SUBJECT
TO COMPLETION
Dated
February 1, 2023
THE
INFORMATION HEREIN IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE U.S. SECURITIES AND
EXCHANGE COMMISSION IS EFFECTIVE. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE
SECURITIES AND IS NOT SOLICITING AN OFFER TO BUY THESE SECURITIES IN ANY
JURISDICTION IN WHICH THE OFFER OR SALE IS NOT PERMITTED.
PROSPECTUS
TrueShares
Trillium Climate Solutions ETF (ECOZ)
(formerly,
TrueShares ESG Active Opportunities ETF)
Listed
on the NYSE Arca, Inc.
[
], 2023
The
U.S. Securities and Exchange Commission (the “SEC”) has not approved or
disapproved of these securities or passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is a criminal
offense.
TABLE
OF CONTENTS
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TrueShares
Trillium Climate Solutions ETF - Fund Summary |
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Principal
Investment Risks |
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Other
Service Providers |
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Taxes |
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Taxes
on Distributions |
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Taxes
When Shares are Sold on the Exchange |
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Taxes
on Purchases and Redemptions of Creation Units |
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Net
Investment Income Tax |
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TRUESHARES
TRILLIUM CLIMATE SOLUTIONS ETF (formerly the TrueShares ESG Active
Opportunities ETF- FUND SUMMARY |
Investment
Objective
The
TrueShares Trillium Climate Solutions ETF (“Fund”) seeks total
return.
Fees
and Expenses of the Fund
This
table describes the fees and expenses that you may pay if you buy, hold, and
sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
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Shareholder
Fees (fees
paid directly from your investment) |
None |
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Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
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Management
Fee |
0.58% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses |
0.00% |
Total
Annual Fund Operating Expenses |
0.58% |
Example
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then redeem 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. The Example does not take into account brokerage commissions
that you may pay on your purchases and sales of Shares. Although your actual
costs may be higher or lower, based on these assumptions your costs would be:
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1
Year: |
$59 |
3
Years: |
$186 |
5
Years: |
$324 |
10
Years: |
$726 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Shares are
held in a taxable account. These costs, which are not reflected in the Total
Annual Fund Operating Expenses or in the Example, affect the Fund’s performance.
For the fiscal year ended December 31, 2022, the Fund’s portfolio turnover
rate was 14% of the average value of its portfolio.
Principal
Investment Strategies
The
Fund is an actively managed exchange-traded fund (“ETF”) that pursues its
investment objective by investing, under normal circumstances, at least 80% of
its net assets (plus any borrowings made for investment purposes) in the common
stock of companies demonstrating leadership on climate change adaption and
mitigation solutions (“Climate Change Solutions Companies”) as defined by the
Fund. The Fund considers Climate Change Solutions Companies to be those
companies that provide products and services in alignment with several
sub-themes defined and reviewed by Trillium Asset Management, LLC (the
“Sub-Adviser”), the Fund’s investment sub-adviser. Current sub-themes include
Renewable Energy, Energy Efficiency/Electrification, Sustainable Design,
Resource Conservation, Water Purity/Conservation, Environmental Education, Green
Building, Sustainable Investments, and Sustainable Agriculture (each, a “Climate
Theme” and collectively, the “Climate Themes”). The Sub-Adviser’s Sustainable
Opportunities Committee (the “Committee”), which is comprised of members of the
Sub-Adviser’s portfolio management and research teams, is responsible for
identifying and defining each Climate Theme and developing a specific
methodology for each to be used in determining whether a company is aligned with
one or more Climate Themes. Each current Climate Theme is described below.
•Renewable
Energy
includes companies working to produce power from solar, wind, geothermal, or
other non-fossil sources, including generation from alternative fuels such as
biofuels.
•Energy
Efficiency/Electrification
includes companies producing products for the electric vehicle market or
products that are differentiated by higher energy efficiency than industry
standards, such as energy efficient microprocessors.
•Sustainable
Design
includes companies implementing circulatory programs in design, manufacturing,
and/or life cycle analysis.
•Resource
Conservation
includes companies emphasizing reducing product input amounts based on
recycling, efficient procurement, and/or more sustainable materials.
•Water
Purity/Conservation
includes companies that make products for water treatment and distribution or
that operate water utilities with a focus on higher efficiency distribution and
customer safety.
•Environmental
Education
includes companies providing resources to inform the public about environmental
issues, such as climate change.
•Green
Building
includes companies providing products and services to allow buildings to operate
with lower energy use, such as energy efficient HVAC systems.
•Sustainable
Investments
includes primarily financial services companies (i) providing investment
products and/or data for investment products that have Environmental, Social,
and/or Governance (“ESG”) characteristics or incorporate ESG criteria in their
investment strategies or insurance products and/or (ii) focusing on climate
change mitigation measures in their lending/financing operations. This could
include, for example, a property and casualty insurance company that
incorporates climate considerations into pricing.
•Sustainable
Agriculture
includes companies producing food products from regenerative practices, sourcing
from local farms, encouraging responsible animal welfare practices, and/or
utilizing fair trade and organic ingredient procurement and distribution.
There
are two core steps in the Investment Manager’s ESG Analysis process for this
Fund. The first stage, approval by the Sub-Adviser’s Investment Management
Committee (“IMC”), involves a ‘materiality review’ to identify the most material
issues at the industry level, or sub-industry level if more appropriate. For
each materiality review, a cross-functional team including representatives of
fundamental analyst, ESG analyst and shareholder advocate teams determines the
topics that are most important to each sector or sub- industry. Some issues are
specific to an industry, such as “access to medicine” for drug companies. Other
issues are pertinent across many industries, such as “climate change”,
“executive compensation” and “board diversity”.
Typically,
one out of every four companies (i.e.,
approximately
25%) from the identified peer group that are reviewed by the Sub-Adviser during
this stage of the process are excluded from the next stage of the review
process. This stage includes a written qualitative report on meaningful ESG
factors completed by a member of the ESG/investment team. The final report is
then presented to the IMC for a formal approval/disapproval vote.
Companies
considered to be materially involved (5% of revenue, unless otherwise indicated)
in the businesses that have higher risk will be excluded/restricted, such
as:
–Agricultural
Biotechnology
–Coal
Mining/Hard Rock Mining/Tar Sands
–Private
Prisons
–Tobacco
(0% tolerance for tobacco producers)
–Weapons
and Firearms (0% tolerance is for biological, chemical, and nuclear
weapons)
–Gaming/gambling
–Pornography
–Traditional
energy and power companies that have not demonstrated a commitment to a business
model designed to succeed in a low-carbon economy. At a minimum, the company
must have no commitments to new fossil fuel (oil, gas, coal) exploration,
production, or refining; or new fossil fuel or nuclear power
generation
The
investment process also restricts companies with identified major recent or
ongoing controversies in areas such as:
–Animal
Welfare
–Environmental
violations
–Workplace
Discrimination and Human Rights
–Product
Safety and Management violations
–Governance
controversies
The
Sub-Adviser’s ESG analysis assesses factors and topics that vary based on
materiality to the particular industry and business model. However, all
portfolio companies are assessed on the topics of climate change and
diversity.
In
the second stage, the Committee has the authority to approve/disapprove
companies for inclusion after reviewing strategy specific research materials
prepared by a member of the PM team and/or other investment team members. The
process evaluates company
alignment
with our stated themes based on quantitative and qualitative data. Companies
with revenue (greater than 10%) generated by activities related to one or more
Climate Themes are considered eligible for Committee vote.
The
Sub-Adviser generally seeks to invest in companies with high-quality financial
characteristics and a strong ESG profiles. The Sub-Adviser defines high-quality
financial characteristics to include: (i) business model momentum, as evidenced
by accelerating sales growth and/or profitability, (ii) differentiated
technology/competitive advantage and commitment to sustainability leadership, as
evidenced by products and services related to the Climate Theme with a 10%
revenue threshold, and (iii) capital discipline, as evidenced by favorable
positioning with regard to capital structure and debt obligations.
The
Sub-Adviser utilizes information obtained from multiple third-party providers
for both financial and ESG data, in addition to internally generated analyses,
throughout its proprietary investment process. Third-party information providers
currently include Bloomberg L.P., MSCI Inc., FactSet Research Systems Inc., and
Institutional Shareholder Services, Inc. The Sub-Adviser may sell Fund holdings
for several reasons, including when the stock no longer meets its climate
solutions criteria, when the security declines in value or is determined by the
Sub-Adviser to be overvalued, or when the security no longer aligns with the
Fund’s investment strategy. The Fund will not invest more than 35% of its assets
in any single industry.
The
Fund invests primarily in equity securities issued by U.S. listed companies,
generally with market capitalizations greater than $250 million. The Fund also
may invest in foreign securities including ordinary securities listed on foreign
exchanges and/or American depositary receipts (“ADRs”) up to 50% of the total
value of the Fund’s equity holdings. The Fund intends to invest in approximately
30-45 securities.
Principal
Investment Risks
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a
risk that you could lose all or a portion of your investment in the Fund. Some
or all of these risks may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”), the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Fund Shares, potentially resulting in financial losses to the
Fund and its shareholders.
•Depositary
Receipts Risk.
ADRs are certificates evidencing ownership of shares of a foreign issuer and are
alternatives to directly purchasing the underlying foreign securities in their
national markets and currencies. However, they continue to be subject to many of
the risks associated with investing directly in foreign securities. These risks
include the social, political and economic risks of the underlying issuer’s
country, as well as in the case of depositary receipts traded on non-U.S.
markets, exchange risk. Issuers of unsponsored ADRs are not contractually
obligated to disclose material information in the U.S., so there may not be a
correlation between such information and the market value of the unsponsored
ADR.
•Environmental,
Social, and Governance Risk. Applying
ESG and sustainability criteria to the investment process may exclude securities
of certain issuers for non-investment reasons and therefore the Fund may forgo
some market opportunities available to funds that do not use ESG or
sustainability criteria. The Fund’s incorporation of ESG considerations may
affect its exposure to certain sectors and/or types of investments, and may
adversely impact the Fund’s performance depending on whether such sectors or
investments are in or out of favor in the market. The Sub-Adviser performs ESG
analyses using third-party data that it believes to be reliable, but it does not
guarantee the accuracy of such third-party data, which may be based on
assumptions and estimates and may be incomplete or inaccurate.
•Equity
Market Risk. The
equity securities held in the Fund’s portfolio may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors that affect securities markets generally or factors affecting
specific issuers, industries, sectors or companies in which the Fund invests.
Common stocks are generally exposed to greater risk than other types of
securities, such as preferred stocks and debt obligations, because common
stockholders generally have inferior rights to receive payment from issuers.
•ETF
Risks.
The Fund is an ETF, and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs
exit
the business or otherwise become unable to process creation and/or redemption
orders and no other APs step forward to perform these services, or
(ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid/ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading
Risk. Although
Shares are listed for trading on the NYSE Arca, Inc. (the “Exchange”) and may be
traded on U.S. exchanges other than the Exchange, there can be no assurance that
Shares will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of Shares may begin to mirror the liquidity of
the Fund’s underlying portfolio holdings, which can be significantly less liquid
than Shares.
•Foreign
Securities Risk. Investments
in non-U.S. securities involve certain risks that may not be present with
investments in U.S. securities. For example, investments in non-U.S. securities
may be subject to risk of loss due to foreign currency fluctuations or to
political or economic instability. There may be less information publicly
available about a non-U.S. issuer than a U.S. issuer. Non-U.S. issuers may be
subject to different accounting, auditing, financial reporting and investor
protection standards than U.S. issuers. Investments in non-U.S. securities also
may be subject to withholding or other taxes and may be subject to additional
trading, settlement, custodial, and operational risks. With respect to certain
countries, there is the possibility of government intervention and expropriation
or nationalization of assets. Because legal systems differ, there also is the
possibility that it will be difficult to obtain or enforce legal judgments in
certain countries. Since foreign 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. Conversely, Shares may trade on days when foreign exchanges are
closed. Each of these factors can make investments in the Fund more volatile and
potentially less liquid than other types of investments.
•Management
Risk.
Your
investment in the Fund varies with the success and failure of the Fund
management team’s investment strategies and the Fund management team’s research,
analysis, and determination of portfolio securities. If the Adviser’s and
Sub-Adviser’s investment strategies, including their stop loss and goal setting
process, do not produce the expected results, the value of the Fund would
decrease.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing Risk.
The securities of large-capitalization companies may be relatively mature
compared to smaller companies and therefore subject to slower growth during
times of economic expansion. Large-capitalization companies also may be unable
to respond quickly to new competitive challenges, such as changes in technology
and consumer tastes.
◦Mid-Capitalization
Investing Risk.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-
capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large-capitalization stocks or the stock market
as a whole.
◦Small-Capitalization
Investing Risk.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or mid-capitalization stocks or the
stock market as a whole. There is typically less publicly available information
concerning smaller-capitalization companies than for larger, more established
companies.
•Models
and Data Risk.
The Adviser and Sub-Adviser may rely on proprietary models and analysis (“Models
and Data”) to make decisions about which securities to purchase or sell or the
timing of such transactions. If Models and Data prove to be incorrect or
incomplete, any decisions made in reliance thereon expose the Fund to potential
risks. Some of the models used to construct the Fund are predictive in nature.
The use of predictive models has inherent risks. For example, such models may
incorrectly forecast future behavior, leading to potential losses. In addition,
in unforeseen or certain low-probability scenarios (often involving a market
disruption of some kind), such models may produce unexpected results, which can
result in losses for the Fund. Furthermore, because predictive models are
usually constructed based on historical data supplied by third parties, the
success of relying on such models may depend heavily on the accuracy and
reliability of the supplied historical data.
•Sector
Risk. To
the extent the Fund invests more heavily in particular sectors of the economy,
its performance will be especially sensitive to developments that significantly
affect those sectors. The Fund may invest a significant portion of its assets in
the following sectors and, therefore, the performance of the Fund could be
negatively impacted by events affecting each of these sectors.
◦Industrial
Sector Risk. Issuers
in the industrial sector are affected by supply and demand, both for their
specific product or service and for industrial sector products in general. The
products of such issuers may face obsolescence due to rapid technological
developments and frequent new product introduction. Government regulations,
world events, economic conditions and exchange rates affect the performance of
companies in the industrial sector. Issuers in the industrial sector may be
adversely affected by liability for environmental damage, product liability
claims and exchange rates. The industrial sector may also be adversely affected
by changes or trends in commodity prices, which may be influenced by
unpredictable factors.
◦Information
Technology Sector Risk. Technology
companies face intense competition, both domestically and internationally, which
may have an adverse effect on profit margins. Technology companies may have
limited product lines, markets, financial resources or personnel. The products
of technology companies may face obsolescence due to rapid technological
developments and frequent new product introduction, unpredictable changes in
growth rates and competition for the services of qualified personnel. Companies
in the technology sector are heavily dependent on patent and intellectual
property rights. The loss or impairment of these rights may adversely affect the
profitability of these companies.
Performance
The
following performance information indicates some of the risks of investing in
the Fund. The bar chart shows the Fund’s performance for the calendar year ended
December 31. The table illustrates how the Fund’s average annual returns for the
1-year and since inception periods compare with those of a broad measure of
market performance. The Fund’s past performance, before and after taxes, does
not necessarily indicate how it will perform in the future. Updated performance
information is available on the Fund’s website at www.true-shares.com.
Calendar
Year Total Return
The
calendar year-to-date total return of the Fund as of [ ], 2022 was [ ]%. During
the period of time shown in the bar chart, the highest quarterly return was
9.08% for the quarter ended December 31, 2021, and the lowest quarterly return
was -1.61% for the quarter ended September 30, 2021.
Average
Annual Total Returns
(for
periods ended December 31, 2021)
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TrueShares
Trillium Climate Solutions ETF |
1-Year |
Since
Inception (2/28/2020) |
Return
Before Taxes |
18.40% |
32.06% |
Return
After Taxes on Distributions |
18.28% |
31.93% |
Return
After Taxes on Distributions and Sale of Shares |
10.97% |
25.06% |
S&P
1500 Total Return Index
(reflects
no deduction for fees, expenses, or taxes) |
28.71% |
31.74% |
After-tax
returns are calculated using the historical highest individual federal marginal
income tax rates during the period covered by the table above and do not reflect
the impact of state and local taxes. Actual after-tax returns depend on an
investor’s tax situation and may differ from those shown. After-tax returns
shown are not relevant to investors who hold their Shares through tax-deferred
arrangements such as an individual retirement account (“IRA”) or other
tax-advantaged accounts.
Portfolio
Management
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Adviser |
TrueMark
Investments, LLC |
Sub-Adviser |
Trillium
Asset Management, LLC |
Portfolio
Managers |
Paul
Hilton, CFA, Portfolio Manager, and Laura McGonagle, CFA, Portfolio
Manager, for the Sub-Adviser, have been portfolio managers of the Fund
since [ ] 2023 |
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.true-shares.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
in an IRA or other tax-advantaged account. Distributions on investments made
through tax-deferred arrangements may be taxed later upon withdrawal of assets
from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
ADDITIONAL
INFORMATION ABOUT THE FUND
Investment
Objectives
The
Fund’s investment objective has been adopted as a non-fundamental investment
policy and may be changed without shareholder approval upon written notice to
shareholders.
Principal
Investment Strategies
The
following information is in addition to, and should be read along with, the
description of the Fund’s principal investment strategies in the section titled
“Fund Summary—Principal Investment Strategies” above.
In
accordance with Rule 35d-1 under the 1940 Act, the Fund, as described in
the SAI, has adopted a non-fundamental investment policy to invest at least 80%
of its net assets (plus any borrowings made for investment purposes) in the
common stock of Climate Change Solutions Companies. The Fund considers Climate
Change Solutions Companies to be those companies that provide products and
services in alignment with several sub-themes defined and reviewed by the
Sub-Adviser. Current themes consist of Renewable Energy, Energy
Efficiency/Electrification, Sustainable Design, Resource Conservation, Water
Purity/Conservation, Environmental Education, Green Building, Sustainable
Investments, and Sustainable Agriculture. This policy may be changed without
shareholder approval upon 60 days’ written notice to shareholders.
For
temporary defensive purposes, the Fund may invest in short-term instruments such
as commercial paper and/or repurchase agreements collateralized by U.S.
government securities. Taking a temporary defensive position may result in the
Fund not achieving its investment objective.
Principal
Investment Risks
An
investment in the Fund entails risks. The Fund could lose money, or its
performance could trail that of other investment alternatives. The following
provides additional information about the Fund’s principal risks. It is
important that investors closely review and understand these risks before making
an investment in the Fund. Just as in the Fund’s summary section, the principal
risks are presented in alphabetical order to facilitate finding particular risks
and comparing them with those of other funds. Each risk summarized below is
considered a “principal risk” of investing in the Fund, regardless of the order
in which it appears.
•Cybersecurity
Risk.
With the increased use of technologies such as the Internet and the dependence
on computer systems to perform business and operational functions, funds (such
as a Fund) and their service providers may be prone to operational and
information security risks resulting from cyber-attacks and/or technological
malfunctions. In general, cyber-attacks are deliberate, but unintentional events
may have similar effects. Cyber-attacks include, among others, stealing or
corrupting data maintained online or digitally, preventing legitimate users from
accessing information or services on a website, releasing confidential
information without authorization, and causing operational disruption.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause a Fund, the Adviser, the Sub-Adviser
and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of a Fund, the
Adviser, the Sub-Adviser or a Fund’s other service providers, market makers,
APs, a Fund’s primary listing or the issuers of securities in which such Fund
invests have the ability to disrupt and negatively affect the Fund’s business
operations, including the ability to purchase and sell Fund Shares, potentially
resulting in financial losses to the Fund and its shareholders. For instance,
cyber-attacks or technical malfunctions may interfere with the processing of
shareholder or other transactions, affect a Fund’s ability to calculate its NAV,
cause the release of private shareholder information or confidential Fund
information, impede trading, cause reputational damage, and subject a Fund to
regulatory fines, penalties or financial losses, reimbursement or other
compensation costs, and additional compliance costs. Cyber-attacks or technical
malfunctions may render records of Fund assets and transactions, shareholder
ownership of Fund Shares, and other data integral to the functioning of a Fund
inaccessible or inaccurate or incomplete. A Fund also may incur substantial
costs for cybersecurity risk management in order to prevent cyber incidents in
the future. A Fund and its respective shareholders could be negatively impacted
as a result.
•Depositary
Receipt Risk.
The Fund may hold the securities of non-U.S. companies in the form of depository
receipts, including ADRs. ADRs are negotiable certificates issued by a U.S.
financial institution that represent a specified number of shares in a foreign
stock and trade on a U.S. national securities exchange, such as the New York
Stock Exchange (“NYSE”). Sponsored ADRs are issued with the support of the
issuer of the foreign stock underlying the ADRs and carry all of the rights of
common shares, including voting rights. The underlying issuers of certain
depositary receipts, particularly unsponsored or unregistered depositary
receipts, are under no obligation to distribute shareholder communications to
the holders of such receipts, or to pass through to them any voting rights with
respect to the deposited securities. Issuers of unsponsored depositary receipts
are not contractually obligated to disclose material information in the U.S.
and, therefore, such information may not correlate to the market value of the
unsponsored depositary receipt. The underlying shares in the Fund’s portfolio
are usually denominated or quoted in currencies other than the U.S. Dollar. As a
result, changes in foreign currency exchange rates may affect the value of the
Fund’s portfolio. In addition, because the underlying shares trade on foreign
exchanges at times when the U.S. markets are not
open
for trading, the value of the underlying shares may change materially at times
when the U.S. markets are not open for trading, regardless of whether there is
an active U.S. market for Shares.
•Environmental,
Social, and Governance Risk. Applying
ESG and sustainability criteria to the investment process may exclude securities
of certain issuers for non-investment reasons and therefore the Fund may forgo
some market opportunities available to funds that do not use ESG or
sustainability criteria. The Fund’s incorporation of ESG considerations may
affect its exposure to certain sectors and/or types of investments, and may
adversely impact the Fund’s performance depending on whether such sectors or
investments are in or out of favor in the market. In addition, the Fund’s
investments in certain companies may be susceptible to various factors that may
impact their businesses or operations, including costs associated with
government budgetary constraints that impact publicly funded projects and clean
energy initiatives, the effects of general economic conditions throughout the
world, increased competition from other providers of services, unfavorable tax
laws or accounting policies and high leverage. The Sub-Adviser performs ESG
analyses using third-party data that it believes to be reliable, but it does not
guarantee the accuracy of such third-party data, which may be based on
assumptions and estimates and may be incomplete or inaccurate.
•Equity
Market Risk. Common
stocks are susceptible to general stock market fluctuations and to volatile
increases and decreases in value as market confidence in and perceptions of
their issuers change. These investor perceptions are based on various and
unpredictable factors including: expectations regarding government, economic,
monetary and fiscal policies; inflation and interest rates; economic expansion
or contraction; and global or regional political, economic and banking crises.
If you held common stock, or common stock equivalents, of any given issuer, you
would generally be exposed to greater risk than if you held preferred stocks and
debt obligations of the issuer because common stockholders, or holders of
equivalent interests, generally have inferior rights to receive payments from
issuers in comparison with the rights of preferred stockholders, bondholders,
and other creditors of such issuers.
The
respiratory illness COVID-19 has spread globally for over two years, resulting
in a global pandemic and major disruption to economies and markets around the
world, including the United States. During this time, financial markets have
experienced extreme volatility and severe losses, and trading in many
instruments has been disrupted or suspended. Liquidity for many instruments has
been greatly reduced for periods of time. Some sectors of the economy and
individual issuers have experienced particularly large losses. Governments and
central banks, including the Federal Reserve in the U.S., have taken
extraordinary and unprecedented actions to support local and global economies
and the financial markets. The impact of these measures, and whether they will
be effective to mitigate the economic and market disruption, will not be known
for some time. However, the rapid COVID-19 vaccination rollout in the United
States and certain other developed countries, coupled with the passage of
stimulus programs in the U.S. and abroad, have resulted in the re-opening of
businesses, a reduction in quarantine and masking requirements, increased
consumer demand, and the resumption of in-person schooling, travel and events.
As a result, many global economies, including the U.S. economy, have either
re-opened fully or decreased significantly the number of public safety measures
in place that are designed to mitigate virus transmission. Despite these
positive trends, the prevalence of new COVID-19 variants, a failure to achieve
herd immunity, or other unforeseen circumstances may result in the continued
spread of the virus throughout unvaccinated populations or a resurgence in
infections among vaccinated individuals. As a result, it remains unclear if
recent positive trends will continue in developed markets and whether such
trends will spread world-wide to countries with limited access to effective
vaccines that are still experiencing rising COVID-19 hospitalizations and
deaths.
•ETF
Risks.
Each Fund is an ETF, and, as a result of the structure, is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk.
The Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
Investors buying or selling Shares in the secondary market will pay brokerage
commissions or other charges imposed by brokers, as determined by that broker.
Brokerage commissions are often a fixed amount and may be a significant
proportional cost for investors seeking to buy or sell relatively small amounts
of Shares. In addition, secondary market investors also will incur the cost of
the difference between the price at which an investor is willing to buy Shares
(the “bid” price) and the price at which an investor is willing to sell Shares
(the “ask” price). This difference in bid and ask prices is often referred to as
the “spread” or “bid/ask spread.” The bid/ask spread varies over time for Shares
based on trading volume and market liquidity and is generally lower if Shares
have more trading volume and market liquidity and higher if Shares have little
trading volume and market liquidity. Further, a relatively small investor base
in the Fund, asset swings in the Fund and/or increased market volatility may
cause increased bid/ask spreads. Due to the costs of buying or selling Shares,
including bid/ask spreads, frequent trading of Shares may significantly reduce
investment results and an investment in Shares may not be advisable for
investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV Risk.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of market volatility or periods of
steep market declines and periods when there is limited trading activity for
Shares in the secondary market, in which case such premiums or discounts may be
significant. The market price of Shares during the trading day, like the price
of any exchange-traded security, includes a “bid/ask” spread charged by the
exchange specialist, market makers or other participants that trade Shares. In
times of severe market disruption, the bid/ask spread can increase
significantly. At those times, Shares are most likely to be traded at a discount
to NAV, and the discount is likely to be greatest when the price of Shares is
falling fastest, which may be the time that you most want to sell your Shares.
The Adviser believes that, under normal market conditions, large market price
discounts or premiums to NAV will not be sustained because of arbitrage
opportunities.
◦Trading
Risk.
Although Shares are listed for trading on the Exchange and may be listed or
traded on U.S. and non-U.S. stock exchanges other than the Exchange, there can
be no assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange “circuit breaker”
rules, which temporarily halt trading on the Exchange when a decline in the
S&P 1500®
Index during a single day reaches certain thresholds (e.g.,
7%, 13%, and 20%). Additional rules applicable to the Exchange may halt trading
in Shares when extraordinary volatility causes sudden, significant swings in the
market price of Shares. There can be no assurance that Shares will trade with
any volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than Shares.
•Foreign
Securities Risk.
Investments in non-U.S. securities involve certain risks that may not be present
with investments in U.S. securities. For example, investments in non-U.S.
securities may be subject to risk of loss due to foreign currency fluctuations
or to political or economic instability. There may be less information publicly
available about a non-U.S. issuer than a U.S. issuer. Non-U.S. issuers may be
subject to different accounting, auditing, financial reporting and investor
protection standards than U.S. issuers. Investments in non-U.S. securities may
be subject to withholding or other taxes and may be subject to additional
trading, settlement, custodial, and operational risks. With respect to certain
countries, there is the possibility of government intervention and expropriation
or nationalization of assets. Because legal systems differ, there also is the
possibility that it will be difficult to obtain or enforce legal judgments in
certain countries. Since foreign 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. Conversely, Shares may trade on days when foreign exchanges are
closed. Each of these factors can make investments in the Fund more volatile and
potentially less liquid than other types of investments.
•Management
Risk.
The
skill of the Adviser and Sub-Adviser will play a significant role in the
respective Fund’s ability to achieve its investment objective. A Fund’s ability
to achieve its investment objective depends on the ability of the Adviser and
respective Sub-Adviser to correctly identify economic trends, especially with
regard to accurately forecasting projected dividend and growth rates and
inflationary and deflationary periods. In addition, a Fund’s ability to achieve
its investment objective depends on the Adviser’s and respective Sub-Adviser’s
ability to select stocks, particularly in volatile stock markets. The Adviser
and respective Sub-Adviser could be incorrect in its analysis of industries,
companies’ projected dividends and growth rates and the relative attractiveness
of value stocks and other matters. In addition, the Adviser’s and respective
Sub-Adviser’s stop loss and goal setting process may not perform as expected,
which may negatively impact a Fund.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. The Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
These developments as well as other events could result in further market
volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing Risk.
The
securities of large-capitalization companies may be relatively mature compared
to smaller companies and, therefore, subject to slower growth during times of
economic expansion. Large-capitalization companies also may be unable to respond
quickly to new competitive challenges, such as changes in technology and
consumer tastes.
◦Mid-Capitalization
Investing Risk.
The
securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large-capitalization stocks or the stock market
as a whole. Some medium capitalization companies have limited product lines,
markets, financial resources, and management personnel and tend to concentrate
on fewer geographical markets relative to large-capitalization companies.
◦Small-Capitalization
Investing Risk.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
larger capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than larger capitalization stocks or the stock
market as a whole. Some small capitalization companies have limited product
lines, markets, and financial and managerial resources and tend to concentrate
on fewer geographical markets relative to larger capitalization companies. There
is typically less publicly available information concerning
smaller-capitalization companies than for larger, more established companies.
Small-capitalization companies also may be particularly sensitive to changes in
interest rates, government regulation, borrowing costs and earnings.
•Models
and Data Risk. When
Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon expose the Fund to potential risks. For example, by relying on
Models and Data, the Adviser or Sub-Adviser may be induced to buy certain
investments at prices that are too high, to sell certain other investments at
prices that are too low, or to miss favorable opportunities altogether.
Similarly, any hedging based on faulty Models and Data may prove to be
unsuccessful.
Some
of the models used by the Adviser and Sub-Adviser for the Fund are predictive in
nature. The use of predictive models has inherent risks. For example, such
models may incorrectly forecast future behavior, leading to potential losses on
a cash flow and/or a mark-to-market basis. In addition, in unforeseen or certain
low-probability scenarios (often involving a market disruption of some kind),
such models may produce unexpected results, which can result in losses for the
Fund. Furthermore, because predictive models are usually constructed based on
historical data supplied by third parties, the success of relying on such models
may depend heavily on the accuracy and reliability of the supplied historical
data.
All
models rely on correct market data inputs. If incorrect market data is entered
into even a well-founded model, the resulting information will be incorrect.
However, even if market data is input correctly, “model prices” will often
differ substantially from market prices, especially for instruments with complex
characteristics, such as derivative instruments.
•Sector
Risk. The
Fund’s investing approach may result in an emphasis on certain sectors or
sub-sectors of the market at any given time. To the extent the Fund invests more
heavily in one sector or sub-sector of the market, it thereby presents a more
concentrated risk and its performance will be especially sensitive to
developments that significantly affect those sectors or sub-sectors. In
addition, the value of Shares may change at different rates compared to the
value of shares of a fund with investments in a more diversified mix of sectors
and industries. An individual sector or sub-sector of the market may have
above-average performance during particular periods, but may also move up and
down more than the broader market. The several industries that constitute a
sector may all react in the same way to economic, political or regulatory
events. The Fund’s performance could also be affected if the sectors or
sub-sectors do not perform as expected. Alternatively, the lack of exposure to
one or more sectors or sub-sectors may adversely affect performance.
◦Industrial
Sector Risk. The
industrial sector includes companies engaged in the manufacture and distribution
of capital goods, such as those used in defense, construction and engineering,
companies that manufacture and distribute electrical equipment and industrial
machinery and those that provide commercial and transportation services and
supplies. Companies in the industrial sector may be adversely affected by
changes in government regulation, world events and economic conditions. In
addition, companies in the industrial sector may be adversely affected by
environmental damages, product liability claims and exchange rates. The success
of these companies is affected by supply and demand both for their specific
product or service and for industrial sector products in general. The products
of manufacturing companies may face product obsolescence due to rapid
technological developments and frequent new product introduction. In addition,
the industrial sector may also be adversely affected by changes or trends in
commodity prices, which may be unpredictable.
◦Information
Technology Sector Risk. Technology
companies are characterized by periodic new product introductions, innovations
and evolving industry standards, and, as a result, face intense competition,
both domestically and internationally, which may have an adverse effect on
profit margins. Companies in the technology sector are often smaller and less
experienced companies and may be subject to greater risks than larger companies;
these risks may be heightened for
technology
companies in foreign markets. Technology companies may have limited product
lines, markets, financial resources or personnel. The products of technology
companies may face product obsolescence due to rapid technological developments
and frequent new product introduction, changes in consumer and business
purchasing patterns, unpredictable changes in growth rates and competition for
the services of qualified personnel. In addition, a rising interest rate
environment tends to negatively affect companies in the technology sector
because, in such an environment, those companies with high market valuations may
appear less attractive to investors, which may cause sharp decreases in the
companies’ market prices. Companies in the technology sector are heavily
dependent on patent and intellectual property rights. The loss or impairment of
these rights may adversely affect the profitability of these companies. The
technology sector may also be adversely affected by changes or trends in
commodity prices, which may be influenced or characterized by unpredictable
factors. Finally, while all companies may be susceptible to network security
breaches, certain companies in the technology 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.
PORTFOLIO
HOLDINGS INFORMATION
Information
about the Fund’s daily portfolio holdings is available at www.true-shares.com. A
complete description of the Fund’s policies and procedures with respect to the
disclosure of the Fund’s portfolio holdings is available in the Fund’s Statement
of Additional Information (the “SAI”).
MANAGEMENT
Investment
Adviser
TrueMark
Investments, LLC, a Delaware limited liability company located at 433 West Van
Buren Street, 1150-E, Chicago, Illinois 60607, serves as the investment adviser
for the Fund. The Adviser, subject to the oversight of the Board, provides an
investment management program and co-manages the Fund. The Adviser also arranges
for transfer agency, custody, fund administration, distribution and all other
services necessary for the Fund to operate. An SEC-registered investment adviser
formed in 2019, the Adviser is majority owned by the TrueMark Group, LLC, which
in turn is controlled by Michael Loukas.
The
Adviser continuously reviews, supervises, and administers the Fund’s investment
program. In particular, the Adviser provides investment and operational
oversight of the Sub-Adviser. The Board supervises the Adviser and establishes
policies that the Adviser must follow in its day-to-day management activities.
For the services it provides to the Fund, the Adviser is entitled to a unified
management fee, which is calculated daily and paid monthly, at an annual rate
based on the Fund’s average daily net assets as set forth in the table below.
|
|
|
|
|
|
Fund |
Management
Fee |
TrueShares
Trillium Climate Solutions ETF |
0.58% |
Pursuant
to an investment advisory agreement between the Trust, on behalf of the Fund,
and the Adviser (the “Advisory Agreement”), the Adviser has agreed to pay all
expenses of the Fund except the fee payable to the Adviser under the Advisory
Agreement, interest charges on any borrowings, dividends and other expenses on
securities sold short, taxes, brokerage commissions and other expenses incurred
in placing orders for the purchase and sale of securities and other investment
instruments, acquired fund fees and expenses, accrued deferred tax liability,
extraordinary expenses, and distribution (12b-1) fees and expenses (if any). The
Adviser, in turn, compensates the Sub-Adviser from the management fee it
receives.
The
basis for the Board’s approval of the continuation of the Advisory Agreement is
available in the Fund’s Annual
Report to Shareholders
for the period ended December 31, 2021.
Manager
of Managers Structure
The
Fund and the Adviser intend to apply for exemptive relief from the SEC
permitting the Adviser (subject to certain conditions and the approval of the
Board) to change or select new sub-advisers without obtaining shareholder
approval. The relief would also permit the Adviser to materially amend the terms
of agreements with a sub-adviser (including an increase in the fee paid by the
Adviser to the sub-adviser (and not paid by the Fund)) or to continue the
employment of a sub-adviser after an event that would otherwise cause the
automatic termination of services with Board approval, but without shareholder
approval. Shareholders will be notified of any sub-adviser changes. Unless and
until such exemptive relief is granted and the Fund’s reliance on such relief is
approved by Fund shareholders, shareholder approval will be required for changes
in a sub-adviser agreement or for the addition of a new
sub-adviser.
Sub-Adviser
Trillium
Asset Management, LLC, a Delaware limited liability company located at Two
Financial Center, 60 South Street, Suite 1100, Boston, Massachusetts 02111, is
responsible for the day-to-day management of the Fund. An SEC-registered
investment adviser formed in 1982, the Sub-Adviser is a wholly owned subsidiary
of Perpetual Limited. The Sub-Adviser provides advisory services to
mutual
funds, separately managed accounts, foundations, endowments, religious
institutions and other non‐profit and for‐profit institutional clients.
The
Sub-Adviser is responsible for recommending the purchase, retention and
disposition of portfolio securities for the Fund, subject to the supervision of
the Adviser and the Board. For its services, the Sub-Adviser is entitled to a
fee paid by the Adviser, which fee is 75% of the Adviser’s net profits (“Net
Profits”). Net Profits are calculated as follows: the Adviser’s Fees received
from the Fund during a fiscal period, less interest charges on any borrowings,
dividends and other expenses on securities sold short, taxes, brokerage
commissions and other expenses incurred in placing orders for the purchase and
sale of securities and other investment instruments, acquired fund fees and
expenses, accrued deferred tax liability, extraordinary expenses, and
distribution (12b‑1) fees and expenses (if any).
The
basis for the Board’s approval of the Sub-Advisory Agreement will be available
in the Fund’s Annual Report to Shareholders for the period ended December 31,
2022.
Portfolio
Managers
The
individuals listed below are jointly and primarily responsible for day-to-day
management of the Fund’s portfolio.
Paul
A. Hilton is a Portfolio Manager for the Sub-Adviser and is the Lead Manager for
the Sustainable Opportunities strategy. Prior to joining the Sub-Adviser in
2011, he was Vice President of Sustainable Investment Business Strategy at
Calvert Investments and also previously held senior positions within Calvert’s
Equities and Marketing Departments. Mr. Hilton also served as Portfolio Manager
for Socially Responsible Investing at The Dreyfus Corporation, then a division
of Mellon Bank, and as a Research Analyst in the Social Awareness Investment
(SAI) program at Smith Barney Asset Management, then a division of Citigroup. He
started his career as an Analyst with the Council on Economic Priorities, a
non‐profit known for an influential consumer guidebook called “Shopping for a
Better World.” Mr. Hilton is former Board Chair of US SIF, former Treasurer of
the United Nations Environment Programme Finance Initiative (UNEP‐FI), and
founder of the Social Investment Research Analysts Network (SIRAN), the first
U.S. network of sustainability analysts. He is a member of CFA Society Boston
and a Chartered Financial Analyst, and holds Master’s degrees in Anthropology
from New York University and Education from Roberts Wesleyan College.
Laura
L. McGonagle is a Portfolio Manager for the Sub-Adviser and leads the Trillium
ESG Small/Mid Cap Core strategy. Prior to joining the Sub-Adviser in 2001, she
was an equity research analyst at Adams, Harkness and Hill, a Boston‐based
investment bank that focuses on emerging growth companies. Ms. McGonagle’s last
position at Adams was as a sell‐side equity analyst in the “Healthy Living”
group. This group covered specialty consumer stocks which addressed the
consumers’ growing awareness of the impact of nutrition, environment and
lifestyle choices on their well‐being. She earned a B.A. in quantitative
economics from Tufts University in 1992. Ms. McGonagle is a member of the CFA
Society Boston and is a Chartered Financial Analyst charterholder.
Other
Service Providers
Foreside
Fund Services, LLC (the “Distributor”) serves as the principal underwriter and
distributor of the Fund’s Shares. The Distributor’s principal address is Three
Canal Plaza, Suite 100, Portland, Maine 04101. The Distributor will not
distribute shares in less than whole Creation Units, and it does not maintain a
secondary market in the Shares. The Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, and a member of the
Financial Industry Regulatory Authority, Inc. (“FINRA”). The Distributor has no
role in determining the policies of the Fund or the securities that are
purchased or sold by the Fund and is not affiliated with the Adviser,
Sub-Adviser, or any of their respective affiliates. U.S. Bancorp Fund Services,
LLC, doing business as U.S. Bank Global Fund Services, located at 615 East
Michigan Street, Milwaukee, Wisconsin 53202, serves as the administrator and
transfer agent for the Fund.
U.S.
Bank National Association, located at 1555 N. Rivercenter Drive, Suite 302,
Milwaukee, Wisconsin 53212, serves as the custodian for the Fund.
Morgan,
Lewis & Bockius LLP, located at 1111 Pennsylvania Avenue, N.W., Washington,
D.C. 20004, serves as legal counsel to the Trust.
[
], located at [ ], serves as the Fund’s independent registered public accounting
firm. The independent registered public accounting firm is responsible for
auditing the annual financial statements of the Fund.
HOW
TO BUY AND SELL SHARES
The
Fund issues and redeems Shares only in Creation Units at the NAV per share next
determined after receipt of an order from an AP. Only APs may acquire Shares
directly from the Fund, and only APs may tender their Shares for redemption
directly to the Fund, at NAV. APs must be a member or participant of a clearing
agency registered with the SEC and must execute a Participant Agreement that has
been agreed to by the Distributor, and that has been accepted by the Fund’s
transfer agent, with respect to purchases and redemptions of Creation Units.
Once created, Shares trade in the secondary market in quantities less than a
Creation Unit.
Most
investors buy and sell Shares in secondary market transactions through brokers.
Individual Shares are listed for trading on the secondary market on the Exchange
and can be bought and sold throughout the trading day like other publicly traded
securities.
When
buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the spread between the
bid and the offer price in the secondary market on each leg of a round trip
(purchase and sale) transaction. In addition, because secondary market
transactions occur at market prices, you may pay more than NAV when you buy
Shares and receive less than NAV when you sell those Shares.
Book
Entry
Shares
are held in book-entry form, which means that no stock certificates are issued.
The Depository Trust Company (the “DTC”) or its nominee is the record owner of
all outstanding Shares.
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. DTC’s
participants include 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 right 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 other securities that you hold in book entry or
“street name” through your brokerage account.
Frequent
Purchases and Redemptions of Shares
The
Fund imposes no restrictions on the frequency of purchases and redemptions of
Shares. In determining not to approve a written, established policy, the Board
evaluated the risks of market timing activities by Fund shareholders. Purchases
and redemptions by APs, who are the only parties that may purchase or redeem
Shares directly from the Fund, are an essential part of the ETF process and help
keep Share trading prices in line with NAV. As such, the Fund accommodates
frequent purchases and redemptions by APs. However, frequent purchases and
redemptions for cash may increase tracking error and portfolio transaction costs
and lead to the realization of capital gains. The Fund’s fair valuation of its
holdings consistent with the 1940 Act and Rule 2a-5 thereunder and its ability
to impose transaction fees on purchases and redemptions of Creation Units to
cover the custodial and other costs incurred by the Fund in effecting trades
help to minimize the potential adverse consequences of frequent purchases and
redemptions.
Determination
of Net Asset Value
The
Fund’s NAV is calculated as of the scheduled close of regular trading on the New
York Stock Exchange (the “NYSE”), generally 4:00 p.m. Eastern time, each day the
NYSE is open for business. The NAV is calculated by dividing the Fund’s net
assets by its Shares outstanding.
In
calculating its NAV, the Fund generally values its assets on the basis of market
quotations, last sale prices, or estimates of value furnished by a pricing
service or brokers who make markets in such instruments. In particular, the Fund
generally values equity securities traded on any recognized U.S. or non-U.S.
exchange at the last sale price or official closing price on the exchange or
system on which they are principally traded. If such information is not
available for a security held by the Fund or is determined to be unreliable, the
security will be valued at fair value estimates under guidelines established by
the Board (as described below
Fair
Value Pricing
The
Adviser has been designated by the Board as the valuation designee for the Fund
pursuant to Rule 2a-5 under the 1940 Act. In its capacity as valuation designee,
the Adviser has adopted procedures and methodologies to fair value Fund
securities whose market prices are not “readily available” or are deemed to be
unreliable. For example, such circumstances may arise when: (i) a security has
been de-listed or has had its trading halted or suspended; (ii) a security’s
primary pricing source is unable or unwilling to provide a price; (iii) a
security’s primary trading market is closed during regular market hours; or (iv)
a security’s value is materially affected by events occurring after the close of
the security’s primary trading market. Generally, when fair valuing a security
held by the Fund, the Adviser will take into account all reasonably available
information that may be relevant to a particular valuation including, but not
limited to, fundamental analytical data regarding the issuer, information
relating to the issuer’s business, recent trades or offers of the security,
general and/or specific market conditions and the specific facts giving rise to
the need to fair value the security. Fair value determinations are made in good
faith and in accordance with the fair value methodologies established by the
Adviser. Due to the subjective and variable nature of determining the fair value
of a security or other investment, there can be no assurance that the Adviser’s
determined fair value will match or closely correlate to any market quotation
that subsequently becomes available or the price quoted or published by other
sources. In addition, the Fund may not be able to obtain the fair value assigned
to an investment if the Fund were to sell such investment at or near the time
its fair value is determined.
DIVIDENDS,
DISTRIBUTIONS, AND TAXES
Dividends
and Distributions
The
Fund intends to pay out dividends, if any, and distribute any net realized
capital gains to shareholders at least annually. The Fund will declare and pay
capital gain distributions, if any, in cash. Distributions in cash may be
reinvested automatically in additional whole Shares only if the broker through
whom you purchased Shares makes such option available. Your broker is
responsible for distributing the income and capital gain distributions to you.
Taxes
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in the Fund. Your investment
in the Fund may have other tax implications. Please consult your tax adviser
about the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws. This summary does not apply
to Shares held in an IRA or other tax-qualified plans, which are generally not
subject to current tax. Transactions relating to Shares held in such accounts
may, however, be taxable at some time in the future. This summary is based on
current tax laws, which may change.
The
Fund intends to qualify each year for treatment as a regulated investment
company (a “RIC”) under Subchapter M of the Internal Revenue Code of 1986, as
amended (the “Code”). If it meets certain minimum distribution requirements, a
RIC is not subject to tax at the fund level on income and gains from investments
that are timely distributed to shareholders. However, the Fund’s failure to
qualify as a RIC or to meet minimum distribution requirements would result (if
certain relief provisions were not available) in fund-level taxation and,
consequently, a reduction in income available for distribution to
shareholders.
Unless
your investment in Shares is made through a tax-exempt entity or tax-advantaged
account, such as an IRA, you need to be aware of the possible tax consequences
when the Fund makes distributions, when you sell your Shares listed on the
Exchange, and when you purchase or redeem Creation Units (APs only).
Taxes
on Distributions
The
Fund intends to distribute, at least annually, substantially all of its net
investment income and net capital gains. For federal income tax purposes,
distributions of investment income are generally taxable as ordinary income or
qualified dividend income. Taxes on distributions of capital gains (if any) are
determined by how long the Fund owned the investments that generated them,
rather than how long a shareholder has owned his or her Shares. Sales of assets
held by the Fund for more than one year generally result in long-term capital
gains and losses, and sales of assets held by the Fund for one year or less
generally result in short-term capital gains and losses. Distributions of the
Fund’s net capital gain (the excess of net long-term capital gains over net
short-term capital losses) that are reported by the Fund as capital gain
dividends (“Capital Gain Dividends”) will be taxable as long-term capital gains,
which for non-corporate shareholders are subject to tax at reduced rates of up
to 20% (lower rates apply to individuals in lower tax brackets). Distributions
of short-term capital gain will generally be taxable as ordinary income.
Dividends and distributions are generally taxable to you whether you receive
them in cash or reinvest them in additional Shares.
Distributions
reported by the Fund as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided holding period and other requirements are met. “Qualified dividend
income” generally is income derived from dividends paid by U.S. corporations or
certain foreign corporations that are either incorporated in a U.S. possession
or eligible for tax benefits under certain U.S. income tax treaties. In
addition, dividends that the Fund receives in respect of stock of certain
foreign corporations may be qualified dividend income if that stock is readily
tradable on an established U.S. securities market. Corporate shareholders may be
entitled to a dividends received deduction for the portion of dividends they
receive from the Fund that are attributable to dividends received by the Fund
from U.S. corporations, subject to certain limitations. For such dividends to be
taxed as qualified dividend income to a non-corporate shareholder, the Fund must
satisfy certain holding period requirements with respect to the underlying stock
and the non-corporate shareholder must satisfy holding period requirements with
respect to his or her ownership of the Fund’s Shares. Holding periods may be
suspended for these purposes for stock that is hedged.
Shortly
after the close of each calendar year, you will be informed of the amount and
character of any distributions received from the Fund.
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are generally
taxable even if they are paid from income or gains earned by the Fund before
your investment (and thus were included in the Shares’ NAV when you purchased
your Shares).
You
may wish to avoid investing in the Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable even though
it may economically represent a return of a portion of your
investment.
If
you are neither a resident nor a citizen of the United States or if you are a
foreign entity, distributions (other than Capital Gain Dividends) paid to you by
the Fund will generally be subject to a U.S. withholding tax at the rate of 30%,
unless a lower treaty rate applies. Gains from the sale or other disposition of
your Shares from non-U.S. shareholders generally are not subject to U.S.
taxation, unless you are a nonresident alien individual who is physically
present in the U.S. for 183 days or more per year. The Fund may, under
certain
circumstances, report all or a portion of a dividend as an “interest-related
dividend” or a “short-term capital gain dividend,” which would generally be
exempt from this 30% U.S. withholding tax, provided certain other requirements
are met. Different tax consequences may result if you are a foreign shareholder
engaged in a trade or business within the United States or if a tax treaty
applies.
The
Fund (or a financial intermediary, such as a broker, through which a shareholder
owns Shares) generally is required to withhold and remit to the U.S. Treasury a
percentage (currently 24%) of the taxable distributions and sale proceeds paid
to any shareholder who fails to properly furnish a correct taxpayer
identification number, who has underreported dividend or interest income, or who
fails to certify that the shareholder is not subject to such withholding.
Taxes
When Shares are Sold on the Exchange
Provided
that a shareholder holds Shares as capital assets, any capital gain or loss
realized upon a sale of Shares generally is treated as a long-term capital gain
or loss if Shares have been held for more than one year and as a short-term
capital gain or loss if Shares have been held for one year or less. However, any
capital loss on a sale of Shares held for six months or less is treated as
long-term capital loss to the extent of Capital Gain Dividends paid with respect
to such Shares. Any loss realized on a sale will be disallowed to the extent
Shares of the Fund are acquired, including through reinvestment of dividends,
within a 61-day period beginning 30 days before and ending 30 days after the
disposition of Shares. The ability to deduct capital losses may be
limited.
The
cost basis of Shares of the Fund acquired by purchase will generally be based on
the amount paid for the Shares and then may be subsequently adjusted for other
applicable transactions as required by the Internal Revenue Code of 1986, as
amended. The difference between the selling price and the cost basis of Shares
generally determines the amount of the capital gain or loss realized on the sale
or exchange of Shares. Contact the broker through whom you purchased your Shares
to obtain information with respect to the available cost basis reporting methods
and elections for your account.
Taxes
on Purchases and Redemptions of Creation Units
An
AP having the U.S. dollar as its functional currency for U.S. federal income tax
purposes who exchanges securities for Creation Units generally recognizes a gain
or a loss. The gain or loss will be equal to the difference between the value of
the Creation Units at the time of the exchange and the exchanging AP’s aggregate
basis in the securities delivered, plus the amount of any cash paid for the
Creation Units. An AP who exchanges Creation Units for securities will generally
recognize a gain or loss equal to the difference between the exchanging AP’s
basis in the Creation Units and the aggregate U.S. dollar market value of the
securities received, plus any cash received for such Creation Units. The
Internal Revenue Service may assert, however, that a loss that is realized upon
an exchange of securities for Creation Units may not be currently deducted under
the rules governing “wash sales” (for an AP who does not mark-to-market its
holdings) or on the basis that there has been no significant change in economic
position. APs exchanging securities should consult their own tax adviser with
respect to whether wash sale rules apply and when a loss might be
deductible.
The
Fund may include a payment of cash in addition to, or in place of, the delivery
of a basket of securities upon the redemption of Creation Units. The Fund may
sell portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause the Fund to recognize investment income and/or capital
gains or losses that it might not have recognized if it had completely satisfied
the redemption in kind. As a result, the Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
Net
Investment Income Tax
U.S.
individuals with income exceeding specified thresholds are subject to a 3.8% tax
on all or a portion of their “net investment income,” which includes interest,
dividends, and certain capital gains (generally including capital gains
distributions and capital gains realized on the sale of Shares). This 3.8% tax
also applies to all or a portion of the undistributed net investment income of
certain shareholders that are estates and trusts.
Foreign
Investments by the Fund
Interest
and other income received by the Fund with respect to foreign securities may
give rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. If as of the close of a taxable year more than 50% of the
value of the Fund’s assets consists of certain foreign stock or securities, the
Fund will be eligible to elect to “pass through” to investors the amount of
foreign income and similar taxes (including withholding taxes) paid by the Fund
during that taxable year. This means that investors would be considered to have
received as additional income their respective shares of such foreign taxes, but
may be entitled to either a corresponding tax deduction in calculating taxable
income, or, subject to certain limitations, a credit in calculating federal
income tax. If the Fund does not so elect, it will be entitled to claim a
deduction for certain foreign taxes incurred by the Fund. The Fund (or a
financial intermediary, such as a broker, through which a shareholder owns
Shares) will notify you if it makes such an election and provide you with the
information necessary to reflect foreign taxes paid on your income tax return.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in the Fund. It is not a substitute for
personal tax advice. You also may be subject to state and local tax on Fund
distributions and sales of Shares. Consult your personal tax adviser about the
potential tax consequences of an investment in Shares under all applicable tax
laws. For more information, please see the section entitled “Federal Income
Taxes” in the SAI.
DISTRIBUTION
PLAN
The
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, the Fund is authorized to
pay an amount up to 0.25% of its average daily net assets each year for certain
distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Fund, and there are no plans to impose
these fees. However, in the event Rule 12b-1 fees are charged in the future,
because the fees are paid out of Fund assets, over time these fees will increase
the cost of your investment and may cost you more than certain other types of
sales charges.
PREMIUM/DISCOUNT
INFORMATION
Information
regarding how often Shares traded on the Exchange at a price above (i.e.,
at a premium) or below (i.e.,
at a discount) the NAV per share is available on the Fund’s website at
www.true-shares.com.
ADDITIONAL
NOTICES
Shares
are not sponsored, endorsed, or promoted by the Exchange. The Exchange is not
responsible for, nor has it participated in the determination of, the timing,
prices, or quantities of the Fund’s Shares to be issued, nor in the
determination or calculation of the equation by which Shares are redeemable. The
Exchange has no obligation or liability to owners of the Fund’s Shares in
connection with the administration, marketing, or trading of the Fund’s
Shares.
Without
limiting any of the foregoing, in no event shall the Exchange have any liability
for any lost profits or indirect, punitive, special, or consequential damages
even if notified of the possibility thereof.
The
Adviser and the Fund make no representation or warranty, express or implied, to
the owners of the Fund’s Shares or any member of the public regarding the
advisability of investing in securities generally or in the Fund’s Shares
particularly.
FINANCIAL
HIGHLIGHTS
The
financial highlights table below shows the financial performance information for
the Fund’s five most recent fiscal years (or the life of the Fund, if shorter).
Certain information reflects financial results for a single share of the Fund.
The financial highlights for the periods prior to August 15, 2022 represent the
periods during which the Fund was sub-advised by Purview Investments, LLC
pursuant to a different investment strategy. The total returns in the table
represent the rate that you would have earned or lost on an investment in the
Fund (assuming you reinvested all distributions). This information has been
audited by Cohen & Company, Ltd., the independent registered public
accounting firm of the Fund, whose report, along with the Fund’s financial
statements, is included in the Fund’s Annual
Report,
which is available upon request.
Financial
Highlights
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Per
Share Operating Performance (For a share outstanding throughout each
period) |
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|
Income
from Investment Operations |
|
Less
Distributions Paid From |
|
Net
Asset Value, Beginning of Period |
Net
investment
income (loss)(1) |
Net
realized and unrealized gain (loss) on investments |
Total
from investment operations |
|
Net
investment income |
Return
of capital |
Net
realized gains |
Total
distributions paid |
TrueShares
Trillium Climate Solutions ETF (formerly, TrueShares ESG Active
Opportunities ETF) |
|
|
For
the year 01/01/2021 - 12/31/2021 |
$35.10 |
0.16 |
6.29 |
6.45 |
|
(0.16) |
— |
— |
(0.16) |
For
the period 02/28/2020(6)
- 12/31/2020 |
$25.00 |
0.17 |
10.07 |
10.24 |
|
(0.14) |
(0.00) |
— |
(0.14) |
(1)
Per share net investment income (loss) was calculated using average shares
outstanding.
(2)
Annualized for periods less than one year.
(3)
Total return in the table represents the rate that the investor would have
earned or lost on an investment in the Fund, assuming reinvestment of
dividends.
(4)
Not annualized for periods less than one year.
(5)
Excludes in-kind transactions associated with creations and redemptions of the
Fund.
(6)
Commencement of operations.
Financial
Highlights
For
a Share Outstanding Throughout Each Period (Continued)
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Per
Share Operating Performance (For a share outstanding throughout each
period) |
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Ratios/Supplemental
Data |
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Ratios
to Average Net Assets of:(2) |
|
Net
Asset Value, End of Period |
|
Total
return, at NAV(3)(4) |
Total
return at Market(3)(4) |
Net
assets, end of period (000’s) |
Expenses |
Net
investment income (loss) |
Portfolio
turnover rate(4)(5) |
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$41.39 |
|
18.40% |
18.42% |
$10,348 |
0.58% |
0.42% |
14% |
$35.10 |
|
40.94% |
40.93% |
$7,020 |
0.58% |
0.70% |
29% |
TRUESHARES
TRILLIUM CLIMATE SOLUTIONS ETF
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Adviser |
TrueMark
Investments, LLC
433
West Van Buren Street, 1150-E
Chicago,
Illinois 60607 |
Transfer
Agent and Administrator |
U.S.
Bancorp Fund Services, LLC
615
East Michigan Street
Milwaukee,
Wisconsin 53202 |
Sub-Adviser |
Trillium
Asset Management, LLC
Two
Financial Center
60
South Street, Suite 1100
Boston,
Massachusetts 02111 |
Distributor |
Foreside
Fund Services, LLC
Three
Canal Plaza, Suite 100
Portland,
Maine 04101 |
Custodian |
U.S.
Bank National Association
1555
North Rivercenter Drive, Suite 302
Milwaukee,
Wisconsin 53212 |
Legal
Counsel |
Morgan,
Lewis & Bockius LLP
1111
Pennsylvania Avenue, NW
Washington,
DC 20004-2541 |
Independent
Registered Public Accounting Firm |
[
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Investors
may find more information about the Funds in the following
documents:
Statement
of Additional Information: The
Fund’s SAI provides additional details about the investments of the Fund and
certain other additional information. A current SAI is on file with the SEC and
is herein incorporated by reference into this Prospectus. It is legally
considered a part of this Prospectus.
Annual/Semi-Annual
Reports: Additional
information about the Fund’s investments is available in the Fund’s annual and
semi-annual reports to shareholders. In the Annual
Report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund’s performance.
You
can obtain free copies of these documents, request other information or make
general inquiries about the Fund by contacting the Fund at c/o U.S. Bank Global
Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or by calling
1-800-617-0004.
Shareholder
reports and other information about the Fund are also available:
•Free
of charge from the SEC’s EDGAR database on the SEC’s website at www.sec.gov;
or
•Free
of charge from the Fund’s Internet web site at www.true-shares.com;
or
•For
a fee, by e-mail request to publicinfo@sec.gov.
(SEC
Investment Company Act File No. 811-23226)