
0.64 |
7.73 |
8.37 |
(0.87) |
— |
— |
(0.87) |
30.76 |
35.98 |
41,831 |
0.61 |
2.21 |
16.08 |
2020(1) |
38.16 |
1.14 |
(15.00) |
(13.86) |
(1.04) |
— |
— |
(1.04) |
23.26 |
(36.91) |
34,181 |
0.62 |
3.91 |
20.85 |
2019(1) |
34.72 |
1.04 |
3.96 |
5.00 |
(1.56) |
— |
— |
(1.56) |
38.16 |
15.05 |
72,282 |
0.62 |
2.81 |
18.05 |
2018(1) |
38.24 |
0.84 |
(3.64) |
(2.80) |
(0.72) |
— |
— |
(0.72) |
34.72 |
(7.55) |
82,282 |
0.62# |
2.01 |
39.15 |
Global
X MSCI China Industrials ETF |
2022 |
16.62 |
0.19 |
(5.75) |
(5.56) |
(0.13) |
— |
— |
(0.13) |
10.93 |
(33.68) |
4,917 |
0.65 |
1.25 |
105.23 |
2021 |
13.43 |
0.21 |
3.27 |
3.48 |
(0.29) |
— |
— |
(0.29) |
16.62 |
26.08 |
3,158 |
0.66 |
1.28 |
66.09 |
2020 |
12.92 |
0.23 |
0.49 |
0.72 |
(0.21) |
— |
— |
(0.21) |
13.43 |
5.57 |
2,014 |
0.66 |
1.71 |
19.54 |
2019 |
13.59 |
0.27 |
(0.49) |
(0.22) |
(0.45) |
— |
— |
(0.45) |
12.92 |
(1.66) |
1,938 |
0.66 |
1.99 |
80.17 |
2018 |
16.06 |
0.29 |
(2.41) |
(2.12) |
(0.35) |
— |
— |
(0.35) |
13.59 |
(13.44) |
2,038 |
0.66 |
1.92 |
18.28 |
Global
X MSCI China Consumer Discretionary ETF |
2022 |
29.94 |
0.06 |
(15.39) |
(15.33) |
(0.06) |
— |
— |
(0.06) |
14.55 |
(51.28) |
214,216 |
0.65 |
0.25 |
22.64 |
2021 |
29.45 |
— |
0.51^ |
0.51 |
(0.02) |
— |
— |
(0.02) |
29.94 |
1.73 |
649,503 |
0.65 |
— |
34.56 |
2020 |
17.68 |
0.04 |
11.89 |
11.93 |
(0.16) |
— |
— |
(0.16) |
29.45 |
67.98 |
393,118 |
0.65 |
0.21 |
32.56 |
2019 |
13.57 |
0.16 |
4.35 |
4.51 |
(0.40) |
— |
— |
(0.40) |
17.68 |
34.20 |
156,486 |
0.65 |
1.03 |
83.41 |
2018 |
17.44 |
0.20 |
(3.95) |
(3.75) |
(0.12) |
— |
— |
(0.12) |
13.57 |
(21.70) |
120,102 |
0.65 |
1.11 |
17.92 |
Global
X MSCI China Communication Services ETF |
2022 |
20.56 |
0.19 |
(10.92) |
(10.73) |
(0.18) |
— |
— |
(0.18) |
9.65 |
(52.56) |
4,922 |
0.65 |
1.15 |
30.28 |
2021 |
26.13 |
0.06 |
(5.27) |
(5.21) |
(0.31) |
— |
(0.05) |
(0.36) |
20.56 |
(20.27) |
12,337 |
0.65 |
0.22 |
65.54 |
2020 |
22.18 |
0.16 |
3.96 |
4.12 |
(0.17) |
— |
— |
(0.17) |
26.13 |
18.61 |
16,984 |
0.65 |
0.67 |
27.78 |
2019 |
22.40 |
0.09 |
(0.21) |
(0.12) |
(0.10) |
— |
— |
(0.10) |
22.18 |
(0.54) |
21,071 |
0.66 |
0.39 |
114.67 |
2018 |
29.24 |
0.07 |
(6.23) |
(6.16) |
(0.68) |
— |
— |
(0.68) |
22.40 |
(21.70) |
24,645 |
0.65 |
0.24 |
33.79 |
Global
X MSCI China Financials ETF |
2022 |
14.42 |
0.39 |
(4.62) |
(4.23) |
(0.41) |
— |
— |
(0.41) |
9.78 |
(30.18) |
27,567 |
0.66 |
2.84 |
37.97 |
2021 |
14.25 |
0.62 |
0.07^ |
0.69 |
(0.52) |
— |
— |
(0.52) |
14.42 |
4.65 |
48,756 |
0.65 |
4.00 |
21.42 |
2020 |
15.83 |
0.41 |
(1.50) |
(1.09) |
(0.49) |
— |
— |
(0.49) |
14.25 |
(7.24) |
47,727 |
0.65 |
2.72 |
21.72 |
2019 |
15.39 |
0.67 |
0.65 |
1.32 |
(0.88) |
— |
— |
(0.88) |
15.83 |
8.95 |
60,160 |
0.66 |
4.11 |
54.17 |
2018 |
17.63 |
0.48 |
(2.38) |
(1.90) |
(0.34) |
— |
— |
(0.34) |
15.39 |
(11.04) |
30,784 |
0.66 |
2.67 |
15.09 |
|
|
|
|
|
|
* |
Per
share data calculated using average shares method. |
** |
Total
Return is for the period indicated and has not been annualized. The return
shown does not reflect the deduction of taxes that a shareholder would pay
on Fund distributions or the redemption of Fund shares.
|
††
|
Portfolio
turnover rate is for the period indicated and periods of less than one
year have not been annualized. Excludes effect of in-kind
transfers. |
^ |
The
amount shown for a share outstanding throughout the period does not accord
with the aggregate net gains on investments for the period because of the
sales and repurchases of fund shares in relation to fluctuating market
value of the investments of the Fund. |
# |
The
ratio of Expenses to Average Net Assets includes the effect of a waiver.
If these offsets were excluded, the ratio would have been 0.68% for the
year ended October 31, 2018. |
(1) |
Per
share amounts have been adjusted for a 1 for 4 reverse share split on
April 28, 2020 (See Note 9 in the Notes to Financial
Statements). |
Amounts
designated as "—" are either $0 or have been rounded to $0.
Selected
Per Share Data & Ratios
For
a Share Outstanding Throughout the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period ($) |
Net
Investment Income ($)* |
Net
Realized and Unrealized Gain (Loss) on Investments ($) |
Total
from Operations ($) |
Distribution
from Net Investment Income ($) |
Distribution
from Capital Gains ($) |
Return
of Capital ($) |
Total
from Distributions ($) |
Net Asset
Value, End of Period ($) |
Total
Return (%)** |
Net
Assets End of Period ($)(000) |
Ratio
of Expenses to Average Net Assets (%) |
Ratio
of Net Investment Income to Average Net Assets (%) |
Portfolio
Turnover (%)†† |
Global
X MSCI China Energy ETF |
2022 |
11.93 |
0.65 |
1.34 |
1.99 |
(0.28) |
— |
— |
(0.28) |
13.64 |
16.86 |
9,140 |
0.66 |
4.73 |
106.55 |
2021 |
7.79 |
0.48 |
3.93 |
4.41 |
(0.27) |
— |
— |
(0.27) |
11.93 |
57.88 |
4,652 |
0.67 |
4.74 |
51.48 |
2020 |
10.43 |
0.44 |
(2.66) |
(2.22) |
(0.42) |
— |
— |
(0.42) |
7.79 |
(22.05) |
1,558 |
0.66 |
5.02 |
34.18 |
2019 |
11.82 |
0.30 |
(1.12) |
(0.82) |
(0.57) |
— |
— |
(0.57) |
10.43 |
(7.04) |
1,564 |
0.66 |
2.67 |
109.41 |
2018 |
11.69 |
0.49 |
0.05 |
0.54 |
(0.41) |
— |
— |
(0.41) |
11.82 |
4.77 |
2,955 |
0.65 |
4.00 |
14.60 |
Global
X MSCI China Materials ETF |
2022 |
25.22 |
0.38 |
(10.60) |
(10.22) |
(0.40) |
— |
— |
(0.40) |
14.60 |
(41.03) |
2,920 |
0.65 |
1.74 |
101.99 |
2021 |
18.18 |
0.43 |
7.12 |
7.55 |
(0.51) |
— |
— |
(0.51) |
25.22 |
41.80 |
6,558 |
0.66 |
1.70 |
26.64 |
2020 |
14.50 |
0.32 |
3.93 |
4.25 |
(0.57) |
— |
— |
(0.57) |
18.18 |
29.88 |
1,818 |
0.66 |
1.95 |
36.02 |
2019 |
15.97 |
0.52 |
(0.99) |
(0.47) |
(1.00) |
— |
— |
(1.00) |
14.50 |
(3.13) |
2,175 |
0.66 |
3.30 |
65.67 |
2018 |
21.59 |
0.46 |
(5.84) |
(5.38) |
(0.24) |
— |
— |
(0.24) |
15.97 |
(25.20) |
2,395 |
0.66 |
2.27 |
26.95 |
Global
X MSCI Norway ETF(1) |
2022 |
32.01 |
1.05 |
(7.93) |
(6.88) |
(0.70) |
— |
— |
(0.70) |
24.43 |
(21.72) |
99,105 |
0.50 |
3.72 |
15.58 |
2021 |
20.12 |
0.42 |
11.94 |
12.36 |
(0.46) |
— |
(0.01) |
(0.47) |
32.01 |
64.44 |
103,935 |
0.50 |
3.09 |
9.74 |
2020(2) |
24.52 |
0.42 |
(4.38) |
(3.96) |
(0.44) |
— |
— |
(0.44) |
20.12 |
(16.32) |
33,570 |
0.50 |
1.92 |
8.38 |
2019(2) |
29.31 |
0.88 |
(3.78) |
(2.90) |
(1.89) |
— |
— |
(1.89) |
24.52 |
(9.77) |
78,323 |
0.50 |
3.36 |
9.63 |
2018(2) |
28.32 |
0.78 |
1.01 |
1.79 |
(0.80) |
— |
— |
(0.80) |
29.31 |
6.47 |
163,471 |
0.50 |
2.64 |
9.55 |
Global
X FTSE Southeast Asia ETF |
2022 |
15.10 |
0.39 |
(0.86) |
(0.47) |
(0.61) |
— |
— |
(0.61) |
14.02 |
(3.13) |
37,861 |
0.65 |
2.67 |
13.92 |
2021 |
11.66 |
0.62 |
3.09 |
3.71 |
(0.27) |
— |
— |
(0.27) |
15.10 |
31.94 |
35,776 |
0.65 |
4.27 |
13.46 |
2020 |
15.95 |
0.37 |
(4.27) |
(3.90) |
(0.39) |
— |
— |
(0.39) |
11.66 |
(24.82) |
20,981 |
0.65 |
2.77 |
5.98 |
2019 |
15.32 |
0.44 |
0.91 |
1.35 |
(0.72) |
— |
— |
(0.72) |
15.95 |
8.94 |
26,323 |
0.65 |
2.76 |
7.01 |
2018 |
15.91 |
0.49 |
(0.81) |
(0.32) |
(0.27) |
— |
— |
(0.27) |
15.32 |
(2.15) |
17,614 |
0.65 |
2.94 |
11.98 |
Global
X MSCI Argentina ETF |
2022 |
33.00 |
0.77 |
(1.99) |
(1.22) |
(0.65) |
— |
— |
(0.65) |
31.13 |
(3.42) |
26,930 |
0.59 |
2.52 |
44.70 |
2021 |
23.64 |
0.26 |
9.21 |
9.47 |
(0.11) |
— |
— |
(0.11) |
33.00 |
40.09 |
34,810 |
0.59 |
0.85 |
31.35 |
2020 |
21.83 |
0.06 |
1.83 |
1.89 |
(0.08) |
— |
— |
(0.08) |
23.64 |
8.61 |
38,421 |
0.60 |
0.25 |
49.17 |
2019 |
25.36 |
0.29 |
(3.26) |
(2.97) |
(0.56) |
— |
— |
(0.56) |
21.83 |
(12.08) |
59,482 |
0.60 |
1.08 |
28.88 |
2018 |
32.05 |
0.35 |
(6.87) |
(6.52) |
(0.17) |
— |
— |
(0.17) |
25.36 |
(20.48) |
89,391 |
0.60‡ |
1.07 |
34.46 |
|
|
|
|
|
|
* |
Per
share data calculated using average shares method. |
** |
Total
return is for the period indicated and has not been annualized. The return
shown does not reflect the deduction of taxes that a shareholder would pay
on Fund distributions or the redemption of Fund shares. |
†† |
Portfolio
turnover rate is for the period indicated and periods of less than one
year have not been annualized. Excludes effect of in-kind
transfers. |
‡ |
The
ratio of Expenses to Average Net Assets includes the effect of a waiver.
If these offsets were excluded, the ratio would have been 0.66% for the
year ended October 31, 2018. |
(1) |
On
October 29, 2021, the Global X MSCI Norway ETF (the “Acquired Fund”) was
reorganized into the Global X FTSE Nordic Region ETF (the “Acquiring
Fund”), each a separate series of the Trust (together, the “Combined
Fund”) and the Combined Fund was renamed the Global X MSCI Norway ETF. As
a result of the Reorganization as of the close of business on October 29,
2021, the Combined Fund assumed the performance and accounting history of
the Acquired Fund. Accordingly, performance figures for the Combined Fund
for periods prior to the date of the Reorganization represent the
performance of the Acquired Fund (See Note 1 in Notes to Financial
Statements). |
(2) |
Per
share data for the Acquired Fund has been restated for periods prior to
the reorganization to reflect the conversion ratio of 0.4766 in effect on
the reorganization date of October 29, 2021 (See Note 1 in Notes to
Financial Statements). |
Amounts
designated as "—" are either $0 or have been rounded to $0.
Selected
Per Share Data & Ratios
For
a Share Outstanding Throughout the Period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, Beginning of Period ($) |
Net
Investment Income ($)* |
Net
Realized and Unrealized Gain (Loss) on Investments ($) |
Total
from Operations ($) |
Distribution
from Net Investment Income ($) |
Distribution
from Capital Gains ($) |
Return
of Capital ($) |
Total
from Distributions ($) |
Net Asset
Value, End of Period ($) |
Total
Return (%)** |
Net
Assets End of Period ($)(000) |
Ratio
of Expenses to Average Net Assets (%) |
Ratio
of Net Investment Income to Average Net Assets (%) |
Portfolio
Turnover (%)†† |
Global
X MSCI Greece ETF |
2022 |
27.98 |
0.73 |
(3.94) |
(3.21) |
(0.63) |
— |
— |
(0.63) |
24.14 |
(11.63) |
107,078 |
0.57 |
2.83 |
24.34 |
2021 |
17.68 |
0.47 |
10.36 |
10.83 |
(0.53) |
— |
— |
(0.53) |
27.98 |
61.52 |
151,828 |
0.56 |
1.76 |
38.42 |
2020(1) |
29.91 |
0.66 |
(12.20) |
(11.54) |
(0.69) |
— |
— |
(0.69) |
17.68 |
(39.39) |
109,016 |
0.58 |
2.81 |
28.48 |
2019(1) |
23.04 |
0.63 |
6.87 |
7.50 |
(0.63) |
— |
— |
(0.63) |
29.91 |
33.57 |
338,840 |
0.57 |
2.43 |
12.67 |
2018(1) |
27.90 |
0.57 |
(4.77) |
(4.20) |
(0.66) |
— |
— |
(0.66) |
23.04 |
(15.63) |
257,901 |
0.59 |
1.98 |
16.38 |
Global
X MSCI Nigeria ETF |
2022 |
15.73 |
0.88 |
(2.97) |
(2.09) |
(0.73) |
— |
— |
(0.73) |
12.91 |
(13.69) |
38,243 |
0.83
|
5.95 |
1.95 |
2021 |
14.25 |
0.73 |
1.52 |
2.25 |
(0.77) |
— |
— |
(0.77) |
15.73 |
16.11 |
46,592 |
0.91
|
5.02 |
5.79 |
2020 |
12.23 |
0.80 |
1.30 |
2.10 |
(0.08) |
— |
— |
(0.08) |
14.25 |
17.25 |
42,199 |
0.89
|
6.81 |
18.79 |
2019 |
17.98 |
0.87 |
(4.96) |
(4.09) |
(1.66) |
— |
— |
(1.66) |
12.23 |
(24.55) |
32,561 |
0.89
|
5.70 |
45.62 |
2018 |
21.43 |
0.73 |
(3.76) |
(3.03) |
(0.42) |
— |
— |
(0.42) |
17.98 |
(14.46) |
40,675 |
0.88
|
3.29 |
62.52 |
Global
X MSCI Next Emerging & Frontier ETF |
2022 |
21.00 |
0.49 |
(2.93) |
(2.44) |
(0.49) |
— |
— |
(0.49) |
18.07 |
(11.75) |
19,519 |
0.55 |
2.48 |
20.09 |
2021 |
16.46 |
0.46 |
4.56 |
5.02 |
(0.48) |
— |
— |
(0.48) |
21.00 |
30.74 |
21,628 |
0.63 |
2.31 |
28.62 |
2020 |
20.09 |
0.41 |
(3.55) |
(3.14) |
(0.49) |
— |
— |
(0.49) |
16.46 |
(15.85) |
13,991 |
0.70 |
2.36 |
31.66 |
2019 |
20.22 |
0.55 |
0.31 |
0.86 |
(0.99) |
— |
— |
(0.99) |
20.09 |
4.29 |
18,077 |
0.66 |
2.66 |
78.67 |
2018 |
23.28 |
0.59 |
(3.24) |
(2.65) |
(0.41) |
— |
— |
(0.41) |
20.22 |
(11.66) |
13,145 |
0.55 |
2.54 |
14.62 |
Global
X MSCI Portugal ETF |
2022 |
11.71 |
0.24 |
(2.25) |
(2.01) |
(0.35) |
— |
— |
(0.35) |
9.35 |
(17.55) |
15,146 |
0.61 |
2.34 |
40.76 |
2021 |
8.50 |
0.36 |
3.22 |
3.58 |
(0.37) |
— |
— |
(0.37) |
11.71 |
42.30 |
11,005 |
0.58 |
3.26 |
53.05 |
2020 |
10.71 |
0.23 |
(2.16) |
(1.93) |
(0.28) |
— |
— |
(0.28) |
8.50 |
(18.37) |
13,169 |
0.58 |
2.34 |
25.19 |
2019 |
11.24 |
0.36 |
(0.11) |
0.25 |
(0.78) |
— |
— |
(0.78) |
10.71 |
2.72 |
22,487 |
0.58 |
3.41 |
20.74 |
2018 |
12.49 |
0.36 |
(1.25) |
(0.89) |
(0.36) |
— |
— |
(0.36) |
11.24 |
(7.26) |
25,295 |
0.57 |
2.91 |
21.05 |
Global
X DAX Germany ETF(2) |
2022 |
32.86 |
0.95 |
(10.13) |
(9.18) |
(0.94) |
— |
— |
(0.94) |
22.74 |
(28.29) |
39,339 |
0.21 |
3.52 |
10.74 |
2021 |
25.21 |
0.62 |
7.95 |
8.57 |
(0.92) |
— |
— |
(0.92) |
32.86 |
34.06 |
44,033 |
0.20+ |
1.90 |
24.22 |
2020 |
27.28 |
0.87 |
(2.64) |
(1.77) |
(0.30) |
— |
— |
(0.30) |
25.21 |
(6.53) |
23,948 |
0.20+ |
3.30 |
10.93 |
2019(3) |
25.92 |
0.67 |
1.82 |
2.49 |
(1.11) |
— |
(0.02) |
(1.13) |
27.28 |
9.98 |
16,370 |
0.21+ |
2.65 |
15.36 |
2018(3) |
31.25 |
0.77 |
(5.75)‡ |
(4.98) |
(0.35) |
— |
— |
(0.35) |
25.92 |
(16.05)@ |
16,851 |
0.20 |
2.57 |
7.00 |
|
|
|
|
|
|
* |
Per
share data calculated using average shares method. |
** |
Total
return is for the period indicated and has not been annualized. The return
shown does not reflect the deduction of taxes that a shareholder would pay
on Fund distributions or the redemption of Fund shares. |
†† |
Portfolio
turnover rate is for the period indicated and periods of less than one
year have not been annualized. Excludes effect of in-kind
transfers. |
+ |
Effective
March 1, 2021, the Fund’s management fees were permanently lowered to
0.20%. Prior to March 1, 2021, the ratio of Expenses to Average Net Assets
included the effect of a waiver. If these offsets were excluded, the ratio
would have been 0.27%, 0.45% and 0.46% for the years ended October 31,
2021, October 31, 2020 and October 31, 2019, respectively. |
‡ |
Includes
a $0.10 gain per share derived from a payment from the prior administrator
of the Predecessor Fund. |
@ |
Before
payment from the prior administrator of the Predecessor Fund for the loss
resulting from an error, the total return for the period would have been
(16.37%). |
(1) |
Per
share amounts have been adjusted for a 1 for 3 reverse share split on
April 28, 2020 (See Note 9 in the Notes to Financial
Statements). |
(2) |
The
financial statements include the financial information of the Predecessor
Fund through December 21, 2018 (See Note 1 in Notes to Financial
Statements). |
(3) |
As
a result of the Reorganization, the Fund assumed the performance and
accounting history of the Predecessor Fund. Accordingly, performance
figures for the Fund for periods prior to the date of the Reorganization
represent the performance of the Predecessor Fund (See Note 1 in Notes to
Financial Statements). |
Amounts
designated as "—" are either $0 or have been rounded to $0.
Selected
Per Share Data & Ratios
For
a Share Outstanding Throughout the Period
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Net
Asset Value, Beginning of Period ($) |
Net
Investment Income (Loss) ($)* |
Net
Realized and Unrealized Gain (Loss) on Investments ($) |
Total
from Operations ($) |
Distribution
from Net Investment Income ($) |
Distribution
from Capital Gains ($) |
Return
of Capital ($) |
Total
from Distributions ($) |
Net
Asset Value, End of Period ($) |
Total
Return (%)** |
Net
Assets End of Period ($)(000) |
Ratio
of Expenses to Average Net Assets (%) |
Ratio
of Net Investment Income (Loss) to Average Net Assets (%) |
Portfolio
Turnover (%) †† |
Global
X MSCI Pakistan ETF |
|
|
|
|
|
|
|
|
|
|
|
|
2022 |
25.99 |
1.58 |
(9.63) |
(8.05) |
(1.49) |
— |
— |
(1.49) |
16.45 |
(32.01) |
14,347 |
0.80 |
7.65 |
28.59 |
2021 |
27.38 |
1.93 |
(1.77) |
0.16 |
(1.55) |
— |
— |
(1.55) |
25.99 |
0.02 |
23,967 |
0.76 |
6.59 |
41.83 |
2020(1) |
26.32 |
0.68 |
1.17 |
1.85 |
(0.79) |
— |
— |
(0.79) |
27.38 |
6.99 |
34,555 |
0.90 |
2.44 |
52.38 |
2019(1) |
41.04 |
1.52 |
(13.88) |
(12.36) |
(2.36) |
— |
— |
(2.36) |
26.32 |
(30.73) |
41,804 |
0.88 |
5.14 |
19.09 |
2018(1) |
54.24 |
1.88 |
(10.72) |
(8.84) |
(1.76) |
(2.60) |
— |
(4.36) |
41.04 |
(17.53) |
40,024 |
0.87 |
3.84 |
44.05 |
Global
X MSCI China Consumer Staples ETF |
2022 |
29.38 |
0.42 |
(11.23) |
(10.81) |
(0.30) |
(1.03) |
— |
(1.33) |
17.24 |
(38.53) |
8,619 |
0.65 |
1.72 |
65.46 |
2021 |
29.04 |
0.26 |
0.34^ |
0.60 |
(0.21) |
(0.05) |
— |
(0.26) |
29.38 |
1.97 |
15,574 |
0.65 |
0.82 |
35.56 |
2020 |
21.08 |
0.31 |
8.41 |
8.72 |
(0.25) |
(0.51) |
— |
(0.76) |
29.04 |
42.48 |
17,424 |
0.65 |
1.21 |
44.54 |
2019(2) |
15.00 |
0.28 |
5.93 |
6.21 |
(0.13) |
— |
— |
(0.13) |
21.08 |
41.48 |
2,109 |
0.67† |
1.66† |
29.25 |
Global
X MSCI China Health Care ETF |
2022 |
24.81 |
0.07 |
(11.40) |
(11.33) |
(0.02) |
— |
— |
(0.02) |
13.46 |
(45.67) |
8,075 |
0.65 |
0.37 |
20.49 |
2021 |
23.68 |
(0.01) |
1.16^ |
1.15 |
(0.02) |
— |
— |
(0.02) |
24.81 |
4.84 |
16,620 |
0.65 |
(0.05) |
29.41 |
2020 |
17.70 |
0.03 |
6.06 |
6.09 |
(0.04) |
(0.07) |
— |
(0.11) |
23.68 |
34.62 |
10,656 |
0.65 |
0.16 |
31.60 |
2019(2) |
15.00 |
0.09 |
2.64 |
2.73 |
(0.03) |
— |
— |
(0.03) |
17.70 |
18.22 |
2,655 |
0.66† |
0.60† |
12.20 |
Global
X MSCI China Information Technology ETF |
2022 |
29.07 |
0.11 |
(13.73) |
(13.62) |
(0.09) |
(0.55) |
— |
(0.64) |
14.81 |
(47.82) |
13,920 |
0.65 |
0.50 |
32.20 |
2021 |
27.78 |
0.12 |
1.46^ |
1.58 |
(0.12) |
(0.17) |
— |
(0.29) |
29.07 |
5.58 |
30,813 |
0.65 |
0.39 |
52.48 |
2020 |
17.92 |
0.09 |
10.03 |
10.12 |
(0.10) |
(0.16) |
— |
(0.26) |
27.78 |
57.01 |
20,832 |
0.65 |
0.37 |
29.01 |
2019(2) |
15.00 |
0.19 |
2.81 |
3.00 |
(0.08) |
— |
— |
(0.08) |
17.92 |
20.06 |
1,792 |
0.66† |
1.29† |
36.75 |
Global
X MSCI China Utilities ETF |
2022 |
19.53 |
0.43 |
(7.22) |
(6.79) |
(0.45) |
(0.45) |
— |
(0.90) |
11.84 |
(36.59) |
2,368 |
0.66 |
2.62 |
38.78 |
2021 |
13.70 |
0.69 |
5.77 |
6.46 |
(0.63) |
— |
— |
(0.63) |
19.53 |
48.14 |
1,953 |
0.67 |
4.11 |
44.06 |
2020 |
15.81 |
0.39 |
(2.09) |
(1.70) |
(0.35) |
(0.06) |
— |
(0.41) |
13.70 |
(10.92) |
1,370 |
0.66 |
2.78 |
37.12 |
2019(2) |
15.00 |
0.33 |
0.60 |
0.93 |
(0.12) |
— |
— |
(0.12) |
15.81 |
6.24 |
1,581 |
0.66† |
2.42† |
28.26 |
Global
X MSCI China Real Estate ETF |
2022(3) |
35.70 |
1.05 |
(21.23) |
(20.18) |
(0.97) |
— |
— |
(0.97) |
14.55 |
(57.96) |
4,219 |
0.66 |
3.81 |
45.91 |
2021(3) |
48.54 |
1.77 |
(12.27) |
(10.50) |
(2.34) |
— |
— |
(2.34) |
35.70 |
(22.77) |
4,405 |
0.66 |
3.80 |
38.66 |
2020(3) |
51.69 |
2.43 |
(3.51) |
(1.08) |
(2.07) |
— |
— |
(2.07) |
48.54 |
(2.55) |
7,281 |
0.66 |
4.73 |
25.75 |
2019(2)(3) |
45.00 |
2.01 |
5.46 |
7.47 |
(0.78) |
— |
— |
(0.78) |
51.69 |
16.56 |
1,723 |
0.65† |
4.44† |
14.00 |
Global
X MSCI Vietnam ETF |
2022(4) |
25.64 |
0.22 |
(11.12) |
(10.90) |
(0.07) |
— |
— |
(0.07) |
14.67 |
(42.60) |
2,787 |
0.50† |
1.12† |
78.28 |
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* |
Per
share data calculated using average shares method. |
** |
Total
return is for the period indicated and has not been annualized. The return
shown does not reflect the deduction of taxes that a shareholder would pay
on Fund distributions or the redemption of Fund shares. |
† |
Annualized. |
†† |
Portfolio
turnover rate is for the period indicated and has not been annualized.
Excludes effect of in-kind transfers. |
^ |
The
amount shown for a share outstanding throughout the period does not accord
with the aggregate net gains on investments for the period because of the
sales and repurchases of fund shares in relation to fluctuating market
value of the investments of the Fund. |
(1) |
Per
share amounts have been adjusted for a 1 for 4 reverse share split on
April 28, 2020 (See Note 9 in the Notes to Financial
Statements). |
(2) |
The
Fund commenced operations on December 7, 2018. |
(3) |
Per
share amounts have been adjusted for a 1 for 3 reverse share split on
December 19, 2022 (See Note 11 in the Notes to Financial
Statements). |
(4) |
The
Fund commenced operations on December 7,
2021. |
Amounts
designated as "—" are either $0 or have been rounded to $0.
OTHER
INFORMATION
The
Funds are not sponsored, endorsed, sold or promoted by any national securities
exchange. No national securities exchange makes any representation or warranty,
express or implied, to the owners of Shares or any member of the public
regarding the advisability of investing in securities generally or in the Funds
particularly or the ability of the Funds to achieve their objectives. No
national securities exchange has any obligation or liability in connection with
the administration, marketing or trading of the Funds.
For
purposes of the 1940 Act, shares that are issued by a registered investment
company and purchases of such shares by investment companies and companies
relying on Sections 3(c)(1) or 3(c)(7) of the 1940 Act are subject to the
restrictions set forth in Section 12(d)(1) of the 1940 Act. Registered
investment companies are permitted to invest in certain of the Funds beyond the
limits set forth in section 12(d)(1), subject to certain conditions set forth in
Rule 12d1-4 under the 1940 Act, including that such investment companies enter
into an agreement with such Fund.
The
method by which Creation Units are created and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold
by the Funds on an ongoing basis, a “distribution,” as such term is used in the
Securities Act, may occur at any point. Broker-dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.
Broker-dealers
who are not “underwriters” but are participating in a distribution (as
contrasted with ordinary secondary trading transactions), and thus dealing with
Shares that are part of an “unsold allotment” within the meaning of Section
4(a)(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
This is because the prospectus delivery exemption in Section 4(a)(3) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note that
dealers who are not underwriters but are participating in a distribution (as
contrasted with ordinary secondary market transactions) and thus dealing with
the Shares that are part of an overallotment within the meaning of Section
4(a)(3)(A) of the Securities Act would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
Firms that incur a prospectus delivery obligation with respect to Shares are
reminded that, under Rule 153 of the Securities Act, a prospectus delivery
obligation under Section 5(b)(2) of the Securities Act owed to an exchange
member in connection with a sale on NYSE Arca or NASDAQ is satisfied by the fact
that the prospectus is available at NYSE Arca or NASDAQ upon request. The
prospectus delivery mechanism provided in Rule 153 is only available with
respect to transactions on an exchange.
For
more information visit our website at
www.globalxetfs.com
or
call 1-888-493-8631
|
|
|
Investment
Adviser and Administrator
Global
X Management Company LLC
605
3rd Avenue, 43rd Floor
New
York, NY 10158
|
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
|
Custodian
and Transfer Agent
Brown
Brothers Harriman & Co.
50
Post Office Square
Boston,
MA 02110
|
Sub-Administrator
SEI
Investments Global Funds Services
One
Freedom Valley Drive
Oaks,
PA 19456
|
Legal
Counsel to the Global X Funds®
and Independent Trustees
Stradley
Ronon Stevens & Young, LLP
2000
K Street, N.W., Suite 700
Washington,
DC 20006
|
Independent
Registered Public Accounting Firm
PricewaterhouseCoopers
LLP
Two
Commerce Square, Suite 1800
2001
Market Street
Philadelphia,
PA 19103 |
A
Statement of Additional Information dated March 1, 2023, which contains
more details about the Funds, is incorporated by reference in its entirety into
this Prospectus, which means that it is legally part of this Prospectus.
Additional
information about each Fund that has commenced operations and its investments is
available in its annual and semi-annual reports to shareholders. The annual
report explains the market conditions and investment strategies affecting each
Fund’s performance during its last fiscal year.
You
can ask questions or obtain a free copy of each such Fund’s semi-annual and
annual report or the Statement of Additional Information by calling
1-888-493-8631. Free copies of a Fund’s semi-annual and annual report and the
Statement of Additional Information are available from our website at
www.globalxetfs.com.
Information
about each Fund, including its semi-annual and annual reports and the Statement
of Additional Information, has been filed with the SEC. It can be reviewed and
copied on the EDGAR database on the SEC’s internet site (http://www.sec.gov).
You can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC’s e-mail address ([email protected]).
PROSPECTUS
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
March 1,
2023
Investment
Company Act File No.: 811-22209
GLX-PS-037-1000