ck0001467831-20220930
BlueStar Israel Technology
ETF
(ITEQ®)
Listed
on NYSE Arca, Inc.
PROSPECTUS
January 31,
2023
Fund
shares are not individually redeemable by the Fund
but
trade on the NYSE Arca, Inc. in individual share lots.
THE
SEC HAS NOT APPROVED OR DISAPPROVED THESE SECURITIES OR PASSED UPON THE ADEQUACY
OR ACCURACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
About
This Prospectus
This
prospectus has been arranged into different sections so that you can easily
review this important information. For detailed information about the Fund,
please see:
BlueStar
Israel Technology ETF—Fund Summary
Investment Objective
The BlueStar Israel Technology
ETF (the “Fund”) seeks to provide investment results that, before fees and
expenses, correspond generally to the total return performance of the BlueStar
Israel Global Technology Index™ (“BIGITech®™” or the
“Index”).
Fees and Expenses
The
following table describes the fees and expenses 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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Annual Fund Operating Expenses
(expenses that you pay each year as a percentage of the value of your
investment) |
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Management
Fee |
0.75 |
% |
Distribution
and Service (12b-1) Fees |
None |
Other
Expenses |
0.00 |
% |
Total
Annual Fund Operating Expenses |
0.75 |
% |
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. This
Example does not take into account the 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 cost would be:
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1
Year |
3
Years |
5
Years |
10
Years |
$77 |
$240 |
$417 |
$930 |
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 the Fund shares are held in a taxable
account. These costs, which are not reflected in annual fund operating expenses
or in the example, affect the Fund’s performance. For the fiscal year ended
September 30, 2022, the Fund’s portfolio turnover rate was 25% of the average value of its
portfolio.
Principal Investment
Strategies
The
Fund uses a “passive” or indexing approach to try to achieve the Fund’s
investment objective. Unlike many investment companies, the Fund does not try to
“beat” the Index and does not seek temporary defensive positions when markets
decline or appear overvalued.
The
BlueStar Israel Global Technology Index™, or BIGITech®, tracks the performance
of exchange-listed Israeli technology operating companies. Such companies may be
engaged in a wide spectrum of technology related sectors, including information
technology, biotechnology, clean energy and water technology and defense
technology.
The
universe of companies deemed “Israeli technology companies” is determined by
MarketVector Indexes GmbH (“MarketVector” or the “Index Provider”) (formerly
known as MV Index Solutions GmbH or “MVIS®”) based on a range of quantitative
and qualitative factors including a company’s domicile; country of formation or
founding; primary management, location of research and development facilities;
tax status; and location of company headquarters. To be included in the Index,
Israeli technology companies must have their equity securities or depositary
receipts, such as American Depositary Receipts (“ADRs”) or Global Depositary
Receipts (“GDRs”) representing such equity securities, listed on a securities
exchange.
Companies
meeting the above criteria are screened for investibility (e.g.,
their equity securities must not be listed on an exchange in a country which
employs restrictions on foreign capital investment deemed to be significant), a
minimum market capitalization and liquidity (i.e.,
average trading volume). The Index is reconstituted semi-annually at the close
of business on the third Thursday of June and December. At the time of each
reconstitution, the companies in the Index are weighted based on their
float-adjusted market capitalization, with a maximum component weight of 7.5%
subject to certain additional limitations designed to prevent inordinately heavy
weightings of any one company. For example, if any individual Index component
exceeds 15% of the Index weight at any time, the Index will be rebalanced to
reduce such component to a weighting of no more than 10%.
The
Index was developed by BlueStar Indexes® (“BlueStar”), and is now administered
and maintained by MarketVector. The Index is calculated by S&P Dow Jones
Indices (the “Index Calculation Agent”). S&P Dow Jones Indices is
independent of BlueStar, MarketVector, the Fund, its adviser, and
distributor.
The
Index is not limited to a minimum or maximum number of constituents; rather, it
targets a coverage of 99% of the investable universe, by float-adjusted market
capitalization of Israeli technology companies. The Index may include companies
of any market capitalization, including small capitalization companies.
As
of January 10, 2023, the Index consisted of 60 constituents.
The
Fund uses a replication strategy. A replication strategy is an indexing strategy
that involves investing in the securities of the Index in approximately the same
proportions as in the Index. However, the Fund may utilize a representative
sampling strategy with respect to the Index when a replication strategy might be
detrimental to shareholders, such as when there are practical difficulties or
substantial costs involved in compiling a portfolio of equity securities to
follow the Index, in instances in which a security in the Index becomes
temporarily illiquid, unavailable or less liquid, or as a result of legal
restrictions or limitations (such as tax diversification requirements) that
apply to the Fund but not the Index.
The
Fund will invest at least 80% of its total assets in the component securities of
the Index and in depositary receipts representing such securities. As a result,
under normal circumstances, the Fund will invest at least 80% of its total
assets in Israeli technology companies (the “80% Policy”).
The
Fund may lend its portfolio securities to brokers, dealers, and other financial
organizations. These loans, if and when made, may not exceed 33 1/3% of the
total asset value of the Fund (including the loan collateral). By lending its
securities, the Fund may increase its income by receiving payments from the
borrower.
The
Fund rebalances its portfolio in accordance with its Index, and, therefore, any
changes to the Index’s rebalance schedule will result in corresponding changes
to the Fund’s rebalance schedule.
Correlation:
Correlation
is the extent to which the values of different types of investments move in
tandem with one another in response to changing economic and market conditions.
An index is a theoretical financial calculation, while the Fund is an actual
investment portfolio. The performance of the Fund and the Index may vary
somewhat due to transaction costs, asset valuations, foreign currency
valuations, market impact, corporate actions (such as mergers and spin-offs),
legal restrictions or limitations, illiquid or unavailable securities, and
timing variances.
The
Fund’s investment adviser expects that, over time, the correlation between the
Fund’s performance and that of the Index, before fees and expenses, will exceed
95%. A correlation percentage of 100% would indicate perfect correlation. If the
Fund uses a replication strategy, it can be expected to have greater correlation
to the Index than if it uses a representative sampling strategy.
Industry
Concentration: The
Fund will concentrate its investments (i.e., hold 25% or more of its net assets) in a
particular industry or group of related industries to approximately the same
extent that the Index is concentrated. As of January 10, 2023, the Index was
concentrated in the group of software and computer
companies.
Principal Risks
As with all funds, a shareholder is subject to the risk
that his or her investment could lose money. The principal risks
affecting shareholders’ investments in the Fund are set forth below.
An investment in the Fund is not a
bank deposit and is not insured or guaranteed by the FDIC or any government
agency.
Israeli
Companies Risk: Investment
in securities of Israeli companies involves risks that may negatively affect the
value of your investment in the Fund. Among other things, Israel’s economy
depends on imports of certain key items, such as crude oil, coal, grains, raw
materials and military equipment. Israel’s relations with the Palestinian
Authority and certain neighboring countries such as Lebanon, Syria and Iran,
among others, have at times been strained due to territorial disputes,
historical animosities or security concerns, which may cause uncertainty in the
Israeli markets and adversely affect the overall economy. In addition,
U.S.-designated terrorist groups such as Hezbollah and Hamas operate in close
proximity to Israel’s borders, and frequently threaten Israel with attack.
Furthermore, Israel’s economy is heavily dependent on trade relationships with
key counterparties around the world, specifically the United States and European
Union countries. Any reduction in these trade flows may have an adverse impact
on the Fund’s investments.
Israel
has experienced a history of hostile relations with several countries in the
Middle East region. Israel and its citizens have also been the target of
periodic acts of terrorism that have the potential to disrupt economic activity
in the country, and certain terrorist groups are committed to violence against
Israel. Current hostilities and the potential for future hostilities may
diminish the value of companies whose principal operations or headquarters are
located in Israel. Actual hostilities or the threat of future hostilities may
cause significant volatility in the share prices of companies based in or having
significant operations in Israel.
Technology
Companies Risk:
Companies in the technology field, including companies in the computers,
telecommunications and electronics industries, face intense competition, which
may have an adverse effect on profit margins. Technology companies may have
limited product lines, markets, financial resources or personnel. The products
of technology companies may face obsolescence due to rapid technological
developments and frequent new product introduction, and such companies may face
unpredictable changes in growth rates, competition for the services of qualified
personnel and competition from foreign competitors with lower production
costs.
Companies in the technology sector are heavily dependent on patent and
intellectual property rights. The loss or impairment of these rights may
adversely affect the profitability of these companies.
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.
Smaller
Companies Risk:
The Fund’s Index may be composed primarily of, or have significant exposure to,
securities of smaller companies. Smaller companies may be more vulnerable to
adverse business or economic events than larger, more established companies, and
may underperform other segments of the market or the equity market as a whole.
The securities of smaller companies also are often traded in the
over-the-counter market and tend to be bought and sold less frequently and at
significantly lower trading volumes than the securities of larger companies. As
a result, it may be more difficult for the Fund to buy or sell a significant
amount of the securities of a smaller company without an adverse impact on the
price of the company’s securities, or the Fund may have to sell such securities
in smaller quantities over a longer period of time, which may increase the
Fund’s tracking error.
Foreign
Investment Risk:
Returns on investments in foreign stocks could be more volatile than, or trail
the returns on, investments in U.S. stocks. Since foreign exchanges may be open
on days when the Fund does not price its Shares, the value of the securities in
the Fund’s portfolio may change on days when shareholders will not be able to
purchase or sell the Shares. Conversely, Shares may trade on days when foreign
exchanges are closed. Because securities held by the Fund trade on foreign
exchanges that are closed when the Fund’s primary listing exchange is open, the
Fund is likely to experience premiums and discounts greater than those of
domestic ETFs. Each of these factors can make investments in the Fund more
volatile and potentially less liquid than other types of
investments.
Currency
Risk:
Indirect and direct exposure to foreign currencies subjects the Fund to the risk
that currencies will decline in value relative to the U.S. dollar. Currency
rates in foreign countries may fluctuate significantly over short periods of
time for a number of reasons, including changes in interest rates and the
imposition of currency controls or other political developments in the U.S. or
abroad.
Depositary
Receipts Risk:
The
Fund may invest in depositary receipts. Investment in ADRs and GDRs may be less
liquid than the underlying shares in their primary trading market and GDRs, many
of which are issued by companies in emerging markets, may be more volatile and
less liquid than depositary receipts issued by companies in more developed
markets.
Foreign
Market and Trading Risk:
The trading markets for many foreign securities are not as active as U.S.
markets and may have less governmental regulation and oversight. Foreign markets
also may have clearance and settlement procedures that make it difficult for the
Fund to buy and sell securities. These factors could result in a loss to the
Fund by causing the Fund to be unable to dispose of an investment or to miss an
attractive investment opportunity, or by causing Fund assets to be uninvested
for some period of time.
Foreign
Securities Risk:
The Fund invests a significant portion of its assets directly in securities of
issuers based outside of the U.S., or in depositary receipts that represent such
securities. Investments in securities of non-U.S. issuers involve certain risks
that may not be present with investments in securities of U.S. issuers, such as
risk of loss due to foreign currency fluctuations or to political or economic
instability, as well as varying regulatory requirements applicable to
investments in non-U.S. issuers. There may be less information publicly
available about a non-U.S. issuer than a U.S. issuer. Non-U.S. issuers may also
be subject to different regulatory, accounting, auditing, financial reporting
and investor protection standards than U.S. issuers.
Political
and Economic Risk:
The Fund is subject to foreign political and economic risk not associated with
U.S. investments, meaning that political events, social and economic events and
natural disasters occurring in a country where the Fund invests could cause the
Fund’s investments in that country to experience gains or losses. The Fund also
could be unable to enforce its ownership rights or pursue legal remedies in
countries where it invests.
Reliance
on Trading Partners Risk:
The Fund invests in some economies that are heavily dependent upon trading with
key partners. Any reduction in this trading may cause an adverse impact on the
economy in which the Fund invests.
The
remaining risks are presented in alphabetical order. Each risk summarized below
is considered a “principal risk” of investing in the Fund, regardless of the
order in which it appears.
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, or sectors in which the Fund invests such as
political, market and economic developments, as well as events that impact
specific issuers. Additionally, natural or environmental disasters, widespread
disease or other public health issues, war, acts of terrorism or other events
could result in increased premiums or discounts to the Fund’s NAV.
ETF
Risks:
Absence
of an Active Market: Although
the Fund’s shares are approved for listing on the NYSE Arca, Inc. (the
“Exchange”), there can be no assurance that an active trading market will
develop and be maintained for Fund shares. There can be no assurance that
the
Fund will grow to or maintain an economically viable size, in which case the
Fund may experience greater tracking error to its Index than it otherwise would
at higher asset levels or the Fund may ultimately liquidate.
Authorized
Participants (“APs”), Market Makers, and Liquidity Providers
Concentration: The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares may trade at a material discount to net asset value (“NAV”) and
possibly face delisting: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
Costs
of Buying or Selling Shares: Investors
buying or selling Fund 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.
Fluctuation
of NAV: The
NAV of Fund shares will generally fluctuate with changes in the market value of
the Fund’s securities holdings. The market prices of shares will generally
fluctuate in accordance with changes in the Fund’s NAV and supply and demand of
shares on the Exchange. It cannot be predicted whether Fund shares will trade
below, at or above their NAV. During periods of unusual volatility or market
disruptions, market prices of Fund shares may deviate significantly from the
market value of the Fund’s securities holdings or the NAV of Fund shares. As a
result, investors in the Fund may pay significantly more or receive
significantly less for Fund shares than the value of the Fund’s underlying
securities or the NAV of Fund shares.
Market
Trading:
An investment in the Fund faces numerous market trading risks, including the
potential lack of an active market for Fund shares, losses from trading in
secondary markets, periods of high volatility and disruption in the
creation/redemption process of the Fund. Any of these factors, among others, may
lead to the Fund’s shares trading at a premium or discount to NAV.
Trading
Issues:
Although
Fund shares are listed for trading on the Exchange, there can be no assurance
that an active trading market for such shares will develop or be maintained.
Trading in Fund shares may be halted due to market conditions or for reasons
that, in the view of the Exchange, make trading in shares inadvisable. There can
be no assurance that the requirements of the Exchange necessary to maintain the
listing of any Fund will continue to be met or will remain unchanged or that the
shares will trade with any volume, or at all. Further, secondary markets may be
subject to erratic trading activity, wide bid/ask spreads and extended trade
settlement periods in times of market stress because market makers and APs may
step away from making a market in Fund shares and in executing creation and
redemption orders, which could cause a material deviation in the Fund’s market
price from its NAV.
Natural
Disaster/Epidemic Risk:
Natural or environmental disasters, such as earthquakes, fires, floods,
hurricanes, tsunamis and other severe weather-related phenomena generally, and
widespread disease, including pandemics and epidemics, have been and may be
highly disruptive to economies and markets, adversely impacting individual
companies, sectors, industries, markets, currencies, interest and inflation
rates, credit ratings, investor sentiment, and other factors affecting the value
of the Fund’s investments. Given the increasing interdependence among global
economies and markets, conditions in one country, market, or region are
increasingly likely to adversely affect markets, issuers, and/or foreign
exchange rates in other countries, including the U.S. Any such events could have
a significant adverse impact on the value of the Fund’s investments.
Passive
Investment Risk:
The Fund is not actively managed and therefore would not sell an equity security
due to current or projected underperformance of a security, industry or sector,
unless that security is removed from the Index. Unlike with an actively managed
fund, the Fund’s investment adviser does not use techniques or defensive
strategies designed to lessen the effects of market volatility or to reduce the
impact of periods of market decline. This means that, based on market and
economic conditions, the Fund’s performance could be lower than other types of
funds that may actively shift their portfolio assets to take advantage of market
opportunities or to lessen the impact of a market decline.
Securities
Lending Risk:
The Fund may engage in securities lending. The Fund may lose money if the
borrower of the loaned securities delays returning in a timely manner or fails
to return the loaned securities. Securities lending involves the risk that the
Fund could lose money in the event of a decline in the value of collateral
provided for loaned securities. In addition, the Fund bears the risk of loss in
connection with its investment of the cash collateral it receives from a
borrower. To the extent that the value or return of the Fund’s investment of the
cash collateral declines below the amount owed to the borrower, the Fund may
incur losses that exceed the amount it earned on lending the security.
Tax
Risk:
To qualify for the favorable tax treatment generally available to regulated
investment companies (“RICs”), the Fund must satisfy certain diversification
requirements under the Internal Revenue Code of 1986, as amended (the “Code”).
In particular, the asset diversification requirements will be satisfied if (i)
at least 50% of the value of the Fund’s total assets are represented by cash and
cash items, U.S. government securities, the securities of other RICs and “other
securities,” provided that such “other securities” of any one issuer do not
represent more than 5% of the Fund’s total assets or greater than 10% of the
outstanding voting securities of such issuer, and (ii) no more than 25% of the
value of the Fund’s assets are invested in securities of any one issuer (other
than U.S. government securities and securities of other RICs), the securities
(other than securities of other RICs) of any two or more issuers that are
controlled by the Fund and are engaged in the same or similar or related trades
or business, or the securities of one or more “qualified
publicly
traded partnerships.” When the Index is concentrated in a relatively small
number of securities, it may not be possible for the Fund to fully implement a
replication strategy or a representative sampling strategy while satisfying
these diversification requirements. The Fund’s efforts to satisfy the
diversification requirements may cause the Fund’s return to deviate from that of
the Index, and the Fund’s efforts to replicate the Index may cause it
inadvertently to fail to satisfy the diversification requirements. If the Fund
were to fail to qualify as a RIC, it would be subject to U.S. federal income tax
at corporate rates on its income, and distributions to its shareholders would
not be deductible by the Fund in computing its taxable income. In addition,
distributions to a Fund’s shareholders would generally be taxed as ordinary
dividends.
Under
certain circumstances, the Fund may be able to cure a failure to qualify as a
RIC, but in order to do so the Fund may incur significant Fund-level taxes and
may be forced to dispose of certain assets. Relief is provided for certain de
minimis failures of the diversification requirements where the Fund corrects the
failure within a specified period. If the Fund were to fail to qualify as a RIC
in any taxable year, the Fund would be required to pay out its earnings and
profits accumulated in that year in order to qualify for treatment as a RIC in a
subsequent year. If the Fund failed to qualify as a RIC for a period greater
than two taxable years, the Fund would generally be required to pay U.S. federal
income tax at corporate rates on any net built-in gains with respect to certain
of its assets upon a disposition of such assets within five years of qualifying
as a RIC in a subsequent year.
Tracking
Error Risk:
The Fund’s return may not match or achieve a high degree of correlation with the
return of the Index. To the extent the Fund utilizes a sampling approach, it may
experience tracking error to a greater extent than if the Fund sought to
replicate the Index. In addition, in order to minimize the market impact of an
Index rebalance, the Fund may begin trading to effect the rebalance in advance
of the effective date of the rebalance and continue trading after the effective
date of the rebalance, which may contribute to tracking error.
Valuation
Risk: The sales price that the Fund could
receive for a security may differ from the Fund’s valuation of the security and
may differ from the value used by the Index, particularly for securities that
trade in low volume or volatile markets or that are valued using a fair value
methodology. In addition, the value of the securities in the Fund’s portfolio
may change on days when shareholders will not be able to purchase or sell the
Fund’s shares.
Performance
Information
The following
information provides some indication of the risks of investing in the
Fund. The bar chart shows the annual return for the Fund. The
table shows how the Fund’s average annual returns for one year, five years, and
since inception compare with those of the Index and a broad measure of market
performance. The Fund’s past performance,
before and after taxes, is not necessarily an indication of how the Fund will
perform in the future. Updated performance information is
available on the Fund’s website at www.iteqetf.com.
Calendar Year Total Returns as of December
31
During the period of time shown
in the bar chart, the Fund’s highest return for a calendar
quarter was 30.46% (quarter ended June 30, 2020) and the
Fund’s lowest return for a calendar
quarter was -19.13% (quarter ended June 30,
2022).
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Average
Annual Total Returns
(for the periods ended
December 31, 2022) |
1
Year |
5
Years |
Since
Inception
11/2/2015 |
BlueStar
Israel Technology ETF |
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Return Before
Taxes |
-30.34% |
7.08% |
8.52% |
Return After Taxes on
Distributions |
-30.34% |
7.04% |
8.46% |
Return After Taxes on Distributions and
Sale of Fund Shares |
-17.96% |
5.57% |
6.84% |
BlueStar
Israel Global Technology Index™
(reflects no deduction for
fees, expenses or taxes) |
-30.46% |
7.75% |
9.23% |
S&P
500 Index (reflects
no deduction for fees, expenses or taxes) |
-18.11% |
9.42% |
10.82% |
After-tax returns are
calculated using the highest historical individual U.S. federal marginal income
tax rates and do not reflect the impact of state and local
taxes. Actual after-tax returns
depend on your tax situation and may differ from those shown and are not
relevant if you hold your shares through tax-advantaged arrangements, such as
401(k) plans or individual retirement accounts. In some cases, the return
after taxes may exceed the return before taxes due to an assumed tax benefit
from any losses on a sale of Fund shares at the end of the measurement
period.
Investment
Adviser
ETF
Managers Group LLC (the “Adviser”) serves as the investment adviser to the Fund.
Portfolio
Managers
Samuel
R. Masucci, III, Chief Executive Officer of the Adviser, has been the Fund’s
portfolio manager since January 2018. Frank Vallario, Chief Investment Officer
of the Adviser has been the Fund's portfolio manager since September 2019.
Purchase
and Sale of Fund Shares
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through brokers at market prices, rather than NAV. Because
Shares trade at market prices rather than NAV, Shares may trade at a price
greater than NAV (premium) or less than NAV (discount).
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.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its NAV, market price, premiums and discounts, and bid-ask spreads is
available on the Fund’s website at www.iteqetf.com.
Except
when aggregated in Creation Units, the Fund’s shares are not redeemable
securities.
Tax
Information
The
distributions made by the Fund generally are taxable to the Fund’s shareholders,
and will be taxed as ordinary income, qualified dividend income, or capital
gains (or a combination thereof), unless your investment is in an IRA or other
tax-advantaged account. However, subsequent withdrawals from such IRA or other
tax-advantaged account may be subject to U.S. federal income tax. You should
consult your tax advisor about your specific tax situation.
Financial
Intermediary Compensation
If
you purchase shares of the Fund 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 the Fund’s shares. These payments may create a
conflict of interest by influencing the Intermediary and your salesperson to
recommend the Fund over another investment. Any such arrangements do not result
in increased Fund expenses. Ask your salesperson or visit the Intermediary’s
website for more information.
Additional
Information about the Fund’s Investment Objective and Strategies
The
Fund, using an “indexing” investment approach, seeks to provide investment
results that, before fees and expenses, correspond generally to the total return
performance of the Index. A number of factors may affect the Fund’s ability to
achieve a high correlation with the Index, including the degree to which the
Fund utilizes a sampling methodology. There can be no guarantee that the Fund
will achieve a high degree of correlation. The Adviser may sell securities that
are represented in the Fund’s Index or purchase securities not yet represented
in the Index, in anticipation of their removal from or addition to the Index.
There may also be instances in which the
Adviser
may choose to overweight securities in the Fund’s Index, thus causing the Fund
to purchase or sell securities not in the Index that the Adviser believes are
appropriate to substitute for certain securities in the Index. The Fund will not
take defensive positions.
The
Fund will invest at least 80% of its total assets in the component securities of
the Index and in depositary receipts representing such securities. The Fund may
invest up to 20% of its total assets in securities that are not in the Index to
the extent that the Adviser believes such investments should help the Fund’s
overall portfolio track the Index.
The
Index is part of the MarketVector Indexes GmbH family, a selection of focused,
investable and diversified benchmark indices that includes the Bluestar Israel
Global Index® family of Israel-focused equity and fixed income indices.
MarketVector Indexes cover a range of asset classes, including equity, fixed
income markets and digital assets. As of December 31, 2022, more than 180
indices with approximately $25 billion in assets under management tracking these
benchmarks are currently invested in financial products based on MarketVector
Indexes family, including the BlueStar® and MVIS® Indices.
The
Index includes technology companies with significant ties to Israel, although
the specific ties qualifying an individual company for inclusion in the Index
will depend on factors such as the company’s specific industry or business
lines, the company’s size, and its sources of capital. For example, the Index
may include multinational companies that were founded in Israel and maintain a
significant portion of their personnel, operations, or assets in Israel, but
which have a majority of their personnel, operations, or assets spread across
other countries. In other words, the success of an Israeli company at raising
capital, attracting customers, and generating profits outside Israel will not
automatically exclude the company from being included in the Index. Certain
candidates for inclusion in the Index are also reviewed by the MVIS-BlueStar
Index Advisory Committee to ensure that a company’s satisfaction of the Index
criteria is not outweighed by other aspects of the company that the Index
Advisory Committee believes might disqualify the company from being considered
an “Israeli technology company” and included in the Index.
The
Fund, as part of its securities lending program, may, but does not currently
intend to, invest collateral in an affiliated series of ETF Managers Trust,
ETFMG Sit Ultra Short ETF (the “Ultra Short ETF”). ETF Managers Group LLC serves
as the investment adviser to the Ultra Short ETF. Other investment companies,
including Ultra Short ETF, in which a Fund may invest cash collateral can be
expected to incur fees and expenses for operations, such as investment advisory
and administration fees, which would be in addition to those incurred by the
Fund, and which, with respect to Ultra Short ETF, will be received in full or in
part by the Adviser.
The
Index’s component securities are selected using the following criteria. An
issuer qualifies as an “Israeli company” when it meets one criteria from Group A
and one criteria from Group B; or meets one criteria from Group A and two
criteria from Group C, as follows:
|
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|
|
|
|
|
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Group
A
• At
least 20% of the company’s employees are located in Israel
• At
least 20% of the company’s long-lived assets are located in Israel
• The
company has a major research and development (“R&D”) center in
Israel |
Group
B
• The
company’s securities are listed on the Tel Aviv Stock
Exchange
• The
company’s tax status is in Israel
• The
company is incorporated in Israel
• The
company maintains a headquarters in Israel or has a dual-headquarters in
Israel |
Group
C
• The
company has a majority of its Board of Directors or at least two Executive
Officers domiciled in Israel
• The
company’s business results would be materially altered without its Israeli
assets. These assets may include but are not limited to: intellectual and
human capital, or licenses to Israeli technology that materially affect
revenue or R&D
• The
company is a subsidiary or non-Israel operating branch of a company that
would otherwise be considered
Israeli |
An
issuer qualifies as a “technology company” when it meets one of the following
criteria:
•The
company is defined as an “Information Technology” company by Standard &
Poor’s Global Industry Classification Standard (“GICS”)
•The
company operates in one of the following Industries or Sub-Industries as defined
by GICS:
◦Health
Care Equipment and Supplies
◦Biotechnology
◦Life
Sciences Tools & Services
◦Aerospace
& Defense
◦Clean
Energy and Clean Water Technology
◦Agriculture
Technology
•The
company is a holding company of companies that operate predominantly as
technology companies
The
Fund’s investment objective has been adopted as a non-fundamental investment
policy and may be changed without shareholder approval upon 60 days’ written
notice to shareholders. Additionally, in accordance with rules under the
Investment Company Act of
1940,
as amended (the “1940 Act”), the 80% Policy has been adopted as a
non-fundamental investment policy and may be changed without shareholder
approval upon 60 days’ written notice to shareholders.
Additional
Risk Information
The
following section provides additional information regarding the principal risks
identified under “Principal Risks” in the Fund’s summary.
Israeli
Companies Risks: Investment
in securities of Israeli companies involves risks that may negatively affect the
value of your investment in the Fund, including risks that are specific to
Israel, such as regulatory, legal, political, security and economic risks. Among
other things, Israel’s economy depends on imports of certain key items, such as
crude oil, coal, grains, raw materials and military equipment. Reduction in
spending on Israeli products and services or changes in any of these other
economies may adversely impact the Fund. The government of Israel may change the
way in which Israeli companies are taxed, or may impose taxes on foreign
investment. Such actions could have a negative impact on the overall market for
Israeli securities and on the Fund. Furthermore, Israel’s economy is heavily
dependent on trade relationships with key counterparties around the world,
including the United States, China, Japan, Canada and European Union countries.
Any reduction in these trade flows may have an adverse impact on the Fund’s
investments.
Israel
has experienced a history of hostile relations with several countries in the
Middle East region. Israel’s relations with the Palestinian Authority and
certain neighboring countries such as Lebanon, Syria and Iran, among others,
have at times been strained due to territorial disputes, historical animosities
or security concerns, which may cause uncertainty in the Israeli markets and
adversely affect the overall economy. Israel and its citizens have also been the
target of periodic acts of terrorism and state-sponsored aggression that have
the potential to disrupt economic activity in the country, and certain terrorist
groups and nation-states are committed to violence against Israel. Current
hostilities and the potential for future hostilities may diminish the value of
companies whose principal operations or headquarters are located in Israel.
Actual hostilities or the threat of future hostilities may cause significant
volatility in the share prices of companies based in or having significant
operations in Israel.
Due
to potential political or civil unrest in Israel, the Israeli securities market
may be closed for extended periods of time or trading on the Israeli securities
market may be suspended altogether. In addition, the Israeli government may
restrict or control to varying degrees the ability of foreign investors to
invest in securities of issuers located or operating in Israel. These
restrictions and/or controls may at times limit or prevent foreign investment in
securities of issuers located or operating in Israel and may inhibit the Fund’s
ability to track the Israel Index.
Technology
Companies Risk:
Companies in the technology field, including companies in the computers,
telecommunications and electronics industries, face intense competition, which
may have an adverse effect on profit margins. Technology companies may have
limited product lines, markets, financial resources or personnel. The products
of technology companies may face obsolescence due to rapid technological
developments and frequent new product introduction, and such companies may face
unpredictable changes in growth rates, competition for the services of qualified
personnel and competition from foreign competitors with lower production costs.
Companies in the technology sector are heavily dependent on patent and
intellectual property rights. The loss or impairment of these rights may
adversely affect the profitability of these companies.
Non-Diversification
Risk:
Because
the Fund is “non-diversified,” the Fund 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.
Smaller
Companies Risk:
The Fund’s Index may be composed primarily of, or have significant exposure to,
securities of smaller companies. As a result, the Fund may be subject to the
risk that securities of smaller companies represented in the Index may
underperform securities of larger companies or the equity market as a whole. In
addition, in comparison to securities of companies with larger capitalizations,
securities of smaller-capitalization companies may experience more price
volatility, greater spreads between their bid and ask prices, less frequent
trading, significantly lower trading volumes, and cyclical or static growth
prospects. As a result of the differences between the securities of smaller
companies and those of companies with larger capitalizations, it may be more
difficult for the Fund to buy or sell a significant amount of the securities of
a smaller company without an adverse impact on the price of the company’s
securities, or the Fund may have to sell such securities in smaller quantities
over a longer period of time, which may increase the Fund’s tracking error.
Smaller-capitalization companies often have limited product lines, markets or
financial resources, and may therefore be more vulnerable to adverse
developments than larger capitalization companies. These securities may or may
not pay dividends.
Foreign
Investment Risk:
Returns on investments in foreign stocks could be more volatile than, or trail
the returns on, investments in U.S. stocks. Since foreign exchanges may be open
on days when the Fund does not price its Shares, the value of the securities in
the Fund’s portfolio may change on days when shareholders will not be able to
purchase or sell the Shares. Conversely, Shares may trade on days when foreign
exchanges are closed. Because securities held by the Fund trade on foreign
exchanges that are closed when the Fund’s primary listing exchange is open, the
Fund is likely to experience premiums and discounts greater than those of
domestic ETFs. Each of these factors can make investments in the Fund more
volatile and potentially less liquid than other types of investments.
Currency
Risk:
Indirect and direct exposure to foreign currencies subject the Fund to the risk
that currencies will decline in value relative to the U.S. dollar. Currency
rates in foreign countries may fluctuate significantly over short periods of
time for a number of reasons, including changes in interest rates and the
imposition of currency controls or other political developments in the U.S. or
abroad. The Fund’s NAV is determined on the basis of U.S. dollars and,
therefore, the Fund may lose value if the local currency of a foreign market
depreciates against the U.S. dollar, even if the local currency value of the
Fund’s holdings goes up.
Depositary
Receipts Risk:
The
Fund may invest in depositary receipts. Depositary receipts include ADRs and
GDRs. ADRs are U.S. dollar-denominated receipts representing shares of
foreign-based corporations. ADRs are issued by U.S. banks or trust companies,
and entitle the holder to all dividends and capital gains that are paid out on
the underlying foreign shares. GDRs are depositary receipts which are similar to
ADRs, but are shares of foreign-based corporations generally issued by
international banks in one or more markets around the world. Investment in ADRs
and GDRs may be less liquid than the underlying shares in their primary trading
market and GDRs, many of which are issued by companies in emerging markets, may
be more volatile and less liquid than depositary receipts issued by companies in
more developed markets.
Depositary
receipts may be sponsored or unsponsored. Sponsored depositary receipts are
established jointly by a depositary and the underlying issuer, whereas
unsponsored depositary receipts may be established by a depositary without
participation by the underlying issuer. Holders of an unsponsored depositary
receipt generally bear all the costs associated with establishing the
unsponsored depositary receipt. In addition, the issuers of the securities
underlying unsponsored depositary receipts are not obligated to disclose
material information in the United States and, therefore, there may be less
information available regarding such issuers and there may not be a correlation
between such information and the market value of the depositary receipts.
Depositary
receipts may be unregistered and unlisted. The Fund’s investments also
may include ADRs and GDRs that are not purchased in the public markets and
are restricted securities that can be offered and sold only to “qualified
institutional buyers” under Rule 144A of the Securities Act of 1933, as
amended. The Adviser will determine the liquidity of such investments pursuant
to guidelines established by the Board. If a particular investment in such ADRs
or GDRs is deemed illiquid, that investment will be included within the Fund’s
limitation on investment in illiquid securities. Moreover, if adverse market
conditions were to develop during the period between the Fund’s decision to sell
these types of ADRs or GDRs and the point at which the Fund is permitted or able
to sell such security, the Fund might obtain a price less favorable than the
price that prevailed when it decided to sell.
Foreign
Market and Trading Risk:
The trading markets for many foreign securities are not as active as U.S.
markets and may have less governmental regulation and oversight. Foreign markets
also may have clearance and settlement procedures that make it difficult for the
Fund to buy and sell securities. These factors could result in a loss to the
Fund by causing the Fund to be unable to dispose of an investment or to miss an
attractive investment opportunity, or by causing Fund assets to be uninvested
for some period of time. Where all or a part of the Fund’s underlying securities
trade in a market that is closed when the Exchange is open, there may be changes
between the last quotation from its closed foreign market and the value of such
securities during the Fund’s domestic trading day. This could lead to
differences between the market price of the Fund’s shares and the value of the
Fund’s underlying securities.
Foreign
Securities Risk:
The Fund invests in foreign securities, including non-U.S. dollar-denominated
securities traded outside of the United States and U.S. dollar-denominated
securities of foreign issuers traded in the United States. Investment in foreign
securities may involve higher costs than investment in U.S. securities,
including higher transaction and custody costs as well as the imposition of
additional taxes by foreign governments. Foreign investments may also involve
risks associated with the level of currency exchange rates, less complete
financial information about the issuers, less market liquidity, more market
volatility and political instability, as well as varying regulatory requirements
applicable to investments in non-U.S. issuers. Future political and economic
developments, the possible imposition of withholding taxes on dividend income,
the possible seizure or nationalization of foreign holdings, the possible
establishment of exchange controls or freezes on the convertibility of currency,
or the adoption of other governmental restrictions might adversely affect an
investment in foreign securities. Additionally, foreign issuers may be subject
to less stringent regulation, and to different accounting, auditing and
recordkeeping requirements.
Political
and Economic Risk:
The Fund is subject to foreign political and economic risk not associated with
U.S. investments, meaning that political events (civil unrest, national
elections, changes in political conditions and foreign relations, imposition of
exchange controls and repatriation restrictions), social and economic events
(labor strikes, rising inflation) and natural disasters occurring in a country
where the Fund invests could cause the Fund’s investments in that country to
experience gains or losses. The Fund also could be unable to enforce its
ownership rights or pursue legal remedies in countries where it invests.
Reliance
on Trading Partners Risk:
The Fund invests in some economies that are heavily dependent upon trading with
key partners. Any reduction in this trading may cause an adverse impact on the
economy in which the Fund invests.
The
remaining risks are presented in alphabetical order. Each risk summarized below
is considered a “principal risk” of investing in the Fund, regardless of the
order in which it appears.
Equity
Market Risk:
An investment in the Fund involves risks of investing in equity securities, such
as market fluctuations caused by such factors as economic and political
developments, changes in interest rates and perceived trends in securities
prices. The values of
equity
securities could decline generally or could underperform other investments.
Different types of equity securities tend to go through cycles of
out-performance and under-performance in comparison to the general securities
markets. In addition, securities may decline in value due to factors affecting a
specific issuer, market or securities markets generally. Holders of common
stocks incur more risk than holders of preferred stocks and debt obligations
because common stockholders, as owners of the issuer, have generally inferior
rights to receive payments from the issuer in comparison with the rights of
creditors of, or holders of debt obligations or preferred stocks issued by, the
issuer. Additionally, natural or environmental disasters, widespread disease or
other public health issues, war, acts of terrorism or other events could result
in increased premiums or discounts to the Fund’s NAV.
ETF
Risks:
Absence
of an Active Market Risk: Although
the Fund’s shares are approved for listing on the Exchange, there can be no
assurance that an active trading market will develop and be maintained for Fund
shares. There can be no assurance that the Fund will grow to or maintain an
economically viable size, in which case the Fund may experience greater tracking
error to its Index than it otherwise would at higher asset levels or the Fund
may ultimately liquidate.
APs,
Market Makers and Liquidity Providers Concentration Risk:
The Fund has a limited number of financial institutions that may act as APs,
none of which are obligated to engage in creation and/or redemption
transactions. 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, there may be a significantly diminished trading market for Fund
shares and 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. The risks associated with limited APs may be
heightened in scenarios where APs have limited or diminished access to the
capital required to post collateral.
Costs
of Buying or Selling Shares Risk: Investors
buying or selling the Fund’s shares in the secondary market will pay brokerage
commissions or other charges imposed by brokers as determined by the applicable
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 that an investor is willing to pay for 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 the
Fund’s shares have more trading volume and market liquidity and higher if the
Fund’s shares have little trading volume and market liquidity. Further,
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.
Fluctuation
of NAV Risk: The
NAV of the Fund’s shares will generally fluctuate with changes in the market
value of the Fund’s securities holdings. The market prices of shares will
generally fluctuate in accordance with changes in the Fund’s NAV and supply and
demand of shares on the Exchange. It cannot be predicted whether the Fund’s
shares will trade below, at or above their NAV. Price differences may be due, in
large part, to the fact that supply and demand forces at work in the secondary
trading market for shares will be closely related to, but not identical to, the
same forces influencing the prices of the securities of the Index trading
individually or in the aggregate at any point in time. The market prices of the
Fund’s shares may deviate significantly from the NAV of the shares during
periods of market volatility. While the creation/redemption feature is designed
to make it likely that the Fund’s shares normally will trade close to the Fund’s
NAV, disruptions to creations and redemptions may result in trading prices that
differ significantly from the Fund’s NAV. As a result, investors in the Fund may
pay significantly more or receive significantly less for Fund shares than the
value of the Fund’s underlying securities or the NAV of Fund shares. If an
investor purchases the Fund’s shares at a time when the market price is at a
premium to the NAV of the shares or sells at a time when the market price is at
a discount to the NAV of the shares, then the investor may sustain losses.
Market
Trading Risk:
An investment in the Fund faces numerous market trading risks, including the
potential lack of an active market for Fund shares, losses from trading in
secondary markets, periods of high volatility and disruption in the
creation/redemption process of the Fund. Any of these
factors, among others, may lead to the Fund’s shares
trading at a premium or discount to NAV.
Trading
Issues Risk:
Although
the Fund’s shares are listed for trading on the Exchange, there can be no
assurance that an active trading market for such shares will be maintained.
Trading in the Fund’s 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 is subject to trading halts caused by
extraordinary market volatility pursuant to the 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 Fund shares when extraordinary volatility causes sudden, significant swings
in the market price of Fund shares. There can be no assurance that the
requirements of the Exchange necessary to maintain the listing of the Fund will
continue to be met or will remain unchanged or that the shares will trade with
any volume, or at all. In stressed market conditions, the liquidity of the
Fund’s shares may begin to mirror the liquidity of the Fund’s
underlying
portfolio holdings, which can be significantly less liquid than the Fund’s
shares, potentially causing the market price of the Fund’s shares to deviate
from their NAV.
Further,
secondary markets may be subject to erratic trading activity, wide bid/ask
spreads and extended trade settlement periods in times of market stress because
market makers and APs may step away from making a market in Fund shares and in
executing creation and redemption orders, which could cause a material deviation
in the Fund’s market price from its NAV. Decisions by market makers or APs
to reduce their role or step away from these activities in times of market
stress could inhibit the effectiveness of the arbitrage process in maintaining
the relationship between the underlying value of the Fund’s portfolio securities
and the Fund’s market price. This reduced effectiveness could result in Fund
shares trading at a price which differs materially from NAV and also in greater
than normal intraday bid/ask spreads for Fund shares. During a “flash crash,”
the market prices of the Fund’s shares may decline suddenly and significantly.
Such a decline may not reflect the performance of the portfolio securities held
by the Fund. Flash crashes may cause APs and other market makers to limit or
cease trading in the Fund’s shares for temporary or longer periods. Shareholders
could suffer significant losses to the extent that they sell shares at these
temporarily low market prices.
Natural
Disaster/Epidemic Risk:
Natural
or environmental disasters, such as earthquakes, fires, floods, hurricanes,
tsunamis and other severe weather-related phenomena generally, and widespread
disease, including pandemics and epidemics, have been and may be highly
disruptive to economies and markets, adversely impacting individual companies,
sectors, industries, markets, currencies, interest and inflation rates, credit
ratings, investor sentiment, and other factors affecting the value of the Fund’s
investments. Given the increasing interdependence among global economies and
markets, conditions in one country, market, or region are increasingly likely to
adversely affect markets, issuers, and/or foreign exchange rates in other
countries, including the U.S. Any such events could have a significant adverse
impact on the value of the Fund’s investments.
Passive
Investment Risk:
The Fund is not actively managed. Therefore, unless a specific security is
removed from the Fund’s Index, the Fund generally would not sell a security
because the security’s issuer was in financial trouble. If a specific security
is removed from the Fund’s Index, the Fund may be forced to sell such security
at an inopportune time or for a price other than the security’s current market
value. An investment in the Fund involves risks similar to those of investing in
any equity securities traded on an exchange, such as market fluctuations caused
by such factors as economic and political developments, changes in interest
rates and perceived trends in security prices. It is anticipated that the value
of the Fund’s shares will decline, more or less, in correspondence with any
decline in value of the Fund’s Index. The Index may not contain the appropriate
mix of securities for any particular economic cycle, and the timing of movements
from one type of security to another in seeking to replicate the Index could
have a negative effect on the Fund. Unlike with an actively managed fund, the
Adviser does not use techniques or defensive strategies designed to lessen the
effects of market volatility or to reduce the impact of periods of market
decline. This means that, based on market and economic conditions, the Fund’s
performance could be lower than other types of funds that may actively shift
their portfolio assets to take advantage of market opportunities or to lessen
the impact of a market decline.
Securities
Lending Risk:
The Fund may engage in securities lending. The Fund may lose money if the
borrower of the loaned securities delays returning in a timely manner or fails
to return the loaned securities. Securities lending involves the risk that the
Fund could lose money in the event of a decline in the value of collateral
provided for loaned securities. In addition, the Fund bears the risk of loss in
connection with its investment of the cash collateral it receives from a
borrower. When the Fund invests cash collateral in other investment companies,
such investments of cash collateral will be subject to substantially the same
risks as those associated with the direct ownership of securities held by such
investment companies. To the extent that the value or return of the Fund’s
investment of the cash collateral declines below the amount owed to the
borrower, the Fund may incur losses that exceed the amount it earned on lending
the security. The Fund may borrow money to repay the applicable borrower the
amount of cash collateral owed to the borrower upon return of the loaned
securities. This will result in financial leverage, which may cause the Fund to
be more volatile because financial leverage tends to exaggerate the effect of
any increase or decrease in the value of the Fund’s portfolio securities.
Tax
Risk:
To qualify for the favorable tax treatment generally available to RICs, the Fund
must satisfy certain diversification requirements under the Internal Revenue
Code of 1986, as amended (the “Code”). In particular, the asset diversification
requirements will be satisfied if (i) at least 50% of the value of the Fund’s
total assets are represented by cash and cash items, U.S. government securities,
the securities of other RICs and “other securities,” provided that such “other
securities” of any one issuer do not represent more than 5% of the Fund’s total
assets or greater than 10% of the outstanding voting securities of such issuer,
and (ii) no more than 25% of the value of the Fund’s assets are invested in
securities of any one issuer (other than U.S. government securities and
securities of other RICs), the securities (other than securities of other RICs)
of any two or more issuers that are controlled by the Fund and are engaged in
the same or similar or related trades or business, or the securities of one or
more “qualified publicly traded partnerships.” When the Index is concentrated in
a relatively small number of securities, it may not be possible for the Fund to
fully implement a replication strategy or a representative sampling strategy
while satisfying these diversification requirements. The Fund’s efforts to
satisfy the diversification requirements may cause the Fund’s return to deviate
from that of the Index, and the Fund’s efforts to replicate the Index may cause
it inadvertently to fail to satisfy the diversification requirements. If the
Fund were to fail to qualify as a RIC, it would be subject to U.S. federal
income tax at corporate rates on its income, and distributions to its
shareholders would not be deductible by the Fund in computing its taxable
income. In addition, distributions to a Fund’s shareholders would generally be
taxed as ordinary dividends.
Under
certain circumstances, the Fund may be able to cure a failure to qualify as a
RIC, but in order to do so the Fund may incur significant Fund-level taxes and
may be forced to dispose of certain assets. Relief is provided for certain de
minimis failures of the diversification requirements where the Fund corrects the
failure within a specified period. If the Fund were to fail to qualify as a RIC
in any taxable year, the Fund would be required to pay out its earnings and
profits accumulated in that year in order to qualify for treatment as a RIC in a
subsequent year. If the Fund failed to qualify as a RIC for a period greater
than two taxable years, the Fund would generally be required to pay U.S. federal
income tax at corporate rates on any net built-in gains with respect to certain
of its assets upon a disposition of such assets within five years of qualifying
as a RIC in a subsequent year. .
Tracking
Error Risk:
Tracking error refers to the risk that the Adviser may not be able to cause the
Fund’s performance to match or correlate to that of the Fund’s Index, either on
a daily or aggregate basis. There are a number of factors that may contribute to
the Fund’s tracking error, such as Fund expenses, imperfect correlation between
the Fund’s investments and those of the Index, rounding of share prices, changes
to the composition of the Index, regulatory policies, and high portfolio
turnover rate. In addition, mathematical compounding may prevent the Fund from
correlating with the monthly, quarterly, annual or other period performance of
the Index. In addition, in order to minimize the market impact of the Index
rebalance, the Fund may begin trading to effect the rebalance in advance of the
effective date of the rebalance and continue trading after the effective date of
the rebalance. This may contribute to tracking error if the weights of the
Fund’s portfolio securities diverge from the weights of the securities in the
Index during the rebalancing. Tracking error in such circumstances may be
greater if the Fund is trading in securities that are less liquid or lightly
traded. Tracking error may cause the Fund’s performance to be less than
expected.
Valuation
Risk:
The sales price that the Fund could receive for a security may differ from the
Fund’s valuation of the security and may differ from the value used by the
Index, particularly for securities that trade in low volume or volatile markets
or that are valued using a fair value methodology. In addition, the value of the
securities in the Fund’s portfolio may change on days when shareholders will not
be able to purchase or sell the Fund’s shares.
Portfolio
Holdings
Information
about the Fund’s daily portfolio holdings will be available at www.iteqetf.com.
A summarized description of the Fund’s policies and procedures with respect to
the disclosure of the Fund’s portfolio holdings is available in the Fund’s
Statement of Additional Information (“SAI”).
Fund
Management
Adviser.
ETF
Managers Group LLC, the investment adviser to the Fund, is a Delaware
limited liability company located at 30 Maple Street, 2nd
Floor, Summit, New Jersey 07901. The Adviser provides investment advisory
services to exchange-traded funds. The Adviser serves as investment adviser to
the Fund with overall responsibility for the day-to-day portfolio management of
the Fund, subject to the supervision of the Board. For its services, the Adviser
receives, and did receive for the Fund’s most recent fiscal year, a fee that is
equal to 0.75% per annum of the average daily net assets of the Fund, calculated
daily and paid monthly.
Under
the Investment Advisory Agreement, the Adviser has overall responsibility for
the general management and administration of the Fund and arranges for transfer
agency, custody, fund administration, securities lending, and all other
non-distribution related services necessary for the Fund to operate.
Additionally, under the Investment Advisory Agreement, the Adviser has agreed to
pay all expenses of the Fund, except for: the fee paid to the Adviser pursuant
to the Investment Advisory Agreement, interest charges on any borrowings, 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 (such
as, among other things and subject to Board approval, certain proxy solicitation
costs and non-standard Board-related expenses and litigation against the Board,
Trustees, Fund, Adviser, and officers of the Adviser), and distribution (12b-1)
fees and expenses (collectively, “Excluded Expenses”).
A
discussion regarding the basis for the Board’s approval of the Investment
Advisory Agreement is available in the Fund’s Semi-Annual
Report
for the reporting period ended March 31, 2022.
Manager
of Managers Structure.
The Adviser and the Trust have received an exemptive order (the “Order”) from
the SEC that permits the Adviser to enter into investment sub-advisory
agreements with sub-advisers without obtaining shareholder approval. The
Adviser, subject to the review and approval of the Board, may select one or more
sub-advisers for the Fund and supervise, monitor and evaluate the performance of
each sub-adviser.
The
Order also permits the Adviser, subject to the approval of the Board, to replace
sub-advisers and amend investment sub-advisory agreements, including fees,
without shareholder approval whenever the Adviser and the Board believe such
action will benefit the Fund and its shareholders. The Adviser thus has the
ultimate responsibility (subject to the ultimate oversight of the Board) to
recommend the hiring and replacement of sub-advisers as well as the discretion
to terminate any sub-adviser and reallocate the Fund’s assets for management
among any other sub-adviser(s) and itself. This means that the Adviser may be
able to reduce the sub-advisory fees and retain a larger portion of the
management fee, or increase the sub-advisory fees and retain a smaller portion
of the management fee. The Adviser will compensate each sub-adviser out of its
management fee. The Fund is required to provide shareholders with certain
information regarding any new sub-adviser within 90 days of the hiring of any
new sub-adviser. Such
information
generally includes the information that would have been provided to shareholders
in the form of a proxy statement in the absence of the Order.
The
Adviser’s reliance on such Order with respect to the Fund is contingent on the
holders of a majority of the Fund’s outstanding voting securities approving the
Fund’s use of a manager of managers structure and the Adviser’s reliance on such
Order. Prior to the date of this Prospectus, shareholders of the Fund approved
the use by the Fund of a manager of managers structure and the Adviser’s
reliance on such Order.
The
Index Provider
BIGITech®™
was developed by BlueStar Indexes®. BlueStar was a research-driven provider of
indices and financial data focused on serving the needs of innovative ETF
issuers, index fund sponsors and asset managers around the world. It was
acquired by MV Index Solutions GmBH (MVIS®) in August 2020. As of April 13,
2022, MV Index Solutions GmbH effectively changed the name of the company to
MarketVector Indexes GmbH (“MarketVector”). MarketVector develops, monitors and
licenses the BlueStar and MVIS Indices, a selection of focused, investable and
diversified benchmark indices. The indices are especially designed to underlie
financial products. MarketVector indices cover a range of asset classes,
including equity, fixed income markets and digital assets. As of December 31,
2022, more than 180 indices with approximately $25 billion in assets under
management tracking these benchmarks are currently invested in financial
products based on MarketVector Indexes family, including the BlueStar® and MVIS®
Indices.
Neither
BlueStar®, nor MVIS®, nor MarketVector, nor any of their affiliates are
affiliated with the Fund, the Adviser, the Fund’s distributor, the Index
Calculation Agent or any of their respective affiliates.
MarketVector
has licensed BIGITech®™ for use by ITEQ ETF Partners LLC (IEP), an affiliate of
BlueStar Global Investors, LLC (collectively “BlueStar”), including in
connection with the Fund. BlueStar has assumed the obligation of the Adviser to
pay all expenses of the Fund, except Excluded Expenses, although the Adviser
retains the ultimate obligation to the Fund to pay such expenses. BlueStar and
its affiliates will also provide marketing support for the Fund, including
distributing marketing materials related to the Fund. Neither BlueStar nor its
affiliates make investment decisions, provide investment advice, or otherwise
act in the capacity of an investment adviser to the Fund, nor are they involved
in the calculation of the Index.
Portfolio
Managers
The
Fund’s portfolio managers are primarily responsible for the day-to-day
management of the Fund. The portfolio managers are responsible for various
functions related to portfolio management, including, but not limited to,
investing cash inflows, implementing investment strategy, researching and
reviewing investment strategy.
The
Fund is managed by Samuel R. Masucci, III, Chief Executive Officer of the
Adviser, and Frank Vallario, Chief Investment Officer of the Adviser.
Samuel
Masucci, III has more than 25 years’ experience in investment banking,
structured product development, sales and trading. He founded ETF Managers Group
(ETFMG) in 2014. Prior to ETFMG he has held senior positions at Bear Stearns,
UBS, SBC Warburg, and Merrill Lynch and has experience in creating, building and
managing businesses for the issuance, sales and trading of: ETFs, index
products, commodity products, hedge funds, ABS, and OTC structured products in
the U.S. and Europe.
Frank
Vallario serves in the role of Chief Investment Officer for the Adviser. Mr.
Vallario is responsible for the portfolio construction, trading, risk management
and portfolio analysis processes associated with ETF strategies. Prior to his
current role at the Adviser, Mr. Vallario has had a variety of senior roles
over his 25-year career in financial services. He joined Oppenheimer Funds in
2017 where he was Head of Equity Portfolio Management for Smart Beta ETFs. Prior
to that he was a Senior Portfolio Manager at Columbia Threadneedle from
September 2015 to June 2017 where he was responsible for the day to day
management of the firm’s ETF business, which was acquired from his previous
firm, Emerging Global Advisors (EGA). From September 2010 to September 2015, he
was relationship manager at MSCI responsible for providing investment solutions
to complex problems using MSCI Barra’s fundamental models and portfolio
construction tools. Previously, he was a partner in a start-up asset management
firm where he served as the director of portfolio management. Mr. Vallario
began his career at UBS Global Asset Management where he spent over a decade in
various quantitative portfolio management equity roles including equity market
neutral, tactical asset allocation, structured active equities, enhanced index,
passive management and factor research. Mr. Vallario served on the
Investment Committee for the Girl Scouts of Connecticut and was a University
Affiliate at the University of Utah – David Eccles School of Business. He
received a B.S. in Finance from Lehigh University and a M.B.A. with a
concentration in Finance from Rutgers University.
The
SAI provides additional information about each Portfolio Manager’s compensation,
other accounts managed, and ownership of the Fund’s shares.
Buying
and Selling the Fund
The
Fund issues and redeems Shares at NAV only in Creation Units. Only APs may
acquire Shares directly from the Fund, and only APs may tender their Shares for
redemption directly to the Fund, at NAV. APs must be a member or participant of
a clearing agency registered with the SEC and must execute a Participant
Agreement that has been agreed to by the Distributor (defined below), and that
has
been accepted by the Fund’s transfer agent, with respect to purchases and
redemptions of Creation Units. Once created, Shares trade in the secondary
market in quantities less than a Creation Unit.
The
Fund’s shares are listed for secondary trading on the Exchange. When you buy or
sell the Fund’s shares on the secondary market, you will pay or receive the
market price. You may incur customary brokerage commissions and charges and may
pay some or all of the spread between the bid and the offered price in the
secondary market on each leg of a round trip (purchase and sale) transaction.
The shares will trade on the Exchange at prices that may differ to varying
degrees from the daily NAV of the shares. The Exchange is generally open Monday
through Friday and is closed weekends and the following holidays: New Year’s
Day, Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day,
Juneteenth Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas
Day.
NAV
per share for the Fund is computed by dividing the value of the net assets of
the Fund (i.e.,
the value of its total assets less total liabilities) by its total number of
shares outstanding. Expenses and fees, including management and distribution
fees, if any, are accrued daily and taken into account for purposes of
determining NAV. NAV is determined each business day, normally as of the close
of regular trading of the New York Stock Exchange (ordinarily 4:00 p.m., Eastern
time).
When
determining NAV, the value of the Fund’s portfolio securities is based on market
prices of the securities, which generally means a valuation obtained from an
exchange or other market (or based on a price quotation or other equivalent
indication of the value supplied by an exchange or other market) or a valuation
obtained from an independent pricing service. If a security’s market price is
not readily available or does not otherwise accurately reflect the fair value of
the security, the security will be valued by another method that the Adviser
believes will better reflect fair value in accordance with the Adviser’s
valuation policies and procedures. The Board has designated the Adviser as the
“valuation designee” for the Fund under Rule 2a-5 of the 1940 Act, subject to
its oversight. Fair value pricing may be used in a variety of circumstances,
including, but not limited to, situations when the value of a security in the
Fund’s portfolio has been materially affected by events occurring after the
close of the market on which the security is principally traded but prior to the
close of the Exchange (such as in the case of a corporate action or other news
that may materially affect the price of a security) or trading in a security has
been suspended or halted. Accordingly, the Fund’s NAV may reflect certain
portfolio securities’ fair values rather than their market prices.
Fair
value pricing involves subjective judgments and it is possible that a fair value
determination for a security will materially differ from the value that could be
realized upon the sale of the security. In addition, fair value pricing could
result in a difference between the prices used to calculate the Fund’s NAV and
the prices used by the Index. This may result in a difference between the Fund’s
performance and the performance of the Index.
The
Fund invests in non-U.S. securities. Non-U.S. securities held by the Fund may
trade on weekends or other days when the Fund does not price its shares. As a
result, the Fund’s NAV may change on days when Authorized Participants will not
be able to purchase or redeem Fund shares.
Frequent
Purchases and Redemptions of the Fund’s Shares
Unlike
frequent trading of shares of a traditional open-end mutual fund’s (i.e.,
not exchange-traded) shares, frequent trading of shares of the Fund on the
secondary market does not disrupt portfolio management, increase the Fund’s
trading costs, lead to realization of capitalization gains, or otherwise harm
the Fund’s shareholders because these trades do not involve the Fund directly.
Certain institutional investors are authorized to purchase and redeem the Fund’s
shares directly with the Fund. Because these trades are effected in-kind
(i.e.,
for securities, and not for cash), they do not cause any of the harmful effects
noted above that may result from frequent cash trades. Moreover, the Fund
imposes transaction fees on in-kind purchases and redemptions of Creation Units
to cover the custodial and other costs incurred by the Fund in effecting in-kind
trades. These fees increase if an investor substitutes cash in part or in whole
for Creation Units, reflecting the fact that the Fund’s trading costs increase
in those circumstances. For these reasons, the Board has determined that it is
not necessary to adopt policies and procedures to detect and deter frequent
trading and market-timing in shares of the Fund.
Dividends,
Distributions, and Taxes
Fund
Distributions
The
Fund intends to pay out dividends, if any, quarterly and distribute any net
realized capital gains to its shareholders annually.
Dividend
Reinvestment Service
Brokers
may make available to their customers who own the Fund’s shares the DTC
book-entry dividend reinvestment service. If this service is available and used,
dividend distributions of both income and capital gains will automatically be
reinvested in additional whole shares of the Fund. Without this service,
investors would receive their distributions in cash. In order to achieve the
maximum total return on their investments, investors are encouraged to use the
dividend reinvestment service. To determine whether the dividend reinvestment
service is available and whether there is a commission or other charge for using
this service, consult your broker. Brokers may require the Fund’s shareholders
to adhere to specific procedures and timetables. If this service is available
and used, dividend distributions of both income and realized gains will be
automatically reinvested in additional whole shares issued by the Fund at NAV
per share.
Tax
Information
The
following is a summary of some important tax issues that affect the Funds and
their respective shareholders. The summary is based on current tax laws, which
may be changed by legislative, judicial or administrative action. You should not
consider this summary to be a detailed explanation of the tax treatment of the
Funds, or the tax consequences of an investment in the Funds. The summary is
very general, and does not address investors subject to special rules, such as
investors who hold shares through an IRA, 401(k) or other tax-advantaged
account. The following summary describes the U.S. federal income tax
consequences to shareholders that are U.S. persons, as defined in the Code, and
that are not partnerships for U.S. federal income tax purposes, unless otherwise
provided. More information about taxes, including a detailed description of the
U.S. federal income tax consequences to shareholders that are not U.S. persons,
as defined in the Code, is located in the SAI. You are urged to consult your tax
adviser regarding specific questions as to U.S. federal, state and local income
taxes. .
Tax
Status of the Fund
Each
Fund is treated as a separate entity for U.S. federal tax purposes, and intends
to qualify for the special tax treatment afforded to RIC under the Code. As long
as each Fund qualifies as a RIC, it generally will not be subject to U.S.
federal income tax on any ordinary income or capital gain that it timely
distributes to its shareholders as dividends. .
Tax
Status of Distributions
•The
Fund intends, for each year, to distribute substantially all of its income and
net capital gains.
•The
Fund’s distributions from income will generally be taxed to you as ordinary
income, qualified dividend income, or capital gain (or a combination thereof).
For non-corporate shareholders, dividends reported by the Fund as qualified
dividend income are generally eligible for reduced tax rates.
•Corporate
shareholders may be entitled to a dividends-received deduction for the portion
of dividends they receive that are attributable to dividends received by the
Fund from U.S. corporations, subject to certain limitations. The Fund’s
strategies may limit its ability to distribute dividends eligible for the
dividends-received deduction for corporate shareholders.
•Any
distributions of net capital gain (the excess of the Fund’s net long-term
capital gains over its net short-term capital losses) properly reported by the
Fund as “capital gain dividends” that you receive from the Fund are taxable as
long-term capital gains regardless of how long you have owned your shares.
Long-term capital gains are currently taxed to non-corporate shareholders at
reduced maximum rates.
•Dividends
and distributions are generally taxable to you whether you receive them in cash
or in additional shares through a broker’s dividend reinvestment service. If you
receive dividends or distributions in the form of additional shares through a
broker’s dividend reinvestment service, you will be required to pay applicable
U.S. federal, state or local taxes on the reinvested dividends but you will not
receive a corresponding cash distribution with which to pay any applicable
tax.
•The
Fund may be able to pass through to you foreign tax credits for certain taxes
paid by the Fund, provided the Fund meets certain requirements.
•Distributions
paid in January but declared by the Fund in October, November or December of the
previous year may be taxable to you in the previous year.
•The
Fund will inform you of the amount of your ordinary income dividends, qualified
dividend income, foreign tax credits and net capital gain distributions received
from the Fund shortly after the close of each calendar year.
Taxes
on Exchange-Listed Share Sales.
A
shareholder generally will recognize gain or loss on the sale, exchange or other
taxable disposition of shares in an amount equal to the difference between the
shareholder’s adjusted basis in the common stock disposed of and the amount
realized on their disposition. Generally, gain recognized by a shareholder on
the disposition of shares will result in gain or loss realized to a shareholder,
and will be long-term capital gain or loss if the shares have been held for more
than one year at the time of sale, except that any capital loss on the sale of
shares held for six months or less will be treated as long-term capital loss to
the extent of amounts treated as capital gain dividends to the shareholder with
respect to such shares.
Investment
in Foreign Securities. The
Fund may be subject to non-U.S. withholding taxes on income it may earn from
investing in non-U.S. securities, which may reduce the return on such
investments. In addition, the Fund’s investments in non-U.S. securities or
non-U.S. currencies may increase or accelerate the Fund’s recognition of
ordinary income and may affect the timing or amount of its distributions. The
Fund may be eligible to file an election that would permit shareholders who are
U.S. citizens, resident aliens or U.S. corporations to claim a foreign tax
credit or deduction (but not both) on their U.S. income tax returns for their
pro rata portions of qualified taxes paid by the Fund to non-U.S. jurisdictions
in respect of non-U.S. securities held for at least the minimum period specified
in the Code. For the purposes of the foreign tax credit, each such shareholder
would include in gross income from foreign sources its pro rata share of such
taxes. Certain limitations imposed by the Code may prevent shareholders from
receiving a full foreign tax credit or deduction for their allocable amount of
such taxes.
Medicare
Tax. U.S.
individuals with income exceeding $200,000 ($250,000 if married and filing
jointly) are subject to a 3.8% Medicare contribution tax on their “net
investment income,” including interest, dividends, and capital gains (including
capital gains realized on the sale or exchange of shares). This 3.8% tax also
applies to all or a portion of the net investment income of certain shareholders
that are estates and trusts which the estate or trust has not distributed to its
beneficiaries.
Non-U.S.
Investors. If
you are not a U.S. person, as defined in the Code, distributions of the Fund’s
ordinary income will generally be subject to a 30% U.S. federal withholding tax,
unless a lower treaty rate applies or unless such income is effectively
connected with a U.S. trade or business of such non-U.S. investor (and if
required by an applicable income tax treaty, attributable to a permanent
establishment maintained in the United States by such non-U.S. investor). This
30% withholding tax generally will not apply to capital gain
dividends.
Backup
Withholding. The
Fund or your broker will be required in certain cases to withhold (as “backup
withholding”) on amounts payable to any shareholder who (1) has provided
either an incorrect tax identification number or no number at all, (2) is
subject to backup withholding by the Internal Revenue Service for failure to
properly report payments of interest or dividends, (3) has failed to
certify that such shareholder is not subject to backup withholding, or
(4) has not certified that such shareholder is a U.S. person (including a
U.S. resident alien). The backup withholding rate is currently 24%. Backup
withholding will not, however, be applied to payments that have been subject to
the 30% withholding tax applicable to shareholders who are neither citizens nor
residents of the United States.
FATCA.
Legislation
commonly referred to as the “Foreign Account Tax Compliance Act,” or “FATCA,”
generally imposes a 30% withholding tax on payments of certain types of income
to foreign financial institutions (“FFIs”) unless such FFIs either: (i) enter
into an agreement with the U.S. Treasury to report certain required information
with respect to accounts held by certain specified U.S. persons (or held by
foreign entities that have certain specified U.S. persons as substantial owners)
or (ii) reside in a jurisdiction that has entered into an intergovernmental
agreement (“IGA”) with the United States to collect and share such information
and are in compliance with the terms of such IGA and any enabling legislation or
regulations. The types of income subject to the tax include U.S. source interest
and dividends. While the Code would also require withholding on payments of the
gross proceeds from the sale of any property that could produce U.S. source
interest or dividends, the U.S. Treasury has indicated its intent to eliminate
this requirement in subsequent proposed regulations, which state that taxpayers
may rely on the proposed regulations until final regulations are issued. The
information required to be reported includes the identity and taxpayer
identification number of each account holder that is a specified U.S. person and
transaction activity within the holder’s account. In addition, subject to
certain exceptions, FATCA also imposes a 30% withholding on certain payments to
certain foreign entities that are not FFIs unless such foreign entities certify
that they do not have a greater than 10% U.S. owner that is a specified U.S.
person or provide the withholding agent with identifying information on each
greater than 10% U.S. owner that is a specified U.S. person. Depending on the
status of a shareholder and the status of the intermediaries through which they
hold their shares, shareholders could be subject to this 30% withholding tax
with respect to distributions on their shares. Under certain circumstances, a
shareholder might be eligible for refunds or credits of such taxes.
Distribution
The
Distributor, ETFMG Financial LLC, an affiliate of the Adviser, is a
broker-dealer registered with the U.S. Securities and Exchange Commission. The
Distributor distributes Creation Units for the Fund on an agency basis and does
not maintain a secondary market in the Fund’s shares. The Distributor has no
role in determining the policies of the Fund or the securities that are
purchased or sold by the Fund. The Distributor’s principal business address is
30 Maple Street, 2nd
Floor, Summit, New Jersey 07901.
The
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act with respect to the Fund. In accordance with the
Plan, the Fund is authorized to pay an amount up to 0.25% of its average daily
net assets each year for certain distribution-related activities and shareholder
services.
No
Rule 12b-1 fees are currently paid by the Fund, and there are no plans to impose
these fees. However, in the event Rule 12b-1 fees are charged in the
future, because the fees are paid out of the 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.
Fund
Service Providers
Eversheds
Sutherland (US) LLP, 700 6th Street NW, Washington, DC 20001, serves as legal
counsel to the Fund.
WithumSmith+Brown,
PC, with offices located at 1411 Broadway, 9th Floor, New York, New York 10018,
serves as the Fund’s independent registered public accounting firm. The
independent registered public accounting firm is responsible for auditing the
annual financial statements of the Fund.
Index/Trademark
Licenses/Disclaimers
Investors
may obtain information about BIGITech®™ and the Index’s methodology at
www.marketvector.com.
BlueStar
Israel Global Technology Index™ and BIGITech®™ are Service Marks of BlueStar
Indexes® owned by MarketVector Indexes GmbH and a Trademark Registration is
filed with the U.S. Patent and Trademark Office for these marks. BlueStar
Indexes has agreed to provide the index for use relating to the Fund.
The
Index Provider makes no representation or warranty, express or implied, to the
owners of the shares of the Fund or any member of the public regarding the
ability of the Fund to track the total return performance of the Index or the
ability of the Index identified herein to track the performance of its
constituent securities. The Index Provider is not responsible for, nor has it
participated in, the calculation of the Index, nor in the determination of the
timing of, prices of, or quantities of the shares of the Fund to be issued, nor
in the determination or calculation of the equation by which the shares are
redeemable. The Index Provider has no obligation or liability to owners of the
shares of the Fund in connection with the administration, marketing, or trading
of the shares of the Fund.
The
Index Provider does not guarantee the accuracy and/or the completeness of the
Index or the data included therein. The Index Provider makes no warranty,
express or implied, as to results to be obtained by the Fund, owners of the
shares, or any other person or entity from the use of the Index or the data
included therein. The Index Provider makes no express or implied warranties, and
hereby expressly disclaim all warranties of merchantability or fitness for a
particular purpose with respect to the Index or the data included therein.
Without limiting any of the foregoing, in no event shall the Index Provider have
any liability for any lost profits or indirect, punitive, special, or
consequential damages even if notified of the possibility thereof.
Additionally,
the Adviser and the Fund make no representation or warranty, express or implied,
to the owners of Fund shares or any members of the public regarding the
advisability of investing in securities generally or in the Fund
particularly.
Neither
the Index Provider or the Index Calculation Agent have any obligation to take
the needs of the Adviser or the owners of the Fund into consideration in
determining, composing or calculating the Index. The Index Provider and the
Index Calculation Agent will apply all necessary means to ensure the accuracy of
the Index. However, the Index Provider and the Index Calculation Agent are not
liable (whether in negligence or otherwise) to any person for any error in the
Index and are not under any obligation to advise any person of any error
therein. All copyrights in the Index values and constituent lists vest in MVIS®.
Neither the publication of the Index by MVIS® nor the granting of a license of
rights relating to the Index or to the Index trademark for the utilization in
connection with the Fund, represents a recommendation by MVIS® for a capital
investment or contains in any manner a warranty or opinion by MVIS® with respect
to the attractiveness of an investment in the Fund. The Fund is not
endorsed or sold by MVIS®, BlueStar® or their affiliates. MVIS® and its
affiliates make no representation or warranty, express or implied, to the owners
of the Fund or any member of the public regarding the advisability of trading in
the Fund. MVIS® and its affiliates are not responsible for and have not
participated in the determination of the timing of, prices of, or quantities of
Fund shares to be sold or in the determination or calculation of the equation by
which the Fund is to be converted into cash. MVIS®, BlueStar® and their
affiliates have an obligation in connection with the marketing of the Fund but
have no obligations or liabilities in connection with the trading of the Fund.
Notwithstanding the foregoing, MVIS® and its affiliates may independently
license their indices for financial products unrelated to the Fund, but which
may be similar to and competitive with the Fund.
MVIS®
AND ITS AFFILIATES DO NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE
INDEX OR ANY DATA INCLUDED THEREIN AND SHALL HAVE NO LIABILITY FOR ANY ERRORS,
OMISSIONS, OR INTERRUPTIONS THEREIN. MVIS® AND ITS RESPECTIVE AFFILIATES MAKE NO
WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ADVISER,
OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR
ANY DATA INCLUDED THEREIN. MVIS® AND ITS AFFILIATES MAKE NO EXPRESS OR IMPLIED
WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED
THEREIN.
Premium/Discount
Information
Information
regarding the number of days the Fund’s market price was a price above
(i.e.,
at a premium) or below (i.e.,
at a discount) its NAV for the most recently completed calendar year and the
most recently completed calendar quarters since that year, are provided, free of
charge, on the Fund’s website at www.iteqetf.com.
Litigation
The
Trust, the Adviser, and certain officers and affiliated persons of the Adviser
(together with the Adviser, the “Adviser Defendants”) were named as defendants
in an action filed December 21, 2021, in the Superior Court of New Jersey, Union
County, captioned PureShares,
LLC, d/b/a PureFunds et al. v. ETF Managers Group, LLC et al.,
Docket No. UNN-C-152-21 (the “NJ Action”). The NJ Action asserted breach of
contract and other tort claims and sought damages in unspecified amounts and
injunctive relief. On May 25, 2022, the court in the NJ Action dismissed with
prejudice all claims asserted against the Trust, as well as all contract claims
and all except one tort claim asserted against the Adviser
Defendants.
Financial
Highlights
The
financial highlights table is intended to help you understand the Fund’s
financial performance for the period of the Fund’s operations. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have gained (or
lost) on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been derived from the financial statements
audited by WithumSmith+Brown, PC, an independent registered public accounting
firm, whose report, along with the Fund’s financial statements, is included in
the Fund’s Annual
Report
dated September 30, 2022, which is available upon request.
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Ended September 30, 2021 |
| Year
Ended September 30, 2020 |
| Year
Ended September 30, 2019 |
| Year
Ended September 30, 2018 |
|
Net
Asset Value, Beginning of Year |
$ |
66.09 |
|
| $ |
55.57 |
|
| $ |
39.92 |
|
| $ |
36.03 |
|
| $ |
31.38 |
| |
|
|
|
|
|
|
|
|
|
| |
Income
(Loss) from Investment Operations: |
|
|
|
|
|
|
|
|
| |
Net
investment income (loss) 1 |
(0.05) |
|
| (0.01) |
|
| (0.06) |
|
| (0.04) |
|
| 0.04 |
| |
Net
realized and unrealized gain (loss) on investments |
(22.10) |
|
| 10.97 |
|
| 15.71 |
|
| 4.03 |
|
| 4.78 |
| |
Total
from investment operations |
(22.15) |
|
| 10.96 |
|
| 15.65 |
|
| 3.99 |
|
| 4.82 |
| |
|
|
|
|
|
|
|
|
|
| |
Less
Distributions: |
|
|
|
|
|
|
|
|
| |
Distributions
from net investment income |
— |
|
| (0.44) |
|
| — |
|
| (0.09) |
|
| (0.17) |
| |
Return
of Capital |
— |
|
| — |
|
| — |
|
| (0.01) |
|
| — |
| |
Total
Distributions |
— |
|
| (0.44) |
|
| — |
|
| (0.10) |
|
| (0.17) |
| |
Net
Asset Value, end of year |
$ |
43.94 |
|
| $ |
66.09 |
|
| $ |
55.57 |
|
| $ |
39.92 |
|
| $ |
36.03 |
| |
Total
Return |
(33.52) |
% |
| 19.76 |
% |
| 39.20 |
% |
| 11.17 |
% |
| 15.41 |
% |
|
|
|
|
|
|
|
|
|
|
| |
Ratios/Supplemental
Data: |
|
|
|
|
|
|
|
|
| |
Net
assets at end of year (000’s) |
$ |
116,443 |
|
| $ |
191,673 |
|
| $ |
127,802 |
|
| $ |
73,847 |
|
| $ |
61,243 |
| |
Expenses
to Average Net Assets |
0.75 |
% |
| 0.75 |
% |
| 0.75 |
% |
| 0.75 |
% |
| 0.75 |
% |
|
Net
Investment Income (Loss) to Average Net Assets |
(0.10) |
% |
| (0.02) |
% |
| (0.12) |
% |
| (0.12) |
% |
| 0.12 |
% |
|
Portfolio
Turnover Rate |
25 |
% |
| 21 |
% |
| 19 |
% |
| 24 |
% |
| 11 |
% |
|
1Calculated
based on average shares outstanding during the year.
ETF
Managers Trust
30
Maple Street, 2nd
Floor
Summit,
New Jersey 07901
ANNUAL/SEMI-ANNUAL
REPORTS TO SHAREHOLDERS
Additional
information about the Fund’s investments is available in the Fund’s annual and
semi-annual reports to shareholders (when available). In the Fund’s annual
report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund’s performance during its last fiscal
year.
STATEMENT
OF ADDITIONAL INFORMATION (SAI)
The
SAI provides more detailed information about the Fund. The SAI is incorporated
by reference into, and is thus legally a part of, this Prospectus.
FOR
MORE INFORMATION
To
request a free copy of the latest annual or semi-annual report, when available,
the SAI or to request additional information about the Fund or to make other
inquiries, please contact us as follows:
Call: 844-ETFMGRS
(383-6477)
Monday
through Friday
8:30
a.m. to 6:30 p.m. (Eastern Time)
Write: ETF
Managers Trust
30
Maple Street, 2nd
Floor
Summit,
New Jersey 07901
Visit: www.iteqetf.com
INFORMATION
PROVIDED BY THE SECURITIES AND EXCHANGE COMMISSION
Reports
and other information about the Fund are available in the EDGAR Database on the
SEC’s Internet site at http://www.sec.gov, or you can receive copies of this
information, after paying a duplicating fee, by electronic request at the
following e-mail address: [email protected].
The
Trust’s Investment Company Act file number: 811-22310