SUBJECT
TO COMPLETION
Dated
October 13, 2021
THE
INFORMATION HEREIN IS NOT COMPLETE AND MAY BE CHANGED. WE MAY NOT SELL THESE
SECURITIES UNTIL THE REGISTRATION STATEMENT FILED WITH THE SEC 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.
Subversive
Cannabis ETF ([GANG])
Listed
on [Exchange]
Subversive
Metaverse ETF ([PUNK])
Listed
on [Exchange]
Prospectus
[...],
2021
The
U.S. Securities and Exchange Commission (“SEC”) has not approved or disapproved
of these securities or determined if this Prospectus is truthful or complete.
Any representation to the contrary is a criminal offense.
Subversive
Cannabis ETF
Subversive
Metaverse ETF
Each
a series of Series Portfolios Trust (the “Trust”)
TABLE
OF CONTENTS
Subversive
Cannabis ETF
Investment
Objective
The
Subversive Cannabis ETF (the “Fund” or the “Cannabis Fund”) seeks to achieve
long-term capital appreciation.
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. 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.
|
|
|
|
|
|
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
|
Management
Fees |
0.75% |
Distribution
and Service (Rule 12b-1) Fees |
0.00% |
Other
Expenses(1) |
0.00% |
Total
Annual Fund Operating Expenses |
0.75% |
(1)“Other
Expenses” are estimated for the Fund’s current fiscal year.
|
|
Example
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. 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 |
$77 |
$240 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
the annual fund operating expenses or in the Example, affect the Fund’s
performance. No portfolio turnover rate is provided for the Fund because the
Fund had not commenced operations prior to the date of this Prospectus.
Principal
Investment Strategies
The
Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing, under normal market conditions, at least
80% of its net assets (plus any borrowings for investment purposes) in
securities of companies that are directly involved in legal
tetrahydrocannabinol-(“THC”) related businesses in the United States (“THC
Cannabis Companies”). For purposes of this investment policy, the Fund considers
a company to be a THC Cannabis Company if the company derives at least 50% of
its net revenue from legal THC-related sales in the cannabis industry in the
United States, which may include companies that are listed on exchanges in
non-U.S. countries where cannabis is legal but which have operations in the
United States. The Fund primarily invests in exchange-traded equity securities
of THC Cannabis Companies and in derivative instruments, including total return
swaps, intended to provide exposure to such securities.
In
addition to its investments in THC Cannabis Companies in the United States, the
Fund may invest up to 20% of its net assets in the equity securities of
companies that, in the opinion of the Subversive Capital Advisor LLC (the
“Adviser”), support THC Cannabis Companies. The types of companies that support
THC Cannabis Companies may include real estate investment trusts (“REITs”) that
target medical-use cannabis facilities, technology companies and tech-enabled
marketing companies that provide software infrastructure to retailers in the
legal cannabis markets, and companies, including business development companies
(“BDCs”), that engage in delivery and financial services activities for THC
Cannabis Companies.
The
Fund may invest in companies of any market capitalization, including mid-,
small- and micro-capitalization. However, the Fund will only invest in companies
with market capitalizations of at least $100 million at the time of purchase.
The
Fund’s direct equity investments will consist only of exchange-traded equity
securities of companies that are engaged exclusively in legal activities under
applicable national and local laws, including U.S. federal law and state laws.
All such equity securities will be listed on exchanges that require the issuing
company’s compliance with all laws, rules and regulations applicable to its
business, including U.S. federal and state laws. The Fund will not directly or
indirectly hold ownership in any companies that engage in THC Cannabis Companies
unless permitted by national and local laws of the relevant jurisdiction,
including U.S. federal and state laws.
In
selecting investments for the Fund, the Adviser will use a top-down approach,
based primarily on the Adviser’s quantitative factors, combined with qualitative
analysis that will skew towards value-oriented companies. The Fund’s portfolio
weightings will favor companies with dominant positions in their respective
markets, exhibit strong profitability characteristics, drive consumer adoption
for cannabis and, in the opinion of the Adviser, are best positioned to
experience significant growth and expansion as the legal marijuana industry
expands. The following are key factors that the Adviser believes will impact the
Fund’s portfolio weightings: (i) core retail and delivery locations in key
cannabis consumer cities and states; (ii) exposure to states that have near term
potential to shift from medical to adult-use; (iii) brand awareness and strength
of wholesale penetration; and (iv) lean business model across cultivation and
manufacturing. The Advisor may also invest the Fund’s assets in emerging
companies that the Advisor believes have growth potential. The Fund may sell a
security when the Advisor believes that the security is overvalued or better
investment opportunities are available, or to limit position size within the
Fund’s portfolio.
The
Fund will concentrate at least 25% of its investments in the legal cannabis
industry. The Fund is classified as “non-diversified” for purposes of the
Investment Company Act of 1940 (the “1940 Act”), which means a relatively high
percentage of the Fund’s assets may be invested in the securities of a limited
number of companies.
Principal
Risks
As
with any fund, there are risks to investing. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. In addition to possibly
not achieving your investment goals, you
could lose all or a portion of your investment in the Fund over short or even
long periods of time.
The principal risks of investing in the Fund are summarized below.
Cannabis-Related
Risks.
•Cannabis
Industry Risk.
The
cannabis industry is a very young, quickly evolving industry subject to rapidly
evolving laws, rules and regulations, and increasing competition. These changes
may cause companies in the cannabis industry to shrink or suddenly close, while
others may be forced to change their business model to survive.
•United
States Regulatory Risks of the Cannabis Industry.
The possession and use of cannabis, even for medical purposes, is illegal under
federal and certain states’ laws, which may negatively impact the value of the
Fund’s investments. Use of cannabis is regulated by both the federal government
and state governments, and state and
federal
laws regarding cannabis often conflict. Even in those states in which the use of
cannabis has been legalized, its possession and use remains a violation of
federal law. Federal law criminalizing the use of cannabis may pre-empts state
laws that legalize its use for medicinal and recreational purposes. Actions by
federal regulatory agencies, such as increased enforcement of current federal
cannabis laws and the prosecution of nonviolent federal drug crimes by the U.S.
Department of Justice (“DOJ”), could produce a chilling effect on the industry’s
growth and discourage banks from expanding their services to THC Cannabis
Companies where such services are currently limited. Any of these outcomes would
negatively affect the profitability and value of the Fund’s investments and even
its ability to pursue its stated investment objective. The conflict between the
regulation of cannabis under federal and state law creates volatility and risk
for all THC Cannabis Companies.
Because
cannabis is a Schedule I controlled substance under the Controlled Substances
Act (“CSA”), meaning that it has a high potential for abuse, has no currently
“accepted medical use” in the United States, lacks accepted safety for use under
medical supervision, and may not be prescribed, marketed or sold in the United
States, no drug product containing cannabis or cannabis extracts has been
approved for use by the Food and Drug Administration (“FDA”) or obtained
registrations for commercial production from the U.S. Drug Enforcement Agency
(“DEA”), and there is no guarantee that such products will ever be legally
produced or sold in the U.S. THC Cannabis Companies in the U.S. that engage in
research, manufacturing, distributing, importing or exporting, or dispensing
controlled substances must be registered (licensed) to perform these activities
and have the security, control, recordkeeping, reporting and inventory
mechanisms required by the DEA to prevent drug loss and diversion. Failure to
obtain the necessary registrations or comply with necessary regulatory
requirements may significantly impair the ability of certain companies in which
the Fund invests to pursue medical cannabis research or to otherwise cultivate,
possess or distribute cannabis. In addition, because cannabis is a Schedule I
controlled substance, Section 280E of the Internal Revenue Code of 1986
(“Internal Revenue Code”) applies by its terms to the purchase and sale of
medical-use cannabis products and provides that no deduction or credit is
allowed for expenses incurred during a taxable year “in carrying on any trade or
business if such trade or business (or the activities which comprise such trade
or business) consists of trafficking in controlled substances (within the
meaning of Schedules I and II of the CSA) which is prohibited by federal law or
the law of any state in which such trade or business is conducted.” The
disallowance of such tax deductions will likely affect the value of THC Cannabis
Companies.
•Non-U.S.
Regulatory Risks of the Cannabis Industry.
The companies that are listed on exchanges in non-U.S. countries in which the
Fund may invest are subject to various laws, regulations and guidelines relating
to the manufacture, management, transportation, storage and disposal of
cannabis, as well as being subject to laws and regulations relating to health
and safety, the conduct of operations and the protection of the environment.
Even if a company’s operations are permitted under current law, they may not be
permitted in the future, in which case such company may not be in a position to
carry on its operations in its current locations. Additionally, controlled
substance legislation differs between countries and legislation in certain
countries may restrict or limit the ability of certain companies in which the
Fund invests to sell their products.
•Operational
Risks of the Cannabis Industry.
Companies
involved in the cannabis industry face intense competition, may have limited
access to the services of banks, may have substantial burdens on company
resources due to litigation, complaints or enforcement actions, and are heavily
dependent on receiving necessary permits and authorizations to engage in medical
cannabis research or to otherwise cultivate, possess or distribute cannabis.
Since the cultivation, possession, and distribution of cannabis can be illegal
under United States federal law under certain circumstances, federally regulated
banking institutions may be unwilling to make financial services available to
growers and sellers of cannabis.
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 only a limited number of institutional investors (known as “Authorized
Participants” or “APs”) that are authorized to purchase and redeem shares
directly from the Fund. In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, shares of the
Fund
may trade at a material discount to the Fund’s net asset value (“NAV”) and
possibly face delisting: (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. Due
to the costs of buying or selling shares of the Fund, 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. As
with all ETFs, shares of the Fund may be bought and sold in the secondary market
at market prices. Although it is expected that the market price of shares of the
Fund 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.
Although shares of the Fund are listed for trading on the [Exchange] (the
“Exchange”), there can be no assurance that an active trading market for shares
will develop or be maintained or that shares will trade with any volume, or at
all, on any stock exchange. In stressed market conditions, the market for shares
of the Fund may become less liquid in response to deteriorating liquidity in the
markets for the Fund’s underlying portfolio holdings. This adverse effect on
liquidity for the Fund’s shares, in turn, can lead to differences between the
market price of the Fund’s shares and the underlying value of those shares. In
addition, trading in Fund shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in shares of the Fund
inadvisable.
New
Adviser Risk. The
Adviser is a newly registered investment adviser and has not previously managed
a mutual fund. As a result, there is no long-term track record against which an
investor may judge the Adviser and it is possible the Adviser may not achieve
the Fund’s intended investment objective.
New
Fund Risk.
The Fund is a recently organized investment company with no operating history.
As a result, prospective investors have no track record or history on which to
base their investment decision.
Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may invest a greater percentage of its
assets in the securities of a single issuer or a lesser number of issuers than
if it was a diversified fund. As a result, the Fund may be more exposed to the
risks associated with and developments affecting an individual issuer or a
lesser number of issuers than a fund that invests more widely. This may increase
the Fund’s volatility and cause the performance of a relatively small number of
issuers to have a greater impact on the Fund’s performance.
Industry
Concentration Risk.
The Fund’s investments will be concentrated in the legal cannabis industry in
the United States. The focus of the Fund’s portfolio on this specific industry
may present more risks than if the portfolio were broadly diversified over
numerous groups of industries.
Growth
Investing Style Risk. If
the Portfolio Manager incorrectly assesses a company’s prospects for growth or
how other investors will value the company’s growth, then the price of the
company’s stock may decrease, or may not increase to the level anticipated by
the sub-adviser. In addition, growth stocks may be more volatile than other
stocks because they are more sensitive to investors’ perceptions of the issuing
company’s growth potential. Also, the growth investing style may over time go in
and out of favor. At times when the investing style used by the Fund is out of
favor, the Fund may underperform other equity funds that use different investing
styles.
Derivatives
Risk.
Derivatives
may pose risks in addition to and greater than those associated with investing
directly in securities, currencies or other investments, including risks
relating to leverage, imperfect correlations with underlying investments or the
Fund’s other portfolio holdings, high price volatility, lack of availability,
counterparty credit, liquidity, valuation and legal restrictions. Their use is a
highly specialized activity that involves investment techniques and risks
different from those associated with ordinary portfolio securities transactions.
The Fund’s use of derivatives to obtain
short
exposure, if any, may result in greater volatility of the Fund's NAV per share.
If the Adviser are incorrect about their expectations of market conditions, the
use of derivatives could also result in a loss, which in some cases may be
unlimited. The Fund may enter into total return swaps, among other instruments,
for purposes of attempting to gain exposure to a particular asset without
actually purchasing that asset. Such swap arrangements are OTC derivatives that
may also subject the Fund to the risk that the counterparty to the transaction
may not meet its obligations.
Swap
Agreements Risk.
Swap
agreements are contracts among the Fund and a counterparty to exchange the
return of the pre-determined underlying investment (such as the rate of return
of the underlying index). Swap agreements may be negotiated bilaterally and
traded OTC between two parties or, for certain standardized swaps, must be
exchange-traded through a futures commission merchant and/or cleared through a
clearinghouse that serves as a central counterparty. Risks associated with the
use of swap agreements are different from those associated with ordinary
portfolio securities transactions, due in part to the fact they could be
considered illiquid and many swaps trade on the OTC market. Swaps are
particularly subject to counterparty credit, correlation, valuation, liquidity
and leveraging risks. While exchange trading and central clearing are intended
to reduce counterparty credit risk and increase liquidity, they do not make swap
transactions risk-free. Additionally, applicable regulators have adopted rules
imposing certain margin requirements, including minimums, on OTC swaps, which
may result in the Fund and its counterparties posting higher margin amounts for
OTC swaps, which could increase the cost of swap transactions to the Fund and
impose added operational complexity.
Counterparty
Risk.
The
Fund may use swap agreements to gain exposure to a particular group of
securities, index, asset class or other reference asset without actually
purchasing those securities or investments, to hedge a position, or for other
investment purposes. Through these investments and related arrangements (e.g.,
prime brokerage or securities lending arrangements or derivatives transactions),
the Fund is exposed to credit risks that the counterparty may be unwilling or
unable to make timely payments or otherwise to meet its contractual obligations.
If the counterparty becomes bankrupt or defaults on (or otherwise becomes unable
or unwilling to perform) its payment or other obligations to the Fund, the Fund
may not receive the full amount that it is entitled to receive or may experience
delays in recovering the collateral or other assets held by, or on behalf of,
the counterparty. If this occurs, the value of your shares in the Fund will
decrease.
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.
Small-
and Mid-Capitalization Companies Risk. The
Fund may invest in the securities of small- and mid-capitalization companies. As
a result, the Fund may be more volatile than funds that invest in larger, more
established companies. The securities of small-and mid-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. Small- and mid-capitalization companies may be particularly
sensitive to changes in interest rates, government regulation, borrowing costs
and earnings.
Real
estate investment trust (“REIT”) risk. The
Fund’s investment in REITs will subject the Fund to risks similar to those
associated with direct ownership of real estate, including losses from casualty
or condemnation, and changes in local and general economic conditions, supply
and demand, interest rates, zoning laws, regulatory limitations on rents,
property taxes and operating expenses.
Foreign
Investments Risk. Securities
of non-U.S. issuers, including those located in foreign countries, may involve
special risks caused by foreign political, social and economic factors,
including exposure to currency fluctuations, less liquidity, less developed and
less efficient trading markets, political instability and less developed legal
and auditing standards.
Business
Development Companies Risk. Business
development companies (“BDCs”) are specialized closed-end funds that trade like
stocks. Shares of BDCs are not priced at the NAV of their underlying portfolio
holdings, but instead trade like stocks at the market price, which may be at a
price above or below their NAV. A BDC’s underlying investments are typically in
privately held companies, and the risks of owning a BDC generally reflect the
risks of owning its underlying investments. Risks may include, but are not
limited to, credit and investment risk, market and valuation risk, price
volatility
risk, liquidity risk and interest rate risk. When the Fund invests in BDCs,
shareholders of the Fund indirectly bear a proportionate share of the BDC’s fees
and expenses, as well as their share of the Fund’s fees and expenses. As a
result, an investment by the Fund in an BDC could cause the Fund’s operating
expenses (taking into account indirect expenses such as the fees and expenses of
the BDC) to be higher and, in turn, performance to be lower than if the Fund
were to invest directly in the instruments held by the BDC.
Management
Risk.
The
Fund is actively-managed and may not meet its investment objective based on the
Adviser’s success or failure to implement investment strategies for the Fund.
The Adviser’s evaluations and assumptions regarding issuers, securities, and
other factors may not successfully achieve the Fund’s investment objective given
actual market conditions.
Market
Events Risk. One
or more markets in which the Fund invests may go down in value, including the
possibility that the markets will go down sharply and unpredictably. This may be
due to numerous factors, including interest rates, the outlook for corporate
profits, the health of the national and world economies, national and world
social and political events, and the fluctuation of other stock markets around
the world. The global pandemic outbreak of an infectious respiratory illness
caused by a novel coronavirus known as COVID-19 and subsequent efforts to
contain its spread have resulted and may continue to result in substantial
market volatility and global business disruption, affecting the global economy
and the financial health of individual companies in significant and unforeseen
ways. In addition, the Fund may face challenges with respect to its day-to-day
operations if key personnel of the Adviser or other service providers are
unavailable due to quarantines, restrictions on travel, or other restrictions
imposed by state or federal regulatory authorities. The duration and future
impact of COVID-19 are currently unknown, which may exacerbate the other risks
that apply to the Fund and could adversely affect the value and liquidity of the
Fund’s investments, impair the Fund’s ability to satisfy AP transaction
requests, and negatively affect the Fund’s performance.
Performance
Performance
information for the Fund is not included because the Fund had not commenced
operations prior to the date of this Prospectus. Performance information will be
available once the Fund has at least one calendar year of performance. The
Fund’s past performance, before and after taxes, is not necessarily an
indication of how the Fund will perform in the future and does not guarantee
future results. Updated performance information will be available on the Fund’s
website at www.subversive.com/ETFs or by calling the Fund toll-free at
[...].
Management
Investment
Adviser
Subversive
Capital Advisor LLC is the Fund’s investment adviser.
Portfolio
Managers
Michael
Auerbach, Founder and Chief Executive Officer of Subversive Capital, Leland
Hensch, Chief Investment Officer of Subversive Capital’s ETF portfolios, and
Steven Yoo, CFA, Principal of Subversive Capital, are the portfolio managers
primarily responsible for the day-to-day management of the Fund and have managed
the Fund since its inception in [...] 2021.
Purchase
and Sale of Fund Shares
Shares
of the Fund are listed on the Exchange, and individual shares may only be bought
and sold in the secondary market through brokers at market prices, rather than
NAV. Because shares of the Fund trade at market prices rather than NAV, the
Fund’s shares may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund issues and redeems its shares at NAV only in large specified numbers of
shares 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.
Investors
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”). Recent information about
the Fund, including its NAV, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at
www.subversive.com/ETFs.
Tax
Information
Fund
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.
Payments
to Broker-Dealers and Other Financial Intermediaries
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.
Subversive
Metaverse ETF
Investment
Objective
The
Subversive Metaverse ETF (the “Fund” or the “Metaverse Fund”) seeks to achieve
long-term capital appreciation.
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. 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.
|
|
|
|
|
|
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
|
Management
Fees |
0.75% |
Distribution
and Service (Rule 12b-1) Fees |
0.00% |
Other
Expenses(1) |
0.00% |
Total
Annual Fund Operating Expenses |
0.75% |
(1)“Other
Expenses” are estimated for the Fund’s current fiscal year.
|
|
Example
This
Example is intended to help you compare the cost of investing in the Fund with
the cost of investing in other mutual funds. 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 |
$77 |
$240 |
Portfolio
Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Fund
shares are held in a taxable account. These costs, which are not reflected in
the annual fund operating expenses or in the Example, affect the Fund’s
performance. No portfolio turnover rate is provided for the Fund because the
Fund had not commenced operations prior to the date of this Prospectus.
Principal
Investment Strategies
The
Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by investing in globally-listed equity securities of
companies that provide services and products that support the infrastructure and
applications of the Metaverse (“Metaverse Companies”). “Metaverse” is a term
used to describe the next generation of the Internet, which has the potential to
allow creators to build the next chapter of human interaction through immersive
experiences in three-dimensional virtual spaces. Under normal market conditions,
the Fund will invest at least 80% of its net assets (plus any borrowings for
investment purposes) in securities of Metaverse Companies. The Fund will invest
in securities of globally-listed companies with a market capitalization, at the
time of investment, of at least $250 million and less than $1 trillion.
Securities
eligible for inclusion in the Fund’s investable universe include publicly listed
equity securities of U.S. and foreign (including emerging markets) issuers. The
Fund’s investments in foreign securities may include American Depositary
Receipts (“ADRs”), Global Depositary Receipts (“GDRs”), International Depositary
Receipts (“IDRs”), U.S. dollar denominated foreign securities, direct foreign
securities purchased on a foreign exchange, and securities of companies
incorporated outside the United States.
A
committee of Metaverse experts (the “Metaverse Committee”) composed of external
subject matter experts will analyze the Metaverse Companies, their role in
supporting the Metaverse, and their current and future potential to generate
profits from the Metaverse. Metaverse Companies selected for inclusion in the
Fund’s portfolio will be engaged in activities that fall into one or more of the
following seven layers of the Metaverse identified by the Metaverse Committee,
each of which are described further below: experience, discovery, creator
economy, spatial computing, decentralization, human interface and
infrastructure.
•Layer
1: Experience
– The Metaverse is about the dematerialization of physical space, distance and
objects. Games are expected to evolve to incorporate more forms of entertainment
such as live music performances and esports (electronic sports), will drive
online and social engagement. Companies in this layer will focus on the creation
of games, social, esports, media and shopping.
•Layer
2: Discovery
– This layer is about the push and pull that introduces people to new
experiences. Communities and social interaction have the potential to drive
users to the Metaverse. Companies in this space will focus on ad networks,
social and curation.
•Layer
3: Creator Economy
– Given advance of technology, we are in the creator era where now designers and
creators do not necessarily need to know code. Companies are building the tools,
templates and marketplaces that allow anyone to launch a website, business, and
applications. Companies in this layer will focus on design tools, asset markets,
workflow and commerce.
•Layer
4: Spatial Computing
– The goal of companies in this layer is to dissolve the layer between the
physical and virtual worlds. This could mean injecting space into computation or
computation into space. The key technologies that will build the Metaverse are:
3D engines, mapping and interpretation, voice and gesture recognition, data
integration and next generation user interfaces.
•Layer
5: Decentralization
– Blockchain technology will free financial assets from centralized control and
custody, for example, through decentralized finance and non-fungible tokens,
which all rely on blockchains. A wave of innovation around decentralized markets
could drive adoption and application for game assets.
•Layer
6: Human Interface
– The vast majority of the workforce relies on some level of technology to
provide output, goods and services. Companies in this layer will focus on the
hardware and technologies that connect the human body and mind to the
Metaverse.
•Layer
7: Infrastructure
– This layer includes the technology that enables our devices and connects them
to each other and the network. The companies in this layer will focus on 5G,
wifi, cloud, and semiconductors.
Once
Metaverse Companies are identified across these layers, Subversive Capital
Advisor LLC (the “Adviser”), the Fund’s investment adviser, will apply a
Subversive Metaverse Ranking (“SMR”) to each company based on the level of focus
and commitment to developing the Metaverse. Applying an SMR can be highly
subjective; however, the Adviser and the Metaverse Committee will rely on
publicly available information where available. Key drivers of applying an SMR
may include the percentage of a company’s revenue, workforce, and future capital
commitments associated with the Metaverse.
In
selecting investments for the Fund, the Adviser will apply a top-down approach,
utilizing primarily quantitative factors, but also considering qualitative
factors. The Adviser will give greater weightings to companies whose primary
business models and growth prospects are dedicated to building the
infrastructure and/or the applications of the Metaverse and less weightings to
companies with limited exposure and business segments focused on the Metaverse.
In addition, the Adviser may also include companies that may not have made any
public announcements yet regarding the Metaverse, but has a
portfolio
of assets and services that would be highly attractive in terms of building one
or more of the seven layers of the Metaverse.
The
Fund will concentrate at least 25% of its investments in the [...] industry. The
Fund is classified as “non-diversified” for purposes of the Investment Company
Act of 1940 (the “1940 Act”), which means a relatively high percentage of the
Fund’s assets may be invested in the securities of a limited number of
companies.
Principal
Risks
As
with any fund, there are risks to investing. An investment in the Fund is not a
deposit of a bank and is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other governmental agency. In addition to possibly
not achieving your investment goals, you
could lose all or a portion of your investment in the Fund over short or even
long periods of time.
The principal risks of investing in the Fund are summarized below.
Metaverse
Companies Risk.
The Fund invests primarily in the equity securities of Metaverse Companies and,
as such, is particularly sensitive to risks to those types of companies. These
risks include, but are not limited to, small or limited markets for such
securities, changes in business cycles, world economic growth, technological
progress, rapid obsolescence, and government regulation. Securities of Metaverse
Companies, especially smaller, start-up companies, tend to be more volatile than
securities of companies that do not rely heavily on technology. Rapid change to
technologies that affect a company’s products could have a material adverse
effect on such company’s operating results. Metaverse Companies may rely on a
combination of patents, copyrights, trademarks and trade secret laws to
establish and protect their proprietary rights in their products and
technologies. There can be no assurance that the steps taken by these companies
to protect their proprietary rights will be adequate to prevent the
misappropriation of their technology or that competitors will not independently
develop technologies that are substantially equivalent or superior to such
companies’ technology.
.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 only a limited number of institutional investors (known as “Authorized
Participants” or “APs”) that are authorized to purchase and redeem shares
directly from the Fund. In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, shares of the Fund may trade at a material discount
to the Fund’s net asset value (“NAV”) and possibly face delisting: (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. Due
to the costs of buying or selling shares of the Fund, 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. As
with all ETFs, shares of the Fund may be bought and sold in the secondary market
at market prices. Although it is expected that the market price of shares of the
Fund 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.
Although shares of the Fund are listed for trading on the [Exchange] (the
“Exchange”), there can be no assurance that an active trading market for shares
will develop or be maintained or that shares will trade with any volume, or at
all, on any stock exchange. In stressed market conditions, the market for shares
of the Fund may become less liquid in response to deteriorating liquidity in the
markets for the Fund’s underlying portfolio
holdings.
This adverse effect on liquidity for the Fund’s shares, in turn, can lead to
differences between the market price of the Fund’s shares and the underlying
value of those shares. In addition, trading in Fund shares may be halted due to
market conditions or for reasons that, in the view of the Exchange, make trading
in shares of the Fund inadvisable.
New
Adviser Risk. The
Adviser is a newly registered investment adviser and has not previously managed
a mutual fund. As a result, there is no long-term track record against which an
investor may judge the Adviser and it is possible the Adviser may not achieve
the Fund’s intended investment objective.
New
Fund Risk.
The Fund is a recently organized investment company with no operating history.
As a result, prospective investors have no track record or history on which to
base their investment decision.
Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may invest a greater percentage of its
assets in the securities of a single issuer or a lesser number of issuers than
if it was a diversified fund. As a result, the Fund may be more exposed to the
risks associated with and developments affecting an individual issuer or a
lesser number of issuers than a fund that invests more widely. This may increase
the Fund’s volatility and cause the performance of a relatively small number of
issuers to have a greater impact on the Fund’s performance.
Industry
Concentration Risk.
The Fund’s investments will be concentrated in the [...] industry in the United
States. The focus of the Fund’s portfolio on this specific industry may present
more risks than if the portfolio were broadly diversified over numerous groups
of industries.
Growth
Investing Style Risk. If
the Portfolio Manager incorrectly assesses a company’s prospects for growth or
how other investors will value the company’s growth, then the price of the
company’s stock may decrease, or may not increase to the level anticipated by
the sub-adviser. In addition, growth stocks may be more volatile than other
stocks because they are more sensitive to investors’ perceptions of the issuing
company’s growth potential. Also, the growth investing style may over time go in
and out of favor. At times when the investing style used by the Fund is out of
favor, the Fund may underperform other equity funds that use different investing
styles.
Consumer
Discretionary Sector Risk.
Consumer discretionary companies are companies that provide non-essential goods
and services, such as retailers, media companies and consumer services. These
companies manufacture products and provide discretionary services directly to
the consumer, and the success of these companies tied closely to the performance
of the overall domestic and international economy, interest rates, competition
and consumer confidence.
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.
Large-Capitalization
Companies Risk.
Larger, more established companies may be unable to respond quickly to new
competitive challenges such as changes in technology and consumer tastes. Larger
companies also may not be able to attain the high growth rates of successful
smaller companies.
Small-
and Mid-Capitalization Companies Risk. The
Fund may invest in the securities of small- and mid-capitalization companies. As
a result, the Fund may be more volatile than funds that invest in larger, more
established companies. The securities of small-and mid-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. Small- and mid-capitalization companies may be particularly
sensitive to changes in interest rates, government regulation, borrowing costs
and earnings.
Foreign
Investments Risk. Securities
of non-U.S. issuers, including those located in foreign countries, may involve
special risks caused by foreign political, social and economic factors,
including exposure to currency fluctuations, less liquidity, less developed and
less efficient trading markets, political instability and less developed legal
and auditing standards.
Depositary
Receipt Risk.
ADRs, GDRs, and IDRs 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.
Foreign
Investments Risk. Securities
of non-U.S. issuers, including those located in foreign countries, may involve
special risks caused by foreign political, social and economic factors,
including exposure to currency fluctuations, less liquidity, less developed and
less efficient trading markets, political instability and less developed legal
and auditing standards.
Management
Risk.
The
Fund is actively-managed and may not meet its investment objective based on the
Adviser’s success or failure to implement investment strategies for the Fund.
The Adviser’s evaluations and assumptions regarding issuers, securities, and
other factors may not successfully achieve the Fund’s investment objective given
actual market conditions.
Market
Events Risk. One
or more markets in which the Fund invests may go down in value, including the
possibility that the markets will go down sharply and unpredictably. This may be
due to numerous factors, including interest rates, the outlook for corporate
profits, the health of the national and world economies, national and world
social and political events, and the fluctuation of other stock markets around
the world. The global pandemic outbreak of an infectious respiratory illness
caused by a novel coronavirus known as COVID-19 and subsequent efforts to
contain its spread have resulted and may continue to result in substantial
market volatility and global business disruption, affecting the global economy
and the financial health of individual companies in significant and unforeseen
ways. In addition, the Fund may face challenges with respect to its day-to-day
operations if key personnel of the Adviser or other service providers are
unavailable due to quarantines, restrictions on travel, or other restrictions
imposed by state or federal regulatory authorities. The duration and future
impact of COVID-19 are currently unknown, which may exacerbate the other risks
that apply to the Fund and could adversely affect the value and liquidity of the
Fund’s investments, impair the Fund’s ability to satisfy AP transaction
requests, and negatively affect the Fund’s performance.
Performance
Performance
information for the Fund is not included because the Fund had not commenced
operations prior to the date of this Prospectus. Performance information will be
available once the Fund has at least one calendar year of performance. The
Fund’s past performance, before and after taxes, is not necessarily an
indication of how the Fund will perform in the future and does not guarantee
future results. Updated performance information will be available on the Fund’s
website at www.subversive.com/ETFs or by calling the Fund toll-free at
[...].
Management
Investment
Adviser
Subversive
Capital Advisor LLC is the Fund’s investment adviser.
Portfolio
Managers
Michael
Auerbach, Founder and Chief Executive Officer of Subversive Capital, Leland
Hensch, Chief Investment Officer of Subversive Capital’s ETF portfolios, and
Steven Yoo, CFA, Principal of Subversive Capital, are the portfolio managers
primarily
responsible for the day-to-day management of the Fund and have managed the Fund
since its inception in [...] 2021.
Purchase
and Sale of Fund Shares
Shares
of the Fund are listed on the Exchange, and individual shares may only be bought
and sold in the secondary market through brokers at market prices, rather than
NAV. Because shares of the Fund trade at market prices rather than NAV, the
Fund’s shares may trade at a price greater than NAV (premium) or less than NAV
(discount).
The
Fund issues and redeems its shares at NAV only in large specified numbers of
shares 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.
Investors
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”). Recent information about
the Fund, including its NAV, market price, premiums and discounts, and bid-ask
spreads is available on the Fund’s website at
www.subversive.com/ETFs.
Tax
Information
Fund
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.
Payments
to Broker-Dealers and Other Financial Intermediaries
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
Objective
Each
Fund’s investment objective is long-term capital appreciation. Each Fund’s
investment objective is not fundamental and may be changed by the Board of
Trustees of the Trust (the “Board”) without shareholder approval upon 60 days’
prior written notice to Fund shareholders.
Principal
Investment Strategies
Please
see the Funds’ SAI for additional information about the securities and
investment strategies described in this Prospectus and about additional
securities and investment strategies that may be used by the Funds.
Temporary
Defensive Positions. Each
Fund may, from time to time, take temporary defensive positions that are
inconsistent with the Fund’s principal investment strategies in an attempt to
respond to adverse or unstable market, economic, political, or other conditions.
During such times, a Fund may hold up to 100% of its portfolio in cash or cash
equivalent positions. When a Fund take a temporary defensive position, the Fund
may not be able to pursue its investment objectives.
Principal
Risks
Before
investing in a Fund, you should carefully consider your own investment goals,
the amount of time you are willing to leave your money invested, and the amount
of risk you are willing to take. Remember that, in addition to possibly not
achieving your investment goals, you
could lose all or a portion of your investment in a Fund.
The principal risks of each Fund have been previously identified and are
described below.
Business
Development Companies Risk. BDCs
are specialized closed-end funds that trade like stocks. Shares of BDCs are not
priced at the NAV of their underlying portfolio holdings, but instead trade like
stocks at the market price, which may be at a price above or below their NAV.
The 1940 Act imposes certain restraints upon the operations of a BDC. For
example, BDCs are required to invest at least 70% of their total assets
primarily in securities of private companies or thinly traded U.S. public
companies, cash, cash equivalents, U.S. Government securities and high quality
debt investments that mature in one year or less. The risks of owning a BDC
generally reflect the risks of owning its underlying investments. Generally,
little public information exists for private and thinly traded companies, and
there is a risk that investors may not be able to make a fully informed
investment decision. Risks may include, but are not limited to, credit and
investment risk, market and valuation risk, price volatility risk, liquidity
risk and interest rate risk. When the Funds invests in BDCs, shareholders of the
Funds indirectly bear a proportionate share of the BDC’s fees and expenses, as
well as their share of the Funds’ fees and expenses. As a result, an investment
by the Funds in an BDC could cause the Funds’ operating expenses (taking into
account indirect expenses such as the fees and expenses of the BDC) to be higher
and, in turn, performance to be lower than if the Funds were to invest directly
in the instruments held by the BDC.
Cannabis-Related
Risks.
•Cannabis
Industry Risk. The
cannabis industry is a very young, quickly evolving industry subject to rapidly
evolving laws, rules and regulations, and increasing competition. These changes
may cause companies in the cannabis industry to shrink or suddenly close, while
others may be forced to change their business model to survive.
•U.S.
Regulatory Risks of the cannabis Industry.
The
possession and use of cannabis, even for medical purposes, is illegal under
federal and certain states’ laws, which may negatively impact the value of the
Cannabis Fund’s investments. Use of cannabis is regulated by both the federal
government and state governments, and state and federal laws regarding cannabis
often conflict. Cannabis is a Schedule I controlled substance under the CSA and
is
illegal under federal law. Currently, over half of the states plus the District
of Columbia have laws and/or regulations that recognize, in one form or another,
legitimate medical uses for cannabis and consumer use of cannabis in connection
with medical treatment or for non-medical purposes. Even in those states in
which the use of cannabis for medical or non-medical purposes has been
legalized, its sale and use remains a violation of federal law. Federal law
criminalizing the use of cannabis may pre-empts state laws that legalizes its
use for medicinal and recreational purposes. The priority for enforcement of
federal cannabis laws may vary by presidential administrations. It is not yet
known whether the current administration will push back against states where
cannabis use and possession is legal and step up the enforcement of federal
cannabis laws and the prosecution of nonviolent federal drug crimes. Such
actions could produce a chilling effect on the industry’s growth and discourage
banks from expanding their services to THC-Cannabis Companies. This conflict
between the regulation of cannabis under federal and state law creates
volatility and risk for all THC-Cannabis Companies. In particular, the stepped
up enforcement of cannabis laws by the federal government would adversely affect
the value of the Cannabis Fund’s U.S. investments. Certain companies engaged in
the cannabis business may never be able to legally produce and sell products in
the United States or other national or local jurisdictions.
As
noted above, cannabis is a Schedule I controlled substance in the United States
under the CSA. The DEA classifies controlled substances into five schedules:
Schedule I, II, III, IV or V substances. Schedule I substances by definition
have a high potential for abuse, have no currently “accepted medical use” in the
United States, lack accepted safety for use under medical supervision, and may
not be prescribed, marketed or sold in the United States. Pharmaceutical
products approved by the FDA for use in the United States may be listed as
Schedule II, III, IV or V, with Schedule II substances considered to present the
highest potential for abuse or dependence and Schedule V substances the lowest
relative risk among such substances.
Few
drug products containing natural cannabis or naturally-derived cannabis extracts
have been approved by the FDA for use in the United States or obtained DEA
registrations for commercial production. Drug products containing cannabis or
cannabis extracts that receive the required government approvals for use in
commercial production may be subject to significant government regulation
regarding manufacture, importation, exportation, domestic distribution, storage,
sale, and legitimate use. In addition, the scheduling process may take one or
more years, thereby delaying the launch of the drug product in the United
States.
THC-Cannabis
Companies in the U.S. that engage in medical or pharmaceutical research or the
production and distribution of controlled substances such as cannabis must be
registered with the DEA to perform such activities and have the security,
control, recordkeeping, reporting and inventory mechanisms required by the DEA
to prevent drug loss and diversion. Failure to obtain the necessary
registrations or comply with necessary regulatory requirements may significantly
impair the ability of certain companies in which the Cannabis Fund invests to
pursue medical cannabis research or to otherwise cultivate, possess or
distribute cannabis.
Additionally,
federal tax law prohibits a taxpayer from claiming a deduction or credit for any
amount paid or incurred during the tax year in carrying on any trade or business
if that trade or business (or the activities that comprise that trade or
business) consists of trafficking in controlled substances (e.g., cannabis)
where that trafficking is prohibited by either federal law or the state law for
the state in which the trade or business is conducted. Consequently, companies
engaged in the cannabis business may pay higher amounts of taxes than
non-cannabis companies, which could result in less income to the Cannabis Fund
and, in turn, less for the Cannabis Fund to distribute to
shareholders.
The
Cannabis Fund’s direct equity investments will consist only of exchange traded
equity securities of THC-Related Companies that are engaged exclusively in legal
activities under applicable national and local laws, including U.S. federal and
state laws. The Fund will not directly or indirectly hold ownership in any
companies that engage in cannabis-related business unless permitted by national
and local laws of the relevant jurisdiction, including U.S. federal and state
laws.
•Non-U.S.
Regulatory Risks of the Cannabis Industry.
The companies that are listed on exchanges in non-U.S. countries in which the
Cannabis Fund may invest are subject to various laws, regulations and guidelines
relating to the manufacture, management, transportation, storage and disposal of
cannabis, as well as being subject to laws and regulations relating to health
and safety, the conduct of operations and the protection of the environment.
Even if a company’s operations are permitted under current law, they may not be
permitted in the future, in which case such company may not be in a position to
carry on its operations in its current locations. Additionally, controlled
substance legislation differs between countries and legislation in certain
countries may restrict or limit the ability of certain companies in which the
Cannabis Fund invests to sell their products.
•Operational
Risks of the Cannabis Industry.
Companies
involved in the cannabis industry face intense competition, may have limited
access to the services of banks, and are heavily dependent on receiving
necessary permits and authorizations to engage in medical cannabis research or
to otherwise cultivate, possess or distribute cannabis. Since the cultivation,
possession, and distribution of cannabis can be illegal under United States
federal law under certain circumstances, federally regulated banking
institutions may be unwilling to make financial services available to growers
and sellers of cannabis.
Companies
participating in the cannabis industry may face litigation, formal or informal
complaints, enforcement actions, and inquiries by various federal, state, or
local governmental authorities. Litigation, complaints, and enforcement actions
could consume considerable amounts of financial and other corporate resources,
which could have a negative impact on sales, revenue, profitability, and growth
prospects. Similarly, certain companies may not be able to obtain or maintain
the necessary licenses, permits, authorizations, or accreditations, or may only
be able to do so at great cost, to engage in medical cannabis research or to
otherwise cultivate, possess or distribute cannabis. Failure to comply with or
to obtain the necessary licenses, permits, authorizations, or accreditations
could result in restrictions on a company’s ability to legally engage in medical
cannabis research or to otherwise cultivate, possess or distribute cannabis,
which could have a negative impact on the value of the Cannabis Funds’
investments.
Consumer
Discretionary Sector Risk.
Consumer discretionary companies are companies that provide non-essential goods
and services, such as retailers, media companies and consumer services. These
companies manufacture products and provide discretionary services directly to
the consumer, and the success of these companies tied closely to the performance
of the overall domestic and international economy, interest rates, competition
and consumer confidence.
Currency
Exchange Rate Risk.
Changes in currency exchange rates and the relative value of non-U.S. currencies
will affect the value of the Funds’ investment and the value of your Shares.
Currency exchange rates can be very volatile and can change quickly and
unpredictably. As a result, the value of an investment in the Fund may change
quickly and without warning and you may lose money.
Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Funds
assets, customer data (including private shareholder information), or
proprietary information, or cause the Fund, the Adviser (defined below), the
Sub-Adviser and/or other service providers (including custodians, transfer
agents and financial intermediaries) to suffer data breaches or data corruption.
Additionally, cybersecurity failures or breaches of the electronic systems of
the Funds, the Adviser, the Sub-Adviser or the Funds’ other service providers,
market makers, Authorized Participants or the issuers of securities in which the
Funds’ invests have the ability to cause disruptions and negatively impact the
Funds’ business operations, potentially resulting in financial losses to the
Funds and its shareholders. In an extreme case, a shareholder’s ability to
redeem Funds shares may be affected.
Depositary
Receipt Risk.
Depositary receipts, including ADRs, involve risks similar to those associated
with investments in foreign securities, such as changes in political or economic
conditions of other countries and changes in the exchange rates of foreign
currencies. Depositary receipts listed on U.S. exchanges are issued by banks or
trust companies, and entitle the holder to all dividends and capital gains that
are paid out on the underlying foreign shares (“Underlying Shares”). When the
Fund invests in depositary receipts as a substitute for an investment directly
in the Underlying Shares, the Fund is exposed to the risk that the depositary
receipts may not provide a return that corresponds precisely with that of the
Underlying Shares. Because the Underlying Shares trade on foreign exchanges that
may be closed when the Funds’
primary
listing exchange is open, the Funds may experience premiums and discounts
greater than those of funds without exposure to such Underlying
Shares.
Counterparty
Risk.
Counterparty
risk is the risk that a counterparty to Fund transactions (e.g.,
prime brokerage or securities lending arrangement or derivatives transaction)
will be unable or unwilling to perform its contractual obligation to the
Cannabis Fund. The Fund may use swap agreements for the purpose of seeking to
gain exposure to a particular group of securities, index, asset class or
reference asset without actually purchasing those securities or investments, or
seeking to hedge a position. Such financial instruments may include, among
others, total return, index, interest rate, and credit default swap agreements.
The Fund may use counterparty agreements to exchange the returns (or
differentials in rates of return) earned or realized in particular predetermined
investments or instruments. Through these investments and related arrangements
(e.g.,
prime brokerage or securities lending arrangements or derivatives transactions),
the Fund is exposed to credit risks that the counterparty may be unwilling or
unable to make timely payments or otherwise meet its contractual obligations. If
the counterparty becomes bankrupt or defaults on (or otherwise becomes unable or
unwilling to perform) its payment or other obligations to the Fund, the risk of
which is particularly acute under current conditions, the Fund may not receive
the full amount that it is entitled to receive or may experience delays in
recovering the collateral or other assets held by, or on behalf of, the
counterparty. If this occurs, or if exercising contractual rights involves
delays or costs for the Fund, the value of your shares in the Funds may
decrease.
The
Cannabis Fund bears the risk that counterparties may be adversely affected by
legislative or regulatory changes, adverse market conditions (such as the
current conditions), increased competition, and/or wide scale credit losses
resulting from financial difficulties of the counterparties’ other trading
partners or borrowers.
Derivatives
Risk.
The
Cannabis Fund may invest in swap agreements to pursue its investment objective
and to create economic leverage in the Fund; to seek to enhance total return; to
seek to hedge against fluctuations in securities prices, interest rates,
currency rates, etc.; to seek to change the effective duration of the Fund’s
portfolio; to seek to manage certain investment risks; as a substitute for the
purchase or sale of securities or currencies; and/or to obtain or replicate
market exposure. The use of such derivatives may expose the Funds to risks in
addition to and greater than those associated with investing directly in the
instruments underlying those derivatives, including risks relating to leverage,
correlation (imperfect correlations with underlying instruments or the Fund’s
other portfolio holdings), high price volatility, lack of availability,
counterparty credit, liquidity, valuation and legal restrictions. The use of
such derivatives also may expose the Fund to the performance of securities that
the Fund does not own. The skills necessary to successfully execute derivatives
strategies may be different from those for more traditional portfolio management
techniques, and if the Adviser are incorrect about their expectations of market
conditions, the use of derivatives also could result in a loss, which in some
cases may be unlimited. Use of derivatives also may cause the Fund to be subject
to additional regulations, which may generate additional Fund expenses. These
practices also entail transactional expenses and may cause the Fund to realize
higher amounts of short-term capital gains than if the Fund had not engaged in
such transactions. The markets for certain derivatives, including those located
in certain foreign countries, are relatively new and still developing, which may
expose the Fund to increased counterparty credit and liquidity risks.
Certain
of the derivatives in which the Cannabis Fund invest are traded (and privately
negotiated) in the OTC market. OTC derivatives are complex and often valued
subjectively, which exposes the Fund to heightened liquidity, mispricing and
valuation risks. Improper valuations can result in increased cash payment
requirements to counterparties or a loss of value to the Fund. In addition, OTC
derivative instruments are often highly customized and tailored to meet the
needs of the Fund and its trading counterparties. If a derivative transaction is
particularly large or if the relevant market is illiquid, it may not be possible
to initiate a transaction or liquidate a position at an advantageous time or
price. As a result and similar to other privately negotiated contracts, the Fund
is subject to counterparty credit risk with respect to such derivative
contracts. Certain derivatives are subject to mandatory exchange trading and/or
clearing, which exposes the Fund to the credit risk of the clearing broker or
clearinghouse. While exchange trading and central clearing are intended to
reduce counterparty credit risk and to increase liquidity, they do not make
derivatives transactions risk-free. Certain risks also are specific to the
derivatives in which the Fund invests.
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.
ETF
Risks.
Each
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
Funds have only a limited number of institutional investors that may act as APs.
In addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, shares of the Funds may trade at a material discount to the Funds’ NAV
and possibly face delisting: (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. Investors
buying or selling shares of the Funds 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 of the Funds. In addition, secondary market investors will also incur
the cost of the difference between the price at which an investor is willing to
buy shares of the Funds (the “bid” price) and the price at which an investor is
willing to sell shares of the Funds (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 of the Funds based on trading volume
and market liquidity, and is generally lower if the Funds’ shares have more
trading volume and market liquidity and higher if Fund’s shares have little
trading volume and market liquidity. Further, a relatively small investor base
in the Funds, asset swings in the Funds and/or increased market volatility may
cause increased bid/ask spreads. Due to the costs of buying or selling shares of
the Funds, including bid/ask spreads, frequent trading of the Funds’ shares may
significantly reduce investment results and an investment in Funds shares may
not be advisable for investors who anticipate regularly making small
investments.
•Shares
May Trade at Prices Other Than NAV. As
with all ETFs, shares of the Funds may be bought and sold in the secondary
market at market prices. Although it is expected that the market price of shares
of the Funds will approximate the Funds’ 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. The market price of shares of the Funds 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 of the Funds. In times of severe market
disruption, the bid/ask spread can increase significantly. At those times,
shares of the Funds will 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.
Although
shares of the Funds 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 of the Funds 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 500 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 of the Funds when extraordinary volatility causes sudden,
significant swings
in
the market price of shares of the Funds. There can be no assurance that shares
of the Funds will trade with any volume, or at all, on any stock exchange. In
stressed market conditions, the market for the Funds’ shares may become less
liquid in response to deteriorating liquidity in the markets for the Funds’
underlying portfolio holdings. These factors, among others, may lead to the
Fund’s shares trading at a premium or discount to NAV.
•Early
Close/Trading Halt.
An exchange or market may close early or issue trading halts on specific
securities or financial instruments. The ability to trade certain securities or
financial instruments may be restricted, which may disrupt the Fund’s creation
and redemption process, potentially affect the price at which the Funds’ shares
trade in the secondary market, and/or result in the Funds being unable to trade
certain securities or financial instruments. In these circumstances, the Funds
may be unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Foreign
Investments Risk. Securities
of non-U.S. issuers, including those located in foreign countries, may involve
special risks caused by foreign political, social and economic factors,
including exposure to currency fluctuations, less liquidity, less developed and
less efficient trading markets, political instability and less developed legal
and auditing standards.
Growth
Investing Style Risk. Growth
companies are companies whose earnings and stock prices are expected to grow at
a faster rate than the overall market. If the portfolio manager incorrectly
assesses a company’s prospects for growth or how other investors will value the
company’s growth, then the price of the company’s stock may decrease, or may not
increase to the level anticipated by the portfolio manager. Growth companies are
often newer or smaller companies, or established companies that may be entering
a growth cycle in their business. Growth stocks may be more volatile than other
stocks because they are more sensitive to investors’ perceptions of the issuing
company’s growth potential. Also, the growth investing style may over time go in
and out of favor. At times when the growth investing style is out of favor, the
Funds may underperform other equity funds that use different investing
styles.
Industry
Concentration Risk.
Each Fund’s investments will be concentrated in an industry or group of
industries. The focus of a Fund’s portfolio on this specific industry may
present more risks than if the portfolio were broadly diversified over numerous
groups of industries.
Large
Capitalization Companies Risk.
Larger, more established companies may be unable to respond quickly to new
competitive challenges such as changes in technology and consumer tastes. Larger
companies also may not be able to attain the high growth rates of successful
smaller companies.
Management
Risk.
The
Funds are actively-managed and may not meet its investment objective based on
the Adviser’s success or failure to implement investment strategies for the
Funds. The Adviser’s evaluations and assumptions regarding issuers, securities,
and other factors may not successfully achieve the Funds’ investment objective
given actual market conditions.
Market
Events Risk. One
or more markets in which the Funds invests may go down in value, including the
possibility that the markets will go down sharply and unpredictably. This may be
due to numerous factors, including interest rates, the outlook for corporate
profits, the health of the national and world economies, national and world
social and political events, and the fluctuation of other stock markets around
the world. The global pandemic outbreak of an infectious respiratory illness
caused by a novel coronavirus known as COVID-19 and subsequent efforts to
contain its spread have resulted and may continue to result in, among other
things, substantial market volatility and reduced liquidity in financial
markets; exchange trading suspensions and closures; higher default rates; travel
restrictions and disruptions; significant global disruptions to business
operations and supply chains; lower consumer demand for goods and services;
significant job losses and increasing unemployment; event and service
cancellations and restrictions; significant challenges in healthcare service
preparation and delivery; prolonged quarantines; and general concern and
uncertainty. The impact of this pandemic and any other public health emergencies
(such as any other epidemics or pandemics) that may arise in the future could
adversely affect the economies of many nations or the entire global economy and
the financial performance of individual issuers, sectors, industries, asset
classes, and markets in significant and unforeseen ways. Extraordinary actions
taken by governments and central banks to support local and global economies and
the financial markets in response to the COVID-19 pandemic may not succeed or
have the intended effect, and in some cases, have resulted in a
large
expansion of government deficits and debt, the long-term consequences of which
are not known. This crisis or other public health crises may also exacerbate
other pre-existing political, social, economic, market and financial risks. In
addition, the Funds may face challenges with respect to its day-to-day
operations if key personnel of the Adviser or other service providers are
unavailable due to quarantines, restrictions on travel, or other restrictions
imposed by state or federal regulatory authorities. The duration and future
impact of COVID-19 are currently unknown and cannot be determined with
certainty, which may exacerbate the other risks that apply to the Funds and
could adversely affect the value and liquidity of the Funds’ investments, impair
the Funds’ ability to satisfy AP transaction requests, and negatively affect the
Funds’ performance.
Metaverse
Companies Risk.
The Fund invests primarily in the equity securities of Metaverse Companies and,
as such, is particularly sensitive to risks to those types of companies. These
risks include, but are not limited to, small or limited markets for such
securities, changes in business cycles, world economic growth, technological
progress, rapid obsolescence, and government regulation. Securities of Metaverse
Companies, especially smaller, start-up companies, tend to be more volatile than
securities of companies that do not rely heavily on technology. Rapid change to
technologies that affect a company’s products could have a material adverse
effect on such company’s operating results. Metaverse Companies may rely on a
combination of patents, copyrights, trademarks and trade secret laws to
establish and protect their proprietary rights in their products and
technologies. There can be no assurance that the steps taken by these companies
to protect their proprietary rights will be adequate to prevent the
misappropriation of their technology or that competitors will not independently
develop technologies that are substantially equivalent or superior to such
companies’ technology.
Mid-Capitalization
Companies 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.
New
Fund Risk.
As of the date of this Prospectus, the Funds have no operating history and there
can be no assurance that the Funds will grow to or maintain an economically
viable size, in which case the Board may determine to liquidate the Funds.
Liquidation of the Funds can be initiated without shareholder approval by the
Trust’s Board of Trustees if it determines it is in the best interest of
shareholders. As a result, the timing of the Funds liquidation may not be
favorable to certain individual shareholders.
Non-Diversification
Risk.
Because the Funds are “non-diversified,” they may invest a greater percentage of
its assets in the securities of a single issuer or a lesser number of issuers
than if it was a diversified funds. As a result, the Funds may be more exposed
to the risks associated with and developments affecting an individual issuer or
a lesser number of issuers than a fund that invests more widely. This may
increase the Funds’ volatility and cause the performance of a relatively small
number of issuers to have a greater impact on the Funds’ performance.
REITs
Risk.
REITs may be affected by economic forces and other factors related to the real
estate industry. These risks include possible declines in the value of real
estate, possible lack of availability of mortgage funds and unexpected vacancies
of properties. REITs are also subject to heavy cash flow dependency, defaults by
borrowers, self-liquidation, interest rate risks (especially mortgage REITs) and
liquidity risk. REITs that invest in real estate mortgages are also subject to
prepayment risk. Investing in REITs may involve risks similar to those
associated with investing in small capitalization companies. REITs may have
limited financial resources, may trade less frequently and in a limited volume,
engage in dilutive offerings and may be subject to more abrupt or erratic price
movements than larger company securities. Historically, small capitalization
stocks, such as REITs, have been more volatile in price than the larger
capitalization stocks included in the S&P 500® Index. In addition, REITs
could possibly fail to (i) qualify for favorable tax treatment under applicable
tax law or (ii) maintain their exemptions from registration under the 1940
Act.
Small-Capitalization
Companies 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.
Swap
Agreements Risk.
Swap
agreements are contracts for periods ranging from one day to more than one year
and may be negotiated bilaterally and traded OTC between two parties or, for
certain standardized swaps, must be exchange-traded through a futures commission
merchant or swap execution facility and/or cleared through a clearinghouse that
serves as a central counterparty. In a standard swap transaction, two parties
agree to exchange the returns (or differentials in rates of return) earned or
realized on particular predetermined investments or instruments. The Cannabis
Fund may enter into swap agreements, including, but not limited to total return
swaps, index swaps, interest rate swaps, municipal market data rate locks, and
credit default swaps. The Fund may utilize swap agreements in an attempt to gain
exposure to certain securities without purchasing those securities to speculate
on the movement of such securities or to hedge a position. Risks associated with
the use of swap agreements are different from those associated with ordinary
portfolio securities transactions, largely due to the fact they could be
considered illiquid and many swaps currently trade on the OTC market. Swaps are
particularly subject to counterparty credit, correlation, valuation, liquidity
and leveraging risks and could result in substantial losses to the
Fund.
As
noted above, certain standardized swaps are subject to mandatory exchange
trading and central clearing. While exchange trading and central clearing are
intended to reduce counterparty credit risk and increase liquidity, they do not
make swap transactions risk-free. Additionally, the Commodity Futures Trading
Commission (the “CFTC”) and other applicable regulators have adopted rules
imposing certain margin requirements, including minimums, on OTC swaps, which
may result in the Cannabis Fund and its counterparties posting higher margin
amounts for OTC swaps, which could increase the cost of swap transactions to the
Fund and impose added operational complexity. The Dodd-Frank Act and related
regulatory developments require the clearing and exchange-trading of many OTC
derivative instruments that the CFTC and the Securities and Exchange Commission
(the “SEC”) have defined as “swaps.” Mandatory exchange-trading and clearing are
occurring on a phased-in basis based on the type of market participant and CFTC
approval of contracts for central clearing. The Advisor will continue to monitor
developments in this area, particularly to the extent regulatory changes affect
the Fund’s ability to enter into swap agreements.
Portfolio
Holdings
Information
about the Funds’ daily portfolio holdings is available at
www.subversive.com/ETFs. A complete description of the Funds’ policies and
procedures with respect to the disclosure of the Funds’ portfolio holdings is
available in the Funds’ Statement of Additional Information
(“SAI”).
Investment
Adviser
The
Funds have entered into an investment advisory agreement (“Advisory Agreement”)
with Subversive Capital Advisor LLC (the “Adviser” or “Subversive Capital”),
located at 217 Centre Street, Suite 122, New York, NY, 10013. Since 2013,
Subversive has been a pioneering investor in emerging industries, specializing
in both early and late-stage investments as well as acquisitions by special
purpose acquisition companies (SPACs). As of [...], the Adviser had
approximately $[ ] in assets under management.
Subject
to the oversight of the Board, the Adviser is responsible for the day-to-day
management of the Funds in accordance with the Funds’ investment objective and
policies. For the services it provides to the Funds, the Funds pay the
Adviser
a unified management fee, which is calculated daily and paid monthly, at an
annual rate of 0.75% of the Funds’ average daily net assets. Under the Advisory
Agreement, the Adviser has agreed to pay all expenses incurred by the Funds
except for 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; distribution fees and expenses paid by the Funds under
any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act, and the
unified management fee payable to the Adviser (collectively, the “Excluded
Expenses”).
A
discussion regarding the basis for the Board’s initial approval of the Advisory
Agreement between the Adviser and the Trust will be available in the Funds’
first semi-annual report to shareholders after the Funds’ commencement of
operations.
The
Funds, as a series of the Trust, does not hold themselves out as related to any
other series of the Trust for purposes of investment and investor services, nor
does it share the same investment adviser with any other series of the
Trust.
Portfolio
Managers
Michael
Auerbach
Michael
Auerbach is the founder and Chief Executive Officer of the Adviser, which was
formed in 2013. Mr. Auerbach is also General Partner of Subversive Capital
Ventures, Chairman of The Parent Company, Chairman of Arrive Acquisition Corp,
and Chairman of Subversive Acquisition LP. He sits on the Board of Directors of
Tilray, Inc. – the first Nasdaq-listed global cannabis company – and holds
several directorships with companies that Subversive invests in. In his capacity
as a private diplomat, Mr. Auerbach serves as a Senior Vice President at
Albright Stonebridge Group (“ASG”), the global consulting firm chaired by former
U.S. Secretary of State Madeleine Albright. Prior to joining ASG, Michael
founded and then sold a risk consulting firm to Control Risks – a leading global
risk consulting firm.
Mr.
Auerbach presently sits on the boards of the Theodore C. Sorensen Center for
International Peace and Justice, The KiDS Board of NYU’s Hassenfeld Children’s
Hospital, Next for Autism (which produces Night of Too Many Stars) and Sophie
Gerson Healthy Youth Foundation. Mr. Auerbach received a M.A. in International
Relations from Columbia University and a B.A. in Critical Theory from the New
School for Social Research.
Leland
Hensch
Leland
Hensch is Director of The Parent Company and General Partner at Subversive
Capital. Mr. Hensch is a former Goldman Sachs Equity Partner based in New York
and London. Mr. Hensch ran Macro Equity Derivatives Trading in New York from
2004 to 2013 and was promoted to Head of Americas Equity trading in 2013. Mr.
Hensch Joined Subversive Capital to focus on building out Subversive Capital’s
trading platform and portfolio management. Prior to joining Subversive Capital,
Leland had made a number of investments across Cannabis, Real Estate,
Hospitality, Media, and Tech businesses. He has been an active investor/owner in
the hospitality and media businesses.
Steven
Yoo, CFA
Steven
Yoo, CFA, is a Principal of Subversive Capital. Prior to joining Subversive in
2020, Steven was in a leadership corporate development role at Tilray, a global
cannabis company and the first cannabis company to engage in an initial public
offering on a U.S. securities exchange. Previous to Tilray, Mr. Yoo was in an
investment role at Privateer Holdings, the first cannabis-focused,
institutionally-backed private equity firm, where he led investments across
vertical integration, tech, consumer packaged goods brands and wellness. Mr. Yoo
is a CFA and holds a Bachelors from the University of Washington.
The
Funds’ SAI provides additional information about the portfolio managers’
compensation, other accounts managed by the portfolio manager and the portfolio
managers’ ownership of Funds shares.
|
|
|
How
to Buy and Sell Shares |
Each
Fund issue and redeem their shares only in Creation Units at the NAV per share
next determined after receipt of an order from an AP. Only APs may acquire the
Funds’ shares directly from the Funds, and only APs may tender their shares for
redemption directly to the Funds, at NAV. APs must be a member or participant of
a clearing agency registered with the SEC and must execute an authorized
participant agreement (“Participant Agreement”) that has been agreed to by the
Distributor (defined below), and that has been accepted by the Funds’ transfer
agent, with respect to purchases and redemptions of Creation Units. Once
created, the Funds’ shares trade in the secondary market in quantities less than
a Creation Unit.
Most
investors buy and sell the Funds’ shares in secondary market transactions
through brokers. Individual shares of the Funds 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 the Funds’ shares through a broker, you will pay or receive
the market price. You may incur customary brokerage commissions and charges, and
you may pay some or all of the spread between the bid and the offered 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 the Funds’ 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.
Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding shares of the Funds.
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.
Investing
in the Fund
For
more information on how to buy and sell shares of the Funds, visit the Funds’
website at www.subversive.com/ETFs or by calling the Funds toll-free at
[...]
Frequent
Purchases and Redemptions of Shares
Shares
of the Funds are listed for trading on the Exchange, which allows retail
investors to purchase and sell individual shares at market prices throughout the
trading day similar to other publicly traded securities. Because these secondary
market trades do not involve the Funds directly, it is unlikely that secondary
market trading would cause any harmful effects of market timing, such as
dilution, disruption of portfolio management, increases in the Funds’ trading
costs or realization of capital gains. The Board has determined not to adopt
policies and procedures designed to prevent or monitor for frequent purchases
and redemptions of the Funds’ shares because the Funds sells and redeems its
shares at NAV only in Creation Units pursuant to the terms of a Participant
Agreement between the Distributor and an AP. The Funds may impose
transaction
fees on such Creation Unit transactions that are designed to offset the Funds’
transfer and other transaction costs associated with the issuance and redemption
of the Creation Unit shares. Direct trading by APs is critical to ensuring that
the Funds’ shares trade at or close to NAV. Although the Funds impose no
restrictions on the frequency of
purchases
and redemptions of Creation Units, the Funds and the Adviser reserve the right
to reject or limit purchases at any time as described in the Funds’
SAI.
Determination
of Net Asset Value
Each
Fund’s NAV is calculated as of the scheduled close of regular trading on the New
York Stock Exchange (“NYSE”), generally 4:00 p.m. Eastern time, each day the
NYSE is open for business. The NAV is calculated by dividing the Funds’ net
assets by its shares outstanding.
In
calculating its NAV, the Funds generally value their 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 Funds 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 Funds 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
Board has adopted procedures and methodologies to fair value each Fund’s
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,
the Funds 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 included in the Board-adopted valuation
procedures. Due to the subjective and variable nature of fair value pricing,
there can be no assurance that the Adviser will be able to obtain the fair value
assigned to the security upon the sale of such security.
Investments
by Other Registered Investment Companies
Section
12(d)(1) of the 1940 Act restricts investments by registered investment
companies in the securities of other investment companies, including shares of
the Funds. Registered investment companies are permitted to invest in 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 the Funds.
|
|
|
Distribution
of Fund Shares |
Dividends,
Distributions and their Taxation
Dividends
and Distributions
Each
Fund intends to pay out dividends, if any, and distribute any net realized
capital gains to their shareholders at least annually. The Funds will declare
and pay capital gain distributions in cash. Your broker is responsible for
distributing the income and capital gain distributions to you.
No
dividend reinvestment service is provided by the Trust. Financial intermediaries
may make the DTC book-entry Dividend Reinvestment Service available for use by
beneficial owners of Funds shares for reinvestment of their dividend
distributions. Beneficial owners should contact their financial intermediary to
determine the availability and costs of the service and the details of
participation therein. Financial intermediaries may require beneficial owners to
adhere to specific procedures and timetables. If this service is available and
used, dividend distributions of both income and net realized capital gains will
be automatically reinvested in additional whole shares of the Funds purchased in
the secondary market.
Taxes
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in the Funds. Your investment
in the Funds may have other tax implications. Please consult your tax advisor
about the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws.
Each
Fund intends to elect and qualify each year for treatment as a regulated
investment company (“RIC”) under 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 Funds’ 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 plan, you need to be aware of the possible tax
consequences when the Funds make distributions, when you sell your Shares listed
on the Exchange; and when you purchase or redeem Creation Units (APs
only).
Taxes
on Distributions
Each
Fund intends to distribute, at least annually, substantially all of their 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 Funds owned the investments that generated them,
rather than how long a shareholder has owned his or her Shares. Sales of assets
held by the Funds for more than one year generally result in long-term capital
gains and losses, and sales of assets held by the Funds for one year or less
generally result in short-term capital gains and losses. Distributions of the
Funds’ net capital gain (the excess of net long-term capital gains over net
short-term capital losses) that are reported by the Funds 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 Funds 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 Funds received 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.
Shortly
after the close of each calendar year, you will be informed of the amount and
character of any distributions received from the Funds.
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.
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 Funds before
your investment (and thus were included in the Shares’ NAV when you purchased
your Shares).
You
may wish to avoid investing in the Funds 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
the Funds’ distributions exceed its earnings and profits, all or a portion of
the distributions made for a taxable year may be recharacterized as a return of
capital to shareholders. A return of capital distribution will generally not be
taxable, but will reduce each shareholder’s cost basis in Shares and result in a
higher capital gain or lower capital loss when the Shares are sold. After a
shareholder’s basis in Shares has been reduced to zero, distributions in excess
of earnings and profits in respect of those Shares will be treated as gain from
the sale of the Shares.
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 Funds 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 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 Funds 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.
Under
legislation generally known as “FATCA” (the Foreign Account Tax Compliance Act),
the Funds are required to withhold 30% of certain ordinary dividends it pays to
shareholders that are foreign entities and that fail to meet prescribed
information reporting or certification requirements.
The
Funds (or a financial intermediary, such as a broker, through which a
shareholder owns Shares) generally are required to withhold and remit to the
U.S. Treasury a percentage of the taxable distributions and sale or redemption
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 he, she or it is not subject to such
withholding.
Taxes
When Shares are Sold on the Exchange
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 Funds 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 Funds 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 Code. 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 their
holdings), or on the basis that there has been no significant change in economic
position. APs exchanging securities should consult their own tax advisor with
respect to whether wash sale rules apply and when a loss might be
deductible.
Any
capital gain or loss realized upon redemption of Creation Units is generally
treated as 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.
Each
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 Funds may
sell portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause the Funds 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 Funds may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
Foreign
Taxes
To
the extent each Fund invests in foreign securities, it may be subject to foreign
withholding taxes with respect to dividends or interest the Funds receive from
sources in foreign countries.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in the Funds. It is not a substitute for
personal tax advice. You also may be subject to state and local tax on Funds
distributions and sales of Funds shares. Consult your personal tax adviser about
the potential tax consequences of an investment in Funds shares under all
applicable tax laws. For more information, please see the section entitled
“Federal Income Taxes” in the SAI.
The
Distributor, Quasar Distributors, LLC, is a broker-dealer registered with the
SEC. The Distributor distributes Creation Units for the Funds on an agency basis
and does not maintain a secondary market in the Funds’ shares. The Distributor
has no role in determining the policies of the Funds or the securities that are
purchased or sold by the Funds. The Distributor’s principal address is
111
East Kilbourn Avenue, Suite 2200, Milwaukee, Wisconsin 53202.
|
|
|
Premium/Discount
Information |
Each
business day, the following information will be available, free of charge, on
the Funds’ website at www.subversive.com/ETFs: (i) information for each
portfolio holding that will form the basis of the next calculation of the Funds’
NAV per share; (ii) the Funds’ NAV per share, market price, and premium or
discount, each as of the end of the prior business day; (iii) a table showing
the number of days the Funds’ shares traded at a premium or discount during the
most recently completed calendar year and the most recently completed calendar
quarter since that year; (iv) a line graph showing Funds share premiums or
discounts for the most recently completed calendar year and the most recently
completed
calendar quarter since that year; (v) the Funds’ median bid-ask spread over the
last thirty calendar days; and (vi) if during the past year the Funds’ premium
or discount was greater than 2% for more than seven consecutive trading days, a
statement that the Funds’ premium or discount, as applicable, was greater than
2% and a discussion of the factors that are reasonably believed to have
materially contributed to the premium or discount.
Shares
of the Funds 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 shares of the Funds to be issued, nor
in the determination or calculation of the equation by which shares of the Funds
are redeemable. The Exchange has no obligation or liability to owners of shares
of the Funds in connection with the administration, marketing, or trading of the
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 Funds make no representation or warranty, express or implied, to
the owners of shares of the Funds or any member of the public regarding the
advisability of investing in securities generally or in the Funds
particularly.
The
Trust enters into contractual arrangements with various parties, including,
among others, the Funds’ investment adviser, administrator and distributor, who
provide services to the Funds. Shareholders of the Funds are not parties to, or
intended (or “third-party”) beneficiaries of, any of those contractual
arrangements, and those contractual arrangements are not intended to create in
any individual shareholder or group of shareholders any right to enforce such
contractual arrangements against the service providers or to seek any remedy
under such contractual arrangements against the service providers, either
directly or on behalf of the Trust.
This
prospectus provides information concerning the Trust and the Funds that you
should consider in determining whether to purchase shares of a Fund. None of
this prospectus, the SAI or any document filed as an exhibit to the Trust’s
registration statement, is intended to, nor does it, give rise to an agreement
or contract between the Trust or the Funds and any investor, or give rise to any
contract or other rights in any individual shareholder, group of shareholders or
other person other than any rights conferred explicitly by federal or state
securities laws that may not be waived.
Closing
the Fund.
The Board of Trustees retains the right to close the Funds (or partially close
the Funds) to new purchases if it is determined to be in the best interest of
shareholders. Based on market and each Fund’s condition, and in consultation
with the Adviser, the Board of Trustees may decide to close the Fund to new
investors, all investors or certain classes of investors (such as fund
supermarkets) at any time. If the Funds are closed to new purchases it will
continue to honor redemption requests, unless the right to redeem shares has
been temporarily suspended as permitted by federal law.
The
Funds reserve the right to cease operations and liquidate at any time. See
“Liquidation of the Fund” in the SAI for additional information.
Because
the Funds have recently commenced operations, there are no financial highlights
available at this time.
INVESTMENT
ADVISER:
Subversive
Capital Advisor LLC
217
Centre Street, Suite 122
New
York, NY 10013
DISTRIBUTOR
Quasar
Distributors, LLC
111
East Kilbourn Avenue, Suite 2200
Milwaukee,
Wisconsin 53202
CUSTODIAN:
U.S.
Bank N.A.
1555
North Rivercenter Drive, Suite 302
Milwaukee,
Wisconsin 53212
ADMINISTRATOR,
FUND ACCOUNTANT
AND TRANSFER AGENT:
U.S.
Bancorp Fund Services, LLC
615
East Michigan Street
Milwaukee,
Wisconsin 53202
INDEPENDENT
REGISTERED PUBLIC ACCOUNTING FIRM:
[...]
LEGAL
COUNSEL:
Goodwin
Procter LLP
1900
N Street, NW
Washington,
DC 20036
The
Funds collect non-public information about you that the law allows or requires
it to have in order to conduct its business and properly service you. The Funds
collect financial and personal information about you (“Personal Information”)
directly (e.g., information on account applications and other forms, such as
your name, address, and social security number, and information provided to
access account information or conduct account transactions online, such as
password, account number, e-mail address, and alternate telephone number), and
indirectly (e.g., information about your transactions with us, such as
transaction amounts, account balance and account holdings).
The
Funds do not disclose any non-public personal information about its shareholders
or former shareholders other than for everyday business purposes such as to
process a transaction, service an account, respond to court orders and legal
investigations or as otherwise permitted by law. Third parties that may receive
this information include companies that provide transfer agency, technology and
administrative services to the Funds, as well as the Funds’ investment adviser
who is an affiliate of the Funds. If you maintain a retirement/educational
custodial account directly with the Funds, we may also disclose your Personal
Information to the custodian for that account for shareholder servicing
purposes. The Funds limit access to your Personal Information provided to
unaffiliated third parties to information necessary to carry out their assigned
responsibilities to the Funds. All shareholder records will be disposed of in
accordance with applicable law. The Funds maintains physical, electronic and
procedural safeguards to protect your Personal Information and requires its
third party service providers with access to such information to treat your
Personal Information with the same high degree of confidentiality.
In
the event that you hold shares of the Funds through a financial intermediary,
including, but not limited to, a broker-dealer, bank, or trust company, the
privacy policy of your financial intermediary would govern how your non-public
personal information would be shared with unaffiliated third
parties.
Subversive
Cannabis ETF
Subversive
Metaverse ETF
Each
a series of Series Portfolios Trust
FOR
MORE INFORMATION
You
can find more information about the Funds in the following
documents:
Statement
of Additional Information
The
SAI provides additional details about the investments and techniques of each
Fund and certain other additional information. A current SAI is on file with the
SEC and is incorporated into this Prospectus by reference. This means that the
SAI is legally considered a part of this Prospectus even though it is not
physically within this Prospectus.
Annual
and Semi-Annual Reports
Additional
information about the Funds' investments is available in the Funds' annual and
semiannual reports to shareholders. The annual report contains a discussion of
the market conditions and investment strategies that significantly affected each
Fund’s performance during their most recently completed fiscal year.
The
SAI and the Shareholder Reports, when available, are available free of charge on
the Funds’ website at wwww.subversive.com/ETFs. You can obtain a free copy of
the SAI and Shareholder Reports, request other information, or make general
inquiries about the Fund by calling the Fund (toll-free) at [...] or by writing
to:
Subversive
Cannabis ETF
c/o
U.S. Bank Global Fund Services
P.O.
Box 701
Milwaukee,
Wisconsin 53201-0701
www.subversive.com/ETFs
Reports
and other information about the Funds are also available:
•Free
of charge from the SEC’s EDGAR database on the SEC’s Internet website at
http://www.sec.gov; or
•For
a fee, by electronic request at the following e-mail address:
[email protected].
(The
Trust’s SEC Investment Company Act of 1940 file number is
811-23084)