ck0001683471-20211031
PROSPECTUS
Changebridge Capital Long/Short Equity
ETF (CBLS)
Changebridge Capital Sustainable Equity
ETF (CBSE)
Listed
on the NYSE Arca, Inc.
February 28,
2022
The
U.S. Securities and Exchange Commission (the “SEC”) has not approved or
disapproved of these securities or passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is a criminal
offense.
TABLE
OF CONTENTS
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Changebridge
Capital Long/Short Equity ETF |
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Changebridge
Capital Sustainable Equity ETF |
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Investments
by Registered Investment Companies |
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CHANGEBRIDGE
CAPITAL LONG/SHORT EQUITY ETF |
Investment Objective
The Changebridge Capital
Long/Short Equity ETF (the “Fund”) seeks long-term capital appreciation while
minimizing volatility.
Fees and Expenses of the
Fund
This
table describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund (“Shares”). You may pay other fees, such as brokerage
commissions and other fees to financial intermediaries, which are not reflected
in the table and Example below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
Management
Fee |
1.70% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses |
0.44% |
Acquired
Fund Fees and Expenses* |
0.01% |
Total
Annual Fund Operating Expenses |
2.15% |
* Acquired
Fund Fees and Expenses (“AFFE”) are the indirect costs of investing in other
investment companies. Total Annual Fund Operating Expenses do not correlate to
the expense ratios in the Fund’s Financial Highlights because the Financial
Highlights include only the direct operating expenses incurred by the Fund and
exclude AFFE.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund’s operating expenses remain the same. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
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1
Year: |
$218 |
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3
Years: |
$673 |
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5
Years |
$1,154 |
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10
Years |
$2,483 |
Portfolio
Turnover
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in the Total Annual Fund Operating Expenses
or in the Example, affect the Fund’s performance. For the fiscal period ended
October 31, 2021, the Fund’s portfolio turnover rate was 160% of the average value of its
portfolio.
Principal Investment
Strategies
The
Fund is an actively-managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by purchasing securities Changebridge Capital, LLC (the
“Adviser’), the Fund’s investment adviser, believes to be undervalued and taking
short positions in securities the Adviser believes will decline in price. The
Fund will generally have net long exposure of between 30%-70% of net assets.
The
Adviser identifies securities to purchase for the Fund primarily through
quantitative and qualitative analysis of U.S.-listed large-, mid-, or
small-capitalization companies. The Fund’s long positions are generally expected
to be comprised of equity securities or depositary receipts. The Adviser
typically looks to purchase securities of companies it believes will outperform
the market over the course of an entire market cycle (typically between 5 and 11
years) while maintaining overall portfolio volatility that is lower than that
experienced by the broader market.
Investment
selection for the Fund’s long positions focuses on companies that are facing
temporary uncertainties and potential problems that are specific to those
individual companies or the companies’ industry or sector and companies that the
Adviser believes are undervalued and/or overlooked by the market. The Adviser
may consider, among other quantitative factors, quality (returns on invested
capital), value (free cash flow yield), momentum (three-month total price
return), size (market cap), and volatility (change in stock price). This data is
structured through proprietary and third-party datasets. In addition, the
Adviser will also take into consideration the results of its fundamental
analysis, which may include an assessment of competitors, suppliers, customers,
and replacements. This information may be obtained via sources including
management meetings, company filings, and industry research. The Adviser also
considers an assessment of a company’s environmental, social, and governance
(“ESG”)
attributes
in determining the attractiveness of an investment opportunity. These attributes
include a company’s impact on the environment, relationships with employees,
suppliers, customers, and in the communities in which they operate, as well as a
broad range of governance policies, including board and management structures,
executive and board diversity, information disclosure, and employee compensation
levels.
The
Adviser considers all of the above factors in determining which securities to
purchase and sell. As a result, the Fund’s portfolio may be composed of a
variety of companies with different attributes that make them attractive
(e.g.,
attractive valuation, sound fundamentals and solid ESG attributes), however, any
single security may not have all three attributes.
The
Adviser seeks to identify positions for the Fund to sell short based on the
Adviser’s assessment of the likelihood of a decline in the value of the security
in the short term. For example, the company may have declining fundamental
measures such as earnings or revenue, have a weakening market position relative
to other similar companies, or be considered by the Adviser to be an
overvalued/overhyped company. Securities selected for short selling may also
include companies expected to underperform relative to their sector or
industry.
A
short sale is a transaction in which the Fund sells a security it does not own,
typically in anticipation of a decline in the market price of that security. To
effect a short sale, the Fund arranges through a broker to borrow the security
it does not own to be delivered to a buyer of such security. In borrowing the
security to be delivered to the buyer, the Fund will become obligated to replace
the security borrowed at the time of replacement, regardless of the market price
at that time. A short sale results in a gain when the price of the securities
sold short declines between the date of the short sale and the date on which a
security is purchased to replace the borrowed security. Conversely, a short sale
will result in a loss if the price of the security sold short increases. When
the Fund makes a short sale, the broker effecting the short sale typically holds
the proceeds as part of the collateral securing the Fund’s obligation to cover
the short position.
In
general, the Fund’s investments are broadly invested over a number of sectors,
but the Fund may focus on the technology, consumer, and healthcare
sectors.
Under
normal circumstances, at least 80% of the Fund’s net assets, plus borrowings for
investment purposes, will be invested long or short in equity securities,
including common stocks and depositary receipts.
The Fund is considered to be
non-diversified, which means that it may invest more of its assets in the
securities of a single issuer or a smaller number of issuers than if it were a
diversified fund.
Principal Investment Risks
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield, total return and/or ability to meet its
objective. The following risks could affect the value of your investment in
the Fund:
•Associated
Risks of Short Selling.
Short selling involves the sale of securities borrowed from a third party. The
short seller profits if the borrowed security’s price declines. If a shorted
security increases in value, a higher price must be paid to buy the stock back
to cover the short sale, resulting in a loss. The Fund may incur expenses
related to short selling, including compensation, interest or dividends, and
transaction costs payable to the security lender, whether the price of the
shorted security increases or decreases. The amount the Fund could lose on a
short sale is theoretically unlimited. Short selling also involves counterparty
risk – the risk associated with the third party ceasing operations or failing to
sell the security back.
•Depositary
Receipts Risk. American
Depositary Receipts (“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. ADRs 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.
•ESG
Risk. Applying
ESG criteria to the investment process may exclude securities of certain issuers
for non-investment reasons and therefore the Fund may forgo some market
opportunities available to funds that do not use ESG criteria. The Fund’s
incorporation of ESG considerations may affect its exposure to certain sectors
and/or types of investments, and may adversely impact the Fund’s performance
depending on whether such sectors or investments are in or out of favor in the
market.
•Equity
Market Risk.
The equity securities held in the Fund’s portfolio may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors that affect securities markets generally or factors affecting
specific issuers, industries, sectors or companies in which the Fund invests.
Common stocks are generally exposed to greater risk than other types of
securities, such as preferred stocks and debt obligations, because common
stockholders generally have inferior rights to receive payment from issuers.
•ETF
Risks.
The Fund is an ETF, and, as a result of this structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as Authorized
Participants (“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 may trade at a material discount to 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, 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 may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading. Although
Shares are listed for trading on the NYSE Arca, Inc. (the “Exchange”) and may be
traded on U.S. exchanges other than the Exchange, there can be no assurance that
Shares will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of Shares may begin to mirror the liquidity of
the Fund’s underlying portfolio holdings, which can be significantly less liquid
than Shares.
•Long/Short
Risk. The
Fund seeks long exposure to certain securities and short exposure to certain
other securities. There is no guarantee that the returns on the Fund’s long or
short positions will produce positive returns, and the Fund could lose money if
either or both the Fund’s long and short positions produce negative
returns.
•Management
Risk.
The
Adviser continuously evaluates the Fund’s holdings, purchases and sales with a
view to achieving the Fund’s investment objective. However, achievement of the
stated investment objective cannot be guaranteed. The Adviser’s judgment about
the markets, the economy, or companies may not anticipate actual market
movements, economic conditions or company performance, and these factors may
affect the return on your investment.
•Market
Risk.
The trading prices of securities and other instruments fluctuate in response to
a variety of factors. These factors include events impacting the entire market
or specific market segments, such as political, market and economic
developments, as well as events that impact specific issuers. The Fund’s NAV and
market price, like security and commodity prices generally, may fluctuate
significantly in response to these and other factors. As a result, an investor
could lose money over short or long periods of time. U.S. and international
markets have experienced significant periods of volatility in recent years due
to a number of these factors, including the impact of the coronavirus (COVID-19)
pandemic and related public health issues, growth concerns in the U.S. and
overseas, uncertainties regarding interest rates, trade tensions and the threat
of tariffs imposed by the U.S. and other countries. These developments as well
as other events could result in further market volatility and negatively affect
financial asset prices, the liquidity of certain securities and the normal
operations of securities exchanges and other markets. It is unknown how long
circumstances related to the pandemic will persist, whether they will reoccur in
the future, whether efforts to support the economy and financial markets will be
successful, and what additional implications may follow from the pandemic. The
impact of these events and other epidemics or pandemics in the future could
adversely affect Fund performance.
•Market
Capitalization Risk
◦Large-Capitalization
Investing.
The securities of large-capitalization companies may be relatively mature
compared to smaller companies and therefore subject to slower growth during
times of economic expansion. Large-capitalization companies may also be unable
to respond quickly to new competitive challenges, such as changes in technology
and consumer tastes.
◦Mid-Capitalization
Investing.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large capitalization stocks or the stock market
as a whole.
◦Small-Capitalization
Investing.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable
price changes than large- or mid-capitalization stocks or the stock market as a
whole. There is typically less publicly available information concerning
smaller-capitalization companies than for larger, more established companies.
•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 small number of issuers than if it was a diversified fund. As a result, a
decline in the value of an investment in a single issuer or a small number of
issuers could cause the Fund’s overall value to decline to a greater degree than
if the Fund held a more diversified portfolio. This may increase the Fund’s
volatility and have a greater impact on the Fund’s
performance.
•Portfolio
Turnover Risk.
Because the Fund may “turn over” some or all of its portfolio frequently, the
Fund may incur high levels of transaction costs, performance that is lower than
expected and potentially greater tax exposure.
•Sector
Risk. To
the extent the Fund invests more heavily in particular sectors of the economy,
its performance will be especially sensitive to developments that significantly
affect those sectors. The Fund may invest a significant portion of its assets in
the following sectors and, therefore, the performance of the Fund could be
negatively impacted by events affecting each of these sectors.
◦Consumer
Sectors Risk.
The success of consumer product manufacturers and retailers is tied closely to
the performance of domestic and international economies, interest rates,
exchange rates, competition, consumer confidence, changes in demographics and
consumer preferences. Companies in the consumer staples sector, such as
companies that produce or sell food, beverage, and drug retail or other
household items, may be adversely impacted by changes in global and economic
conditions, rising energy prices, and changes in the supply or price of
commodities. Companies in the consumer discretionary sector, such as automobile,
textile, retail, and media companies, depend heavily on disposable household
income and consumer spending, and may be strongly affected by social trends and
marketing campaigns. These companies may be subject to severe competition, which
may have an adverse impact on their profitability.
◦Health
Care Sector Risk. Companies
in the health care sector are subject to extensive government regulation and
their profitability can be significantly affected by restrictions on government
reimbursement for medical expenses, rising costs of medical products and
services, pricing pressure (including price discounting), limited product lines,
an increased emphasis on the delivery of healthcare through outpatient services,
loss or impairment of intellectual property rights and litigation regarding
product or service liability.
◦Information
Technology Sector Risk. Market
or economic factors impacting information technology companies and companies
that rely heavily on technological advances could have a significant effect on
the value of the Fund’s investments. The value of stocks of information
technology companies and companies that rely heavily on technology is
particularly vulnerable to rapid changes in technology product cycles, rapid
product obsolescence, government regulation and competition, both domestically
and internationally, including competition from foreign competitors with lower
production costs. Stocks of information technology companies and companies that
rely heavily on technology, especially those of smaller, less-seasoned
companies, tend to be more volatile than the overall market. Information
technology companies are heavily dependent on patent and intellectual property
rights, the loss or impairment of which may adversely affect
profitability.
•Value
Investing Risk.
Because the Fund may utilize a value style of investing, the Fund could suffer
losses or produce poor results relative to other funds, even in a rising market,
if the Adviser’s assessment of a company’s value or prospects for exceeding
earnings expectations or market conditions is
incorrect.
Performance
The following
performance information indicates some of the risks of investing in the
Fund. The bar chart shows the Fund’s performance for the most
recent calendar year ended December 31. The table illustrates how the Fund’s
average annual returns for the 1-year and since inception periods compare with
those of a broad measure of market performance. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is available on the
Fund’s website at www.changebridgefunds.com
or by calling the Fund toll-free at 1-800-617-0004.
Calendar Year Returns as of December
31
During the period shown in the
bar chart, the best performance for a
quarter was 14.01% (for the quarter ended March 31, 2021) and the
worst performance was
-8.18% (for the quarter ended December 31,
2021).
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Average Annual Total Returns (for the
Periods Ended December 31, 2021) |
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One
Year |
Since
Inception
11/12/20 |
Return Before
Taxes |
3.01% |
17.25% |
Return After Taxes on
Distributions |
3.01% |
17.25% |
Return After Taxes on Distributions and
Sale of Fund Shares |
1.78% |
13.18% |
Wilshire
Liquid Alternative Equity Hedge Total Return Index (reflects no deductions for
fees, expenses, or taxes) |
12.75% |
14.71% |
After-tax returns are
calculated using the historically highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown, and
after-tax returns are not relevant to investors who hold their Fund shares
through tax-deferred or other tax-advantaged arrangements such as 401(k) plans
or individual retirement accounts
(“IRAs”).
Portfolio
Management
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Adviser |
Changebridge
Capital, LLC |
Portfolio
Managers |
Ross
Klein and Vincent Lorusso are the Fund’s portfolio managers and are
primarily responsible for the day-to-day management of the Fund’s
portfolio. Messrs. Klein and Lorusso have been the portfolio managers of
the Fund since its inception in November
2020. |
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities (the “Deposit Securities”) and/or a designated amount of U.S.
cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.changebridgefunds.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
in an individual retirement account (“IRA”) or other tax-advantaged account.
Distributions on investments made through tax-deferred arrangements may be taxed
later upon withdrawal of assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
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CHANGEBRIDGE
CAPITAL SUSTAINABLE EQUITY ETF |
Investment Objective
The Changebridge Capital
Sustainable Equity ETF (the “Fund”) seeks capital appreciation and lower
volatility than the broader market.
Fees and Expenses of the
Fund
This table describes the fees
and expenses that you may pay if you buy, hold and sell shares of the Fund
(“Shares”). You may pay other fees, such as brokerage commissions and other fees
to financial intermediaries, which are not reflected in the table and Example
below.
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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
Management
Fee |
0.85% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses |
0.00% |
Total
Annual Fund Operating Expenses |
0.85% |
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund’s operating expenses remain the same. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
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1
Year: |
$87 |
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3
Years: |
$271 |
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5
Years |
$471 |
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10
Years |
$1,049 |
Portfolio
Turnover
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in the Total Annual Fund Operating expenses
or in the Example, affect the Fund’s performance. For the fiscal period ended
October 31, 2021, the Fund’s portfolio turnover rate was 105% of the average value of its
portfolio.
Principal Investment
Strategies
The
Fund is an actively-managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by purchasing securities Changebridge Capital, LLC (the
“Adviser”), the Fund’s investment adviser, believes to have above-average
financial characteristics and growth potential that exhibit positive
environmental, social, and governance (“ESG”) attributes.
The
Adviser identifies securities to purchase for the Fund primarily through
quantitative and qualitative analysis of U.S.-listed large-, mid-, or
small-capitalization companies. The Adviser utilizes a combination of
fundamental analysis and a proprietary quantitative model to identify companies
with attractive financial and ESG attributes. The Adviser selects equity
securities that it believes offer opportunities for significant market
outperformance, with the ultimate goal of outperforming over the course of an
entire market cycle, which is generally between 5 and 11 years, while
maintaining overall portfolio volatility that is lower than that experienced by
the broader market. The investment approach focuses on managing a portfolio of
approximately 20-40 securities with low portfolio turnover. The Adviser selects
equity securities that it believes are undervalued and/or overlooked by the
market, or with current valuations out of line with similar companies or trading
at significant discounts to the broader market.
Consistent
with the Adviser’s integration of quantitative and fundamental research
methodologies throughout the research process, the team also establishes a
sustainability assessment for each security it considers for inclusion in the
portfolio by applying quantitative and fundamental ESG considerations. This
sustainability assessment, which is assigned to each security evaluated for
inclusion in the portfolio, is derived from factors including: 1) environmental
- which may include a company’s energy use, waste, pollution, and natural
resource conservation; 2) social - which may include a company’s relationship
with suppliers, customers, employees, and in the communities which it operates;
and 3) governance - which may include the accuracy and transparency of
accounting methods as well as possible conflicts of interest.
Quantitatively,
the Adviser utilizes proprietary risk factor screens and third-party commercial
data sources to assign an ESG ranking to all securities in the Fund’s investment
universe.
Fundamentally,
the Adviser makes a qualitative sustainability assessment for each security
considered for inclusion in the Fund’s portfolio based on its evaluation of
company filings, meetings with management teams, industry research, and review
of corporate sustainability reports.
The
Adviser’s quantitative and fundamental research capability when applied to
sustainability factors enables it to determine which securities in the Fund’s
investment universe are meeting positive thresholds of performance on ESG
issues. If information on a specific metric is unavailable, the security may
still be selected for the portfolio if the Adviser believes it can evaluate the
security qualitatively or if the financial criteria and remaining ESG scores
warrant investment.
Under
normal circumstances, the Fund will invest at least 80% of its net assets, plus
borrowings for investment purposes, in equity securities, including common
stocks and depositary receipts, of sustainable companies. For purposes of this
policy, the Adviser defines sustainable companies as those to which the
Adviser’s quantitative and fundamental research assigns an overall
sustainability assessment ranking in the top three quartiles of the
sustainability scores assigned to all of the companies in the Fund’s investment
universe.
The Fund is considered to be
non-diversified, which means that it may invest more of its assets in the
securities of a single issuer or a smaller number of issuers than if it were a
diversified fund.
Principal Investment
Risks
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net NAV, trading price,
yield, total return and/or ability to meet its objective. The following
risks
could
affect the value of your investment
in
the Fund:
•Depositary
Receipts Risk. American
Depositary Receipts (“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. ADRs 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.
•ESG
Risk. Applying
ESG criteria to the investment process may exclude securities of certain issuers
for non-investment reasons and therefore the Fund may forgo some market
opportunities available to funds that do not use ESG criteria. The Fund’s
incorporation of ESG considerations may affect its exposure to certain sectors
and/or types of investments, and may adversely impact the Fund’s performance
depending on whether such sectors or investments are in or out of favor in the
market.
•Equity
Market Risk.
The equity securities held in the Fund’s portfolio may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors that affect securities markets generally or factors affecting
specific issuers, industries, sectors or companies in which the Fund invests.
Common stocks are generally exposed to greater risk than other types of
securities, such as preferred stocks and debt obligations, because common
stockholders generally have inferior rights to receive payment from issuers.
•ETF
Risks.
The Fund is an ETF, and, as a result of this structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as Authorized
Participants (“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 may trade at a material discount to 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, 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 may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading. Although
Shares are listed for trading on the NYSE Arca, Inc. (the “Exchange”) and may be
traded on U.S. exchanges other than the Exchange, there can be no assurance that
Shares will trade with any volume, or at all, on any stock
exchange.
In stressed market conditions, the liquidity of Shares may begin to mirror the
liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than Shares.
•Management
Risk.
The
Adviser continuously evaluates the Fund’s holdings, purchases and sales with a
view to achieving the Fund’s investment objective. However, achievement of the
stated investment objective cannot be guaranteed. The Adviser’s judgment about
the markets, the economy, or companies may not anticipate actual market
movements, economic conditions or company performance, and these factors may
affect the return on your investment.
•Market
Risk.
The trading prices of securities and other instruments fluctuate in response to
a variety of factors. These factors include events impacting the entire market
or specific market segments, such as political, market and economic
developments, as well as events that impact specific issuers. The Fund’s NAV and
market price, like security and commodity prices generally, may fluctuate
significantly in response to these and other factors. As a result, an investor
could lose money over short or long periods of time. U.S. and international
markets have experienced significant periods of volatility in recent years due
to a number of these factors, including the impact of the coronavirus (COVID-19)
pandemic and related public health issues, growth concerns in the U.S. and
overseas, uncertainties regarding interest rates, trade tensions and the threat
of tariffs imposed by the U.S. and other countries. These developments as well
as other events could result in further market volatility and negatively affect
financial asset prices, the liquidity of certain securities and the normal
operations of securities exchanges and other markets. It is unknown how long
circumstances related to the pandemic will persist, whether they will reoccur in
the future, whether efforts to support the economy and financial markets will be
successful, and what additional implications may follow from the pandemic. The
impact of these events and other epidemics or pandemics in the future could
adversely affect Fund performance.
•Market
Capitalization Risk
◦Large-Capitalization
Investing.
The securities of large-capitalization companies may be relatively mature
compared to smaller companies and therefore subject to slower growth during
times of economic expansion. Large-capitalization companies may also be unable
to respond quickly to new competitive challenges, such as changes in technology
and consumer tastes.
◦Mid-Capitalization
Investing.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large capitalization stocks or the stock market
as a whole.
◦Small-Capitalization
Investing.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or mid-capitalization stocks or the
stock market as a whole. There is typically less publicly available information
concerning smaller-capitalization companies than for larger, more established
companies.
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 small number of issuers than if it was a diversified fund. As a result, a
decline in the value of an investment in a single issuer or a small number of
issuers could cause the Fund’s overall value to decline to a greater degree than
if the Fund held a more diversified portfolio. This may increase the Fund’s
volatility and have a greater impact on the Fund’s
performance.
•Sector
Risk. To
the extent the Fund invests more heavily in particular sectors of the economy,
its performance will be especially sensitive to developments that significantly
affect those sectors. The Fund may invest a significant portion of its assets in
the following sectors and, therefore, the performance of the Fund could be
negatively impacted by events affecting each of these sectors.
◦Consumer
Sectors Risk.
The success of consumer product manufacturers and retailers is tied closely to
the performance of domestic and international economies, interest rates,
exchange rates, competition, consumer confidence, changes in demographics and
consumer preferences. Companies in the consumer staples sector, such as
companies that produce or sell food, beverage, and drug retail or other
household items, may be adversely impacted by changes in global and economic
conditions, rising energy prices, and changes in the supply or price of
commodities. Companies in the consumer discretionary sector, such as automobile,
textile, retail, and media companies, depend heavily on disposable household
income and consumer spending, and may be strongly affected by social trends and
marketing campaigns. These companies may be subject to severe competition, which
may have an adverse impact on their profitability.
◦Health
Care Sector Risk. Companies
in the health care sector are subject to extensive government regulation and
their profitability can be significantly affected by restrictions on government
reimbursement for medical expenses, rising costs of medical products and
services, pricing pressure (including price discounting), limited product lines,
an increased emphasis on the delivery of healthcare through outpatient services,
loss or impairment of intellectual property rights and litigation regarding
product or service liability.
◦Information
Technology Sector Risk. Market
or economic factors impacting information technology companies and companies
that rely heavily on technological advances could have a significant effect on
the value of the Fund’s investments. The value of stocks of information
technology companies and companies that rely heavily on technology is
particularly vulnerable to rapid changes in technology product cycles, rapid
product obsolescence, government regulation and competition, both domestically
and internationally, including competition from foreign competitors with lower
production costs. Stocks of information technology companies and companies that
rely heavily on technology, especially those of smaller, less-seasoned
companies, tend to be more volatile than the overall market. Information
technology companies are heavily dependent on patent and intellectual property
rights, the loss or impairment of which may adversely affect
profitability.
•Portfolio
Turnover Risk.
Because the Fund may “turn over” some or all of its portfolio frequently, the
Fund may incur high levels of transaction costs, performance that is lower than
expected and potentially greater tax exposure.
•Value
Investing Risk.
Because the Fund may utilize a value style of investing, the Fund could suffer
losses or produce poor results relative to other funds, even in a rising market,
if the Adviser’s assessment of a company’s value or prospects for exceeding
earnings expectations or market conditions is
incorrect.
Performance
The following
performance information indicates some of the risks of investing in the
Fund. The bar chart shows the Fund’s performance for the most
recent calendar year ended December 31. The table illustrates how the Fund’s
average annual returns for the 1-year and since inception periods compare with
those of a broad measure of market performance. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is available on the
Fund’s website at www.changebridgefunds.com
or by calling the Fund toll-free at 1-800-617-0004.
Calendar Year Returns as of December
31
During the period shown in the
bar chart, the best performance for a
quarter was 20.41% (for the quarter ended March 31, 2021) and the
worst performance was
-6.61% (for the quarter ended December 31,
2021).
|
|
|
|
|
|
|
|
|
Average Annual Total Returns (for the
Periods Ended December 31, 2021) |
|
One
Year |
Since
Inception (11/12/20) |
Return Before
Taxes |
14.72% |
31.66% |
Return After Taxes on
Distributions |
14.72% |
31.66% |
Return After Taxes on Distributions and
Sale of Fund Shares |
8.72% |
24.23% |
S&P
500®
Total Return Index (reflects no deductions for
fees, expenses, or taxes) |
28.71% |
31.97% |
After-tax returns are
calculated using the historically highest individual federal marginal income tax
rates and do not reflect the impact of state and local taxes.
Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown, and
after-tax returns are not relevant to investors who hold their Fund shares
through tax-deferred or other tax-advantaged arrangements such as 401(k) plans
or individual retirement accounts
(“IRAs”).
Portfolio
Management
|
|
|
|
|
|
Adviser |
Changebridge
Capital, LLC |
Portfolio
Managers |
Ross
Klein and Vincent Lorusso are the Fund’s portfolio managers and are
primarily responsible for the day-to-day management of the Fund’s
portfolio. Messrs. Klein and Lorusso have been portfolio managers of the
Fund since its inception in November
2020. |
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities (the “Deposit Securities”) and/or a designated amount of U.S.
cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer at market prices, rather than
NAV. Because Shares trade at market prices rather than NAV, Shares may trade at
a price greater than NAV (premium) or less than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. The difference in the bid and
ask prices is referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.changebridgefunds.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
in an individual retirement account (“IRA”) or other tax-advantaged account.
Distributions on investments made through tax-deferred arrangements may be taxed
later upon withdrawal of assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
ADDITIONAL
INFORMATION ABOUT THE FUNDS
Investment
Objectives
Each
Fund’s investment objective has been adopted as a non-fundamental investment
policy and may be changed without shareholder approval upon written notice to
shareholders.
Principal
Investment Strategies
Each
Fund has adopted a policy to comply with Rule 35d-1 under the Investment Company
Act of 1940. Each such policy has been adopted as a non-fundamental investment
policy and may be changed without shareholder approval upon 60 days’ written
notice to shareholders.
Under
normal circumstances, the Changebridge Capital Long/Short Equity ETF (the
“Long/Short Fund”) invests at least 80% of its net assets (plus any borrowings
for investment purposes) long or short in equity securities, including common
stocks and depositary receipts.
Under
normal circumstances, the Changebridge Capital Sustainable Equity ETF invests at
least 80% of its net assets (plus any borrowings for investment purposes) in
equity securities, including common stocks and depositary receipts, of
sustainable companies. For purposes of this policy, the Adviser defines
sustainable companies as those to which the Adviser’s quantitative and
fundamental research assigns an overall sustainability assessment ranking in the
top three quartiles of the sustainability scores assigned to all of the
companies in the Fund’s investment universe.
Non-Principal
Investment Strategies
Each
Fund may also purchase or sell (write) include exchange-traded put or call
options on stocks or stock indices for any purpose consistent with its
investment objective, such as for hedging or obtaining market exposure. A put
option gives the owner of the put the right, but not the obligation, to sell a
security at a stated price within a specific timeframe, and a call option gives
the owner of the call the right, but not the obligation, to buy a security at a
stated price within a specific timeframe.
Principal
Investment Risks
An
investment in a Fund entails risks. A Fund could lose money, or its performance
could trail that of other investment alternatives. The following provides
additional information about the Funds’ principal risks. It is important that
investors closely review and understand these risks before making an investment
in a Fund. Each risk applies to each Fund unless otherwise specified. Just as in
each Fund’s summary section above, the principal risks below are presented in
alphabetical order to facilitate finding particular risks and comparing them
with those of other funds. Each risk summarized below is considered a “principal
risk” of investing in the applicable Fund, regardless of the order in which it
appears.
•Associated
Risks of Short Selling
(Long/Short Fund only).
Short selling involves the sale of securities borrowed from a third party. The
short seller profits if the borrowed security’s price declines. If a shorted
security increases in value, a higher price must be paid to buy the stock back
to cover the short sale, resulting in a loss. The Fund may incur expenses
related to short selling, including compensation, interest or dividends, and
transaction costs payable to the security lender, whether the price of the
shorted security increases or decreases. The amount the Fund could lose on a
short sale is theoretically unlimited. Short selling also involves counterparty
risk – the risk associated with the third party ceasing operations or failing to
sell the security back.
•Depositary
Receipts Risk. The
Funds may hold the securities of non-U.S. companies in the form of ADRs. ADRs
are negotiable certificates issued by a U.S. financial institution that
represent a specified number of shares in a foreign stock and trade on a U.S.
national securities exchange, such as the New York Stock Exchange. Sponsored
ADRs are issued with the support of the issuer of the foreign stock underlying
the ADRs and carry all of the rights of common shares, including voting rights.
The underlying securities of the ADRs in a Fund’s portfolio are usually
denominated or quoted in currencies other than the U.S. Dollar. As a result,
changes in foreign currency exchange rates may affect the value of a Fund’s
portfolio. In addition, because the underlying securities of ADRs trade on
foreign exchanges at times when the U.S. markets are not open for trading, the
value of the securities underlying the ADRs may change materially at times when
the U.S. markets are not open for trading, regardless of whether there is an
active U.S. market for shares.
•ESG
Risk. Applying
ESG and sustainability criteria to the investment process may exclude securities
of certain issuers for non-investment reasons and therefore the Funds may forgo
some market opportunities available to funds that do not use ESG or
sustainability criteria. The Funds’ incorporation of ESG considerations may
affect its exposure to certain sectors and/or types of investments, and may
adversely impact a Fund’s performance depending on whether such sectors or
investments are in or out of favor in the market. In addition, a Fund’s
investments in certain companies may be susceptible to various factors that may
impact their businesses or operations, including costs associated with
government budgetary constraints that impact publicly funded projects and clean
energy initiatives, the effects of general economic conditions throughout the
world, increased competition from other providers of services, unfavorable tax
laws or accounting policies and high leverage.
•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 the structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk.
The Funds have a limited number of financial institutions that may act as APs.
In addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares may trade at a material discount to 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 in the secondary market will pay brokerage
commissions or other charges imposed by brokers, as determined by that broker.
Brokerage commissions are often a fixed amount and may be a significant
proportional cost for investors seeking to buy or sell relatively small amounts
of Shares. In addition, secondary market investors will also incur the cost of
the difference between the price at which an investor is willing to buy Shares
(the “bid” price) and the price at which an investor is willing to sell Shares
(the “ask” price). This difference in bid and ask prices is often referred to as
the “spread” or “bid/ask spread.” The bid/ask spread varies over time for Shares
based on trading volume and market liquidity, and is generally lower if Shares
have more trading volume and market liquidity and higher if Shares have little
trading volume and market liquidity. Further, a relatively small investor base
in the 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,
including bid/ask spreads, frequent trading of Shares may significantly reduce
investment results and an investment in Shares may not be advisable for
investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the 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 or periods of
steep market declines. The market price of Shares during the trading day, like
the price of any exchange-traded security, includes a “bid/ask” spread charged
by the exchange specialist, market makers or other participants that trade
Shares. In times of severe market disruption, the bid/ask spread can increase
significantly. At those times, Shares are most likely to be traded at a discount
to NAV, and the discount is likely to be greatest when the price of Shares is
falling fastest, which may be the time that you most want to sell your Shares.
The Adviser believes that, under normal market conditions, large market price
discounts or premiums to NAV will not be sustained because of arbitrage
opportunities.
◦Trading.
Although Shares are listed for trading on the Exchange and may be listed or
traded on U.S. and non-U.S. stock exchanges other than the Exchange, there can
be no assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange “circuit breaker”
rules, which temporarily halt trading on the Exchange when a decline in the
S&P 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 when extraordinary volatility causes sudden, significant swings in the
market price of Shares. There can be no assurance that Shares will trade with
any volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of the Funds’ underlying
portfolio holdings, which can be significantly less liquid than
Shares.
•Long/Short
Risk (Long/Short
Fund only).
The
Fund seeks long exposure to certain securities and short exposure to certain
other securities. There is no guarantee that the returns on the Fund’s long or
short positions will produce positive returns, and the Fund could lose money if
either or both the Fund’s long and short positions produce negative
returns.
•Management
Risk.
The
Adviser continuously evaluates each Fund’s holdings, purchases and sales with a
view to achieving the Fund’s investment objective. However, achievement of the
stated investment objective cannot be guaranteed. The Adviser’s judgment about
the markets, the economy, or companies may not anticipate actual market
movements, economic conditions or company performance, and these factors may
affect the return on your investment. In fact, no matter how good a job the
Adviser does, you could lose money on your investment in a Fund, just as you
could with other investments. If the Adviser is incorrect in
its
assessment of the income, growth or price realization potential of a Fund’s
holdings or incorrect in its assessment of general market or economic
conditions, then the value of the Fund’s shares may decline.
•Market
Risk. The
trading prices of securities and other instruments fluctuate in response to a
variety of factors. These factors include events impacting the entire market or
specific market segments, such as political, market and economic developments,
as well as events that impact specific issuers. A Fund’s NAV and market price,
like security and commodity prices generally, may fluctuate significantly in
response to these and other factors. As a result, an investor could lose money
over short or long periods of time. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
economic, political and global macro factors, including public health issues,
growth concerns in the U.S. and overseas, uncertainties regarding interest
rates, trade tensions and the threat of tariffs imposed by the U.S. and other
countries. These developments as well as other events could result in further
market volatility and negatively affect financial asset prices, the liquidity of
certain securities and the normal operations of securities exchanges and other
markets, which could have an adverse effect on a Fund.
The
respiratory illness COVID-19 caused by a novel coronavirus has resulted in a
pandemic and major disruption to economies and markets around the world,
including the United States. The pandemic has resulted in a wide range of social
and economic disruptions, including closed borders, voluntary or compelled
quarantines of large populations, stressed healthcare systems, reduced or
prohibited domestic or international travel, supply chain disruptions, and
so-called “stay-at-home” orders throughout much of the United States and many
other countries. Financial markets have experienced extreme volatility and
severe losses, and trading in many instruments has been disrupted. Some sectors
of the economy and individual issuers have experienced particularly large
losses. Such disruptions may continue for an extended period of time or reoccur
in the future to a similar or greater extent. Liquidity for many instruments has
been greatly reduced for periods of time. In response to these disruptions, the
U.S. government and the Federal Reserve have taken extraordinary actions to
support the domestic economy and financial markets, resulting in very low
interest rates and in some cases negative yields. It is unknown how long
circumstances related to the pandemic will persist, whether they will reoccur in
the future, whether efforts to support the economy and financial markets will be
successful, and what additional implications may follow from the pandemic. The
impact of these events and other epidemics or pandemics in the future could
adversely affect Fund performance.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing.
The
securities of large-capitalization companies may be relatively mature compared
to smaller companies and therefore subject to slower growth during times of
economic expansion. Large-capitalization companies may also be unable to respond
quickly to new competitive challenges, such as changes in technology and
consumer tastes.
◦Mid-Capitalization
Investing.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large capitalization stocks or the stock market
as a whole. Some medium-capitalization companies have limited product lines,
markets, financial resources and management personnel and tend to concentrate on
fewer geographical markets relative to large-capitalization
companies.
◦Small-Capitalization
Investing.
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. As with some medium-capitalization companies, 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.
•Non-Diversification
Risk.
Because the Funds are “non-diversified,” it may invest a greater percentage of
its assets in the securities of a single issuer or a small number of issuers
than if it was a diversified fund. As a result, a decline in the value of an
investment in a single issuer or a small number of issuers could cause the
Fund’s overall value to decline to a greater degree than if the Funds held a
more diversified portfolio. This may increase the Funds’ volatility and have a
greater impact on the Fund’s performance.
•Portfolio
Turnover Risk. Each
Fund’s strategy may frequently involve buying and selling securities, which may
lead to relatively high portfolio turnover. Higher portfolio turnover may result
in a Fund paying increased transaction costs and generating greater tax
liabilities for shareholders. Higher portfolio turnover also may cause a Fund’s
performance to be less than you expect.
•Sector
Risk.
Each Fund’s investing approach may result in an emphasis on certain sectors or
sub-sectors of the market at any given time. To the extent a Fund invests more
heavily in one sector or sub-sector of the market, it thereby presents a more
concentrated risk and its performance will be especially sensitive to
developments that significantly affect those sectors or sub-sectors. In
addition, the value of a Fund’s shares may change at different rates compared to
the value of shares of a fund with investments in a more diversified mix of
sectors and industries. An individual sector or sub-sector of the market may
have above-average performance during particular periods but may also move up
and down more than the broader market. The several industries that constitute a
sector may all react in the same way to economic, political or regulatory
events. A Fund’s performance could also be affected if the sectors or
sub-sectors do not perform as expected. Alternatively, the lack of exposure to
one or more sectors or sub-sectors may adversely affect
performance.
◦Consumer
Sectors Risk. The
success of consumer product manufacturers and retailers is tied closely to the
performance of domestic and international economies, interest rates, exchange
rates, competition, consumer confidence, tariffs and trade barriers, changes in
demographics, and consumer preferences. Companies in consumer-oriented sectors
depend heavily on disposable household income and consumer spending, and may be
strongly affected by social trends and marketing campaigns. These companies may
be subject to severe competition, which may have an adverse impact on their
profitability.
◦Health
Care Sector Risk.
Companies in the health care sector are subject to extensive government
regulation and their profitability can be significantly affected by restrictions
on government reimbursement for medical expenses, rising costs of medical
products and services, pricing pressure (including price discounting), limited
product lines and an increased emphasis on the delivery of healthcare through
outpatient services. Companies in the health care sector are heavily dependent
on obtaining and defending patents, which may be time consuming and costly, and
the expiration of patents may also adversely affect the profitability of these
companies. Health care companies are also subject to extensive litigation based
on product liability and similar claims. In addition, their products can become
obsolete due to industry innovation, changes in technologies or other market
developments. Many new products in the health care sector require significant
research and development and may be subject to regulatory approvals, all of
which may be time consuming and costly with no guarantee that any product will
come to market.
◦Information
Technology Sector Risk.
Market
or economic factors impacting information technology companies and companies
that rely heavily on technological advances could have a significant effect on
the value of the Funds’ investments. The value of stocks of information
technology companies and companies that rely heavily on technology is
particularly vulnerable to rapid changes in technology product cycles, rapid
product obsolescence, government regulation and competition, both domestically
and internationally, including competition from foreign competitors with lower
production costs. Stocks of information technology companies and companies that
rely heavily on technology, especially those of smaller, less-seasoned
companies, tend to be more volatile than the overall market. Information
technology companies are heavily dependent on patent and intellectual property
rights, the loss or impairment of which may adversely affect profitability.
Additionally, companies in the technology sector may face dramatic and often
unpredictable changes in growth rates and competition for the services of
qualified personnel.
•Value
Investing Risk.
Because a Fund may utilize a value style of investing, the Fund could suffer
losses or produce poor results relative to other funds, even in a rising market,
if the Adviser’s assessment of a company’s value or prospects for exceeding
earnings expectations or market conditions is incorrect. A company may be
undervalued due to market or economic conditions, temporary earnings declines,
unfavorable developments affecting the company and other factors.
Non-Principal
Investment Risks.
Risks
from Purchasing Options.
If a call or put option purchased by a Fund is not sold when it has remaining
value and if the market price of the underlying security, in the case of a call,
remains less than or equal to the exercise price, or, in the case of a put,
remains equal to or greater than the exercise price, the fund will lose its
entire investment in the option. Since many factors influence the value of an
option, including the price of the underlying security, the exercise price, the
time to expiration, the interest rate, and the dividend rate of the underlying
security, the Adviser’s success in implementing a Fund’s strategy may depend on
an ability to predict movements in the prices of individual securities,
fluctuations in markets, and movements in interest rates. There is no assurance
that a liquid market will exist when a Fund seeks to close out an option
position. Where a position in a purchased option is used as a hedge against
price movements in a related position, the price of the option may move more or
less than the price of the related position.
Risks
from Writing Options.
Writing option contracts can result in losses that exceed a Fund’s initial
investment and may lead to additional turnover and higher tax liability. The
risk involved in writing a call option is that there could be an increase in the
market value of the security. If this occurred, the option could be exercised
and the underlying security would then be sold by a Fund at a lower price than
its current market value or in the case of cash settled options, the Fund would
be required to purchase the option at a price that is higher than the original
sales prices for such option. Similarly, while writing call options can reduce
the risk of owning stocks, such a strategy limits the opportunity of a Fund to
profit from an increase in the market value of stocks in exchange for up-front
cash at the time of selling the call option. The risk involved in writing a put
option is that there could be a decrease in the market value of the underlying
security. If this occurred, the option could be exercised and the underlying
security would then be sold to a
Fund
at a higher price than its current market value or in the case of cash settled
options, the Fund would be required to purchase the option at a price that is
higher than the original sales price for such option.
PORTFOLIO
HOLDINGS INFORMATION
Information
about each Fund’s daily portfolio holdings is available at
www.changebridgefunds.com. 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”).
MANAGEMENT
Investment
Adviser
Changebridge
Capital, LLC, a Massachusetts limited liability company located at 180 Canal
Street, Suite 600, Boston, Massachusetts 02114, serves as the investment adviser
for each Fund. The Adviser, subject to the oversight of the Board of Trustees
(the “Board”) of Listed Funds Trust (the “Trust”), provides an investment
management program for each Fund and manages the day-to-day operations of the
Funds. The Adviser also arranges for transfer agency, custody, fund
administration, distribution and all other services necessary for each Fund to
operate. The Adviser is an SEC-registered investment adviser. As of January 31,
2022, the Adviser had approximately $15 million in assets under
management.
For
the services it provides to the Funds, the Adviser is entitled to a unified
management fee, which is calculated daily and paid monthly, at an annual rate
based on each Fund’s average daily net assets as set forth in the table below.
|
|
|
|
|
|
Fund |
Management
Fee |
Changebridge
Capital Long/Short Equity ETF |
1.70% |
Changebridge
Capital Sustainable Equity ETF |
0.85% |
Pursuant
to an investment advisory agreement between the Trust, on behalf of each Fund,
and the Adviser (the “Advisory Agreement”), the Adviser has agreed to pay all
expenses of each Fund except the fee payable to the Adviser under the Advisory
Agreement, interest charges on any borrowings, dividends, and other expenses on
securities sold short, taxes, brokerage commissions and other expenses incurred
in placing orders for the purchase and sale of securities and other investment
instruments, acquired fund fees and expenses, accrued deferred tax liability,
extraordinary expenses, and distribution (12b-1) fees and expenses (if
any).
The
basis for the Board’s approval of the Advisory Agreement is available in the
Funds’ Semi-Annual Report to Shareholders dated April 30, 2021.
Portfolio
Managers
Ross
Klein and Vincent Lorusso are jointly and primarily responsible for the
day-to-day management of each Fund’s portfolio.
Ross
Klein, CFA, has been a portfolio manager of each Fund since its inception. Mr.
Klein has served as the Chief Investment Officer of Changebridge Capital since
he founded the firm in February 2020. Previously, he served as a long/short
generalist for a $1B long/short equity portfolio at Boston Partners from April
2010 to February 2020. Mr. Klein has developed an expertise in discovering short
positions, and his cumulative coverage list exceeds 1,000 individual companies.
He received his CFA designation in 2014 and a BS in Business Administration from
Babson College.
Vincent
Lorusso has been a portfolio manager of each Fund since its inception. He has
more than 20 years of industry experience, previously serving as Partner and
Portfolio Manager at Clough Capital Partners, LP where he worked for 16 years.
Prior to that, Mr. Lorusso was a Senior Investment Consultant with Natixis Asset
Management. With a global perspective, he has analyzed and invested in a broad
range of equity securities over the course of his career. Mr. Lorusso holds an
MS in Finance and a BS in Finance & English, both from Boston
College.
The
SAI provides additional information about each portfolio manager’s compensation
structure, other accounts managed by the portfolio manager and the portfolio
manager’s ownership of Shares of the Funds.
Other
Service Providers
Foreside
Fund Services, LLC (the “Distributor”) is the principal underwriter and
distributor of each Fund’s shares. The Distributor’s principal address is Three
Canal Plaza, Suite 100, Portland, Maine 04101. The Distributor will not
distribute shares in less than whole Creation Units, and it does not maintain a
secondary market in the shares. The Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934 and a member of the Financial Industry
Regulatory Authority, Inc. (“FINRA”). The Distributor has no role in determining
the policies of the Funds or the securities that are purchased or sold by the
Funds and is not affiliated with the Adviser or any of its
affiliates.
U.S.
Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services,
located at 615 East Michigan Street, Milwaukee, Wisconsin 53202, serves as the
administrator and transfer agent for the Funds.
U.S.
Bank National Association, located at 1555 N. Rivercenter Drive, Suite 302,
Milwaukee, Wisconsin 53212, serves as the custodian for the Funds.
Morgan,
Lewis & Bockius LLP, located at 1111 Pennsylvania Avenue, N.W., Washington,
D.C. 20004, serves as legal counsel to the Trust.
Cohen
& Company, Ltd., located at 1350 Euclid Avenue, Suite 800, Cleveland, Ohio
44115, serves as the Funds’ independent registered public accounting firm. The
independent registered public accounting firm is responsible for auditing the
annual financial statements of the Funds.
HOW
TO BUY AND SELL SHARES
Each
Fund issues and redeems Shares only in Creation Units at the NAV per share next
determined after receipt of an order from an AP. Only APs may acquire Shares
directly from a Fund, and only APs may tender their Shares for redemption
directly to the Fund, at NAV. APs must be a member or participant of a clearing
agency registered with the SEC and must execute a Participant Agreement that has
been agreed to by the Distributor, and that has been accepted by a Fund’s
transfer agent, with respect to purchases and redemptions of Creation Units.
Once created, Shares trade in the secondary market in quantities less than a
Creation Unit.
Most
investors buy and sell Shares in secondary market transactions through brokers.
Individual Shares are listed for trading on the secondary market on the Exchange
and can be bought and sold throughout the trading day like other publicly traded
securities.
When
buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the spread between the
bid and the offer price in the secondary market on each leg of a round trip
(purchase and sale) transaction. In addition, because secondary market
transactions occur at market prices, you may pay more than NAV when you buy
Shares, and receive less than NAV when you sell those Shares.
Book
Entry
Shares
are held in book-entry form, which means that no stock certificates are issued.
The Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding Shares.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares. DTC’s
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other institutions that directly or indirectly
maintain a custodial relationship with DTC. As a beneficial owner of Shares, you
are not entitled to receive physical delivery of stock certificates or to have
Shares registered in your name, and you are not considered a registered owner of
Shares. Therefore, to exercise any right as an owner of Shares, you must rely
upon the procedures of DTC and its participants. These procedures are the same
as those that apply to any other securities that you hold in book entry or
“street name” through your brokerage account.
Frequent
Purchases and Redemptions of Shares
The
Funds impose no restrictions on the frequency of purchases and redemptions of
Shares. In determining not to approve a written, established policy, the Board
evaluated the risks of market timing activities by Fund shareholders. Purchases
and redemptions by APs, who are the only parties that may purchase or redeem
Shares directly with the Funds, are an essential part of the ETF process and
help keep Share trading prices in line with NAV. As such, the Funds accommodate
frequent purchases and redemptions by APs. However, frequent purchases and
redemptions for cash may increase tracking error and portfolio transaction costs
and may lead to the realization of capital gains. To minimize these potential
consequences of frequent purchases and redemptions, the Funds employ fair value
pricing and may impose transaction fees on purchases and redemptions of Creation
Units to cover the custodial and other costs incurred by the Funds in effecting
trades. In addition, the Funds reserve the right to reject any purchase order at
their discretion.
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 (the “NYSE”), generally 4:00 p.m. Eastern time, each day the
NYSE is open for business. The NAV for a Fund is calculated by dividing the
applicable Fund’s net assets by its Shares outstanding.
In
calculating its NAV, each Fund generally values its assets on the basis of
market quotations, last sale prices, or estimates of value furnished by a
pricing service or brokers who make markets in such instruments. The values of
non-U.S. dollar denominated securities are converted to U.S. dollars using
foreign currency exchange rates generally determined as of 4:00 p.m., London
time. If such information is not available for a security held by a Fund or is
determined to be unreliable, the security will be valued at fair value estimates
under guidelines established by the Board (as described below).
Fair
Value Pricing
The
Board has adopted procedures and methodologies to fair value Fund securities
whose market prices are not “readily available” or are deemed to be unreliable.
For example, such circumstances may arise when: (i) a security has been
de-listed or has had its trading
halted
or suspended; (ii) a security’s primary pricing source is unable or unwilling to
provide a price; (iii) a security’s primary trading market is closed during
regular market hours; or (iv) a security’s value is materially affected by
events occurring after the close of the security’s primary trading market.
Generally, when fair valuing a security, 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 Registered Investment Companies
Section 12(d)(1)
of the 1940 Act restricts investments by registered investment companies in the
securities of other investment companies. Registered investment companies are
permitted to invest in a Fund beyond the limits set forth in
section 12(d)(1), subject to certain terms and conditions, including that
such investment companies enter into an agreement with the Funds.
DIVIDENDS,
DISTRIBUTIONS, AND TAXES
Dividends
and Distributions
Each
Fund intends to pay out dividends, if any, and distribute any net realized
capital gains to its shareholders at least annually. Each Fund will declare and
pay capital gain distributions in cash. Distributions in cash may be reinvested
automatically in additional whole Shares only if the broker through whom you
purchased Shares makes such option available. Your broker is responsible for
distributing the income and capital gain distributions to you.
Taxes
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in the Funds. Your investment
in a Fund 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 to qualify each year for treatment as a regulated
investment company (“RIC”). 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, a Fund’s
failure to qualify as a RIC or to meet minimum distribution requirements would
result (if certain relief provisions were not available) in fund-level taxation
and, consequently, a reduction in income available for distribution to
shareholders.
Unless
your investment in Shares is made through a tax-exempt entity or tax-advantaged
account, such as an IRA plan, you need to be aware of the possible tax
consequences when a Fund makes distributions, when you sell your Shares listed
on the Exchange, and when you purchase or redeem Creation Units (institutional
investors only).
Taxes
on Distributions
Each
Fund intends to distribute, at least annually, substantially all of its net
investment income and net capital gains income. For federal income tax purposes,
distributions of investment income are generally taxable as ordinary income or
qualified dividend income. A portion of dividends received from a Fund (but none
of a Fund’s capital gain distributions) may qualify for the dividends received
deduction for corporations. Taxes on distributions of capital gains (if any) are
determined by how long a Fund owned the investments that generated them, rather
than how long a shareholder has owned his or her Shares. Sales of assets held by
a Fund for more than one year generally result in long-term capital gains and
losses, and sales of assets held by a Fund for one year or less generally result
in short-term capital gains and losses. Distributions of a Fund’s net capital
gain (the excess of net long-term capital gains over net short-term capital
losses) that are reported by such Fund as capital gain dividends (“Capital Gain
Dividends”) will be taxable as long-term capital gains, which for non-corporate
shareholders are subject to tax at reduced rates of up to 20% (lower rates apply
to individuals in lower tax brackets). Distributions of short-term capital gain
will generally be taxable as ordinary income. Dividends and distributions are
generally taxable to you whether you receive them in cash or reinvest them in
additional shares.
Distributions
reported by a Fund as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided holding period and other requirements are met. “Qualified dividend
income” generally is income derived from dividends paid by U.S. corporations or
certain foreign corporations that are either incorporated in a U.S. possession
or eligible for tax benefits under certain U.S. income tax treaties. In
addition, dividends that the Funds receive in respect of stock of certain
foreign corporations may be qualified dividend income if that stock is readily
tradable on an established U.S. securities market. Corporate shareholders may be
entitled to a dividends received deduction for the portion of dividends they
receive from a Fund that are attributable to dividends received by the Funds
from U.S. corporations, subject to certain limitations. Certain of the Funds’
investment strategies may limit their ability to make distributions eligible for
treatment as qualified dividend income in the hands of non-corporate
shareholders or eligible for the dividends received deduction for corporate
shareholders.
Shortly
after the close of each calendar year, you will be informed of the character of
any distributions received from a Fund.
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are generally
taxable even if they are paid from income or gains earned by a Fund before your
investment (and thus were included in the Shares’ NAV when you purchased your
Shares).
You
may wish to avoid investing in a Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable even though
it may economically represent a return of a portion of your
investment.
If
you are neither a resident nor a citizen of the United States or if you are a
foreign entity, distributions (other than Capital Gain Dividends) paid to you by
a Fund will generally be subject to a U.S. withholding tax at the rate of 30%,
unless a lower treaty rate applies. Gains from the sale or other disposition of
Shares by non-U.S. shareholders generally are not subject to U.S. taxation,
unless you are a nonresident alien individual who is physically present in the
U.S. for 183 days or more per year. A Fund may, under certain circumstances,
report all or a portion of a dividend as an “interest-related dividend” or a
“short-term capital gain dividend,” which would generally be exempt from this
30% U.S. withholding tax, provided certain other requirements are met. Different
tax consequences may result if you are a foreign shareholder engaged in a trade
or business within the United States or if a tax treaty applies.
Under
legislation generally known as “FATCA” (the Foreign Account Tax Compliance Act),
the Fund is 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.
Each
Fund (or a financial intermediary, such as a broker, through which a shareholder
owns Shares) generally is required to withhold and remit to the U.S. Treasury a
percentage 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 a Fund are acquired, including through
reinvestment of dividends, within a 61-day period beginning 30 days before and
ending 30 days after the disposition of Shares. The ability to deduct capital
losses may be limited.
The
cost basis of Shares of a Fund acquired by purchase will generally be based on
the amount paid for the Shares and then may be subsequently adjusted for other
applicable transactions as required by the 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 its
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
gain or loss realized upon redemption of Creation Units is treated as capital
gain or loss or ordinary gain or loss depending on the circumstances. 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.
A
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. A Fund may sell
portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause a Fund to recognize investment income and/or capital
gains or losses that it might not have recognized if it had completely satisfied
the
redemption
in-kind. As a result, a Fund may be less tax efficient if it includes such a
cash payment in the proceeds paid upon the redemption of Creation
Units.
Net
Investment Income Tax
U.S.
individuals with income exceeding specified thresholds are subject to a 3.8% tax
on all or a portion of their “net investment income,” which includes interest,
dividends, and certain capital gains (generally including capital gains
distributions and capital gains realized on the sale of Shares). This 3.8% tax
also applies to all or a portion of the undistributed net investment income of
certain shareholders that are estates and trusts.
Taxation
of Fund Investments
If
positions held by a Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury Regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment and would not be eligible for the
dividends-dividends received deduction for corporate shareholders. In addition,
generally, straddles are subject to certain rules that may affect the amount,
character and timing of a Fund’s gains and losses with respect to straddle
positions by requiring, among other things, that: (1) any loss realized on
disposition of one position of a straddle may not be recognized to the extent
that the Fund has unrealized gains with respect to the other position in such
straddle; (2) the Fund’s holding period in straddle positions be suspended while
the straddle exists (possibly resulting in a gain being treated as short-term
capital gain rather than long-term capital gain); (3) the losses recognized with
respect to certain straddle positions that are part of a mixed straddle and that
are not subject to Code Section 1256 be treated as 60% long-term and 40%
short-term capital loss; (4) losses recognized with respect to certain straddle
positions that would otherwise constitute short-term capital losses be treated
as long-term capital losses; and (5) the deduction of interest and carrying
charges attributable to certain straddle positions may be deferred.
Foreign
Investments by a Fund
Interest
and other income received by a Fund with respect to foreign securities may give
rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. If as of the close of a taxable year more than 50% of the
value of a Fund’s assets consists of certain foreign stock or securities, each
such Fund will be eligible to elect to “pass through” to investors the amount of
foreign income and similar taxes (including withholding taxes) paid by such Fund
during that taxable year. This means that investors would be considered to have
received as additional income their respective shares of such foreign taxes, but
may be entitled to either a corresponding tax deduction in calculating taxable
income, or, subject to certain limitations, a credit in calculating federal
income tax. If a Fund does not so elect, each such Fund will be entitled to
claim a deduction for certain foreign taxes incurred by such Fund. A Fund (or
your broker) will notify you if it makes such an election and provide you with
the information necessary to reflect foreign taxes paid on your income tax
return.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in each Fund. It is not a substitute for
personal tax advice. You also may be subject to state and local tax on a Fund’s
distributions and sales of Shares. Consult your personal tax advisor about the
potential tax consequences of an investment in Shares
under
all applicable tax laws. For more information, please see the section entitled
“Federal Income Taxes” in the SAI.
DISTRIBUTION
PLAN
The
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, each Fund is authorized
to pay an amount up to 0.25% of its average daily net assets each year for
certain distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Funds, and there are no plans to
impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because the fees are paid out of a Fund’s assets, over time these fees
will increase the cost of your investment and may cost you more than certain
other types of sales charges.
PREMIUM/DISCOUNT
INFORMATION
Information
regarding how often each Fund’s Shares traded on the Exchange at a price above
(i.e.,
at a premium) or below (i.e.,
at a discount) the NAV per share is available on the Funds’ website at
www.changebridgefunds.com.
ADDITIONAL
NOTICES
Shares
are not sponsored, endorsed, or promoted by the Exchange. The Exchange is not
responsible for, nor has it participated in the determination of, the timing,
prices, or quantities of Shares to be issued, nor in the determination or
calculation of the equation by which Shares are redeemable. The Exchange has no
obligation or liability to owners of Shares in connection with the
administration, marketing, or trading of 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 or any member of the public regarding the advisability of
investing in securities generally or in the Funds particularly.
FINANCIAL
HIGHLIGHTS
The
financial highlights table is intended to help you understand each Fund’s
financial performance since the Fund commenced operations. Certain information
reflects financial results for a single Fund share. The total returns in each
Fund’s table represent the rate that an investor would have earned or lost on an
investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Cohen & Company, Ltd.,
the Funds’ independent registered public accounting firm, whose report, along
with the Funds’ financial statements, is included in the Funds’ annual report,
which is available upon request.
CHANGEBRIDGE
ETFs
Financial
Highlights
For
a Share Outstanding Throughout the Period
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Changebridge
Capital Long/Short Equity ETF |
|
Changebridge
Capital Sustainable Equity ETF |
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Period
Ended
October
31,
2021(1) |
|
Period
Ended
October
31
2021(1) |
|
Net
Asset Value, Beginning of Period |
$ |
20.00 |
|
|
$ |
20.00 |
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Income
(Loss) from investment operations: |
|
|
|
|
Net
investment income (loss)(2) |
(0.39) |
|
|
(0.07) |
|
|
Net
realized and unrealized gain (loss) |
6.60 |
|
|
9.61 |
|
|
Total
from investment operations |
6.21 |
|
|
9.54 |
|
|
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|
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|
|
Net
Asset Value, End of Period |
$ |
26.21 |
|
|
$ |
29.54 |
|
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|
Total
return, at NAV(3) |
31.06 |
% |
(4) |
47.72 |
% |
(4) |
Total
return, at Market(3) |
31.04 |
% |
(4) |
47.71 |
% |
(4) |
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Supplemental
Data and Ratios: |
|
|
|
|
Net
assets, end of period (000’s) |
$ |
7,863 |
|
|
$ |
10,045 |
|
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|
Ratio
of expenses to average net assets, including dividends and interest
expense on short positions |
2.14 |
% |
(5) |
0.85 |
% |
(5) |
Ratio
of expenses to average net assets, excluding dividends and interest
expense on short positions |
1.70 |
% |
(5) |
0.85 |
% |
(5) |
Ratio
of net investment income (loss) to average net assets, including dividends
and interest expense on short positions |
(1.58 |
%) |
(5) |
(0.25 |
%) |
(5) |
Ratio
of net investment income (loss) to average net assets, excluding dividends
and interest expense on short positions |
(1.14 |
%) |
(5) |
(0.25 |
%) |
(5) |
Portfolio
turnover rate(6) |
160 |
% |
(4) |
105 |
% |
(4) |
(1)The
Fund commenced operations on November 12, 2020.
(2)Per
share net investment income (loss) was calculated using average shares
outstanding.
(3)Total
return in the table represents the rate that the investor would have earned or
lost on an investment in the Fund, assuming reinvestment of
dividends.
(4)Not
annualized for periods less than one year.
(5)Annualized
for periods less than one year.
(6)Excludes
in-kind transactions associated with creations and redemptions of the
Fund.
CHANGEBRIDGE
CAPITAL LONG/SHORT EQUITY ETF
CHANGEBRIDGE
CAPITAL SUSTAINABLE EQUITY ETF
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Adviser |
Changebridge
Capital, LLC
180
Canal Street, Suite 600
Boston,
Massachusetts 02114 |
Transfer
Agent and Administrator |
U.S.
Bancorp Fund Services, LLC
d/b/a
U.S. Bank Global Fund Services
615
East Michigan Street
Milwaukee,
Wisconsin 53202
|
Custodian |
U.S.
Bank National Association
1555
North Rivercenter Drive, Suite 302
Milwaukee,
Wisconsin 53212 |
Distributor |
Foreside
Fund Services, LLC
Three
Canal Plaza, Suite 100,
Portland,
Maine 04101
|
Independent
Registered Public Accounting Firm |
Cohen
& Company, Ltd.
1350
Euclid Avenue, Suite 800
Cleveland,
Ohio 44115 |
Legal
Counsel |
Morgan,
Lewis & Bockius LLP
1111
Pennsylvania Avenue, NW
Washington,
DC 20004-2541 |
Investors
may find more information about the Funds in the following
documents:
Statement
of Additional Information: The
Funds’ SAI provides additional details about the investments of each Fund and
certain other additional information. The SAI is on file with the SEC and is
herein incorporated by reference into this Prospectus. It is legally considered
a part of this Prospectus.
Annual/Semi-Annual
Reports: Additional
information about a Fund’s investments is available in the Fund’s annual and
semi-annual reports to shareholders. In the annual report, you will find a
discussion of the market conditions and investment strategies that significantly
affected a Fund’s performance after the first fiscal year the Fund is in
operation.
You
can obtain free copies of these documents, request other information or make
general inquiries about a Fund by contacting the Funds at c/o U.S. Bank Global
Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or by calling
1-800-617-0004.
Shareholder
reports and other information about a Fund are also available:
•Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov;
•Free
of charge from the Funds’ Internet web site at www.changebridgefunds.com;
or
(SEC
Investment Company Act File No. 811-23226)