ck0001540305-20210930
Premise Capital Diversified Tactical
ETF (TCTL)
Listed
on Cboe BZX Exchange, Inc.
PROSPECTUS
January 31,
2022
THE
U.S. SECURITIES AND EXCHANGE COMMISSION (“SEC”) HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
INVESTMENT
PRODUCTS: ☐
ARE NOT FDIC INSURED ☐
MAY LOSE VALUE ☐
ARE NOT BANK GUARANTEED
The Premise Capital
Diversified Tactical ETF (the “Fund”) seeks to track the performance, before
fees and expenses, of the Premise Capital Frontier Advantage Diversified
Tactical Index (the “Index”).
Fees and Expenses of the Fund
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
Fees |
0.75% |
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Distribution
and/or Service (12b-1) Fees |
0.00% |
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Other
Expenses |
0.00% |
| Acquired
Fund Fees and Expenses |
0.11% |
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Total
Annual Fund Operating Expenses(1) |
0.86% |
(1)
Total Annual Fund
Operating Expenses do not correlate to the ratio of expenses to average net
assets provided in the Financial Highlights section of the Prospectus, which
reflects only the operating expenses of the Fund and does not include acquired
fund fees and expenses.
Expense 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 continue to hold or redeem all of
your Shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The Example does not take into account brokerage commissions
that you may pay on your purchases and sales of Shares.
Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
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| 1
Year |
3
Years |
Five
Years |
Ten
Years |
| $88 |
$274 |
$477 |
$1,061 |
Portfolio Turnover
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
Example, affect the Fund’s performance. For the fiscal year ended September 30,
2021, the Fund’s portfolio turnover rate was 52% of the average value of its
portfolio.
Principal Investment Strategies of the
Fund
The
Fund is a “fund of funds” that employs a “passive management”—or
indexing—investment approach designed to track the performance of the Index. The
rules-based Index measures the performance of a diversified portfolio of
exchange traded funds (“ETFs”) representing common global equity, fixed income,
and cash asset classes.
The
Index
The
Index consists of an investible portfolio of ETFs (“Underlying ETFs”) with
exposure to major U.S. and non-U.S. asset classes. The weighting of each
Underlying ETF is adjusted to (i) reduce exposure to individual asset classes
determined to be in a downward trend (the “Trend Adjustment”) and (ii) reduce
overall exposure to equity asset classes (and increase exposure to fixed income
asset classes) as the aggregate size of equity asset classes determined to be in
a downward trend grows (the “Risk Adjustment”).
The
Index universe consists of cash and Underlying ETFs that each principally track
the performance of one of the following assets classes:
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| Fixed
Income Asset Classes |
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Equity
Asset Classes |
| Short
Term |
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U.S.
Large Cap |
Developed
International |
| Intermediate
Term |
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U.S.
Mid Cap |
Developed
International Small Cap |
| Long
Term |
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U.S.
Small Cap |
Emerging
Market |
| High
Yield (Junk Bonds) |
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Real
Estate |
| Inflation
Protected |
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The
U.S. Large Cap asset class is further broken down into each of its eleven
sectors (each, a “Sector”), with the Index’s exposure to each Sector adjusted
separately. The Underlying ETFs used by the Index are generally the largest,
most liquid ETF tracking the performance of the applicable asset class.
Construction
of the Index begins by determining the expected rate of return for each asset
class (the “Market Expected Return”) using a mathematical model (the “Allocation
Model”) designed to calculate such returns based on the standard deviation of
each asset class and correlation of each asset class to the other asset classes
over the past five years and the market capitalization of each asset class as of
the most recently available calendar year-end. In other words, the model uses
the amount investors currently have invested in each asset class (as measured by
the market capitalizations of the constituents of each asset class), plus the
historical performance of each asset class, to calculate the expected return for
each asset class, rather than the particular views of the Fund’s investment
adviser.
The
Index then utilizes a proprietary intermediate trend following algorithm (the
“Trend Algorithm”) to determine whether each asset class and Sector is in an
“upward” or “downward” trend. The Trend Algorithm considers a number of
trend-related data points over an intermediate time frame, such as the direction
of an asset class’ or Sector’s performance, the extent to which any trend in
such performance is accelerating or decelerating, and the degree of variability
in performance to determine whether an asset class’ or Sector’s performance
trend is “upward” or “downward”. The intermediate time frame is generally 1-3
years; however, the Trend Algorithm also includes a volatility component that
considers the rate at which volatility is increasing for an asset class and can
cause changes in the determination of whether an asset class’ trend is “upward”
or “downward” more often, even frequently, if market conditions warrant.
The
Trend Adjustment is then implemented by optimizing the Index’s weighting of each
asset class using the Allocation Model. If the Trend Algorithm determines an
asset class or Sector is in an upward trend, the Allocation Model assumes the
expected rate of return of the asset class is the Market Expected Return. If the
Trend Algorithm determines an asset class or Sector is in a downward trend, the
Allocation Model assumes the expected rate of return of the asset class or
Sector is 0%, causing the asset class or Sector to be underweighted. The Index
may weight one or more asset classes or Sectors at 0% from time to time
depending on the outcome of the Trend Adjustment and Allocation Model.
The
Risk Adjustment is then implemented based on the aggregate size of the equity
asset classes determined to be in a downward trend by the Trend Algorithm. When
all equity asset classes are determined to be in an upward trend, the Index’s
allocation to equity asset classes will reflect the Index’s most aggressive
posture (i.e., maximum allocation to equity asset classes). As one or more
equity asset classes is determined to be in a downward trend, the Index’s
allocation to equity asset classes will shrink as the aggregate size of the
equity asset classes determined to be in a downward trend grows. When all equity
asset classes are determined to be in a downward trend, the Index’s allocation
to equity asset classes will reflect its most conservative posture (i.e.,
maximum allocation to fixed income asset classes).
Additionally,
the Index’s weighting of certain asset classes is limited such that the
following weights will not be exceeded at the time of each rebalance: High Yield
Fixed Income (20%), Inflation Protected Fixed Income (20%), U.S. Mid Cap Equity
(12.5%), U.S. Small Cap Equity (12.5%), Developed International Equity (35%),
Developed International Small Cap Equity (10%), Emerging Markets Equity (15%),
and Real Estate (15%). Additionally, to the extent the Index’s allocation to the
Intermediate Term Fixed Income asset class exceeds 50%, the amount in excess of
50% will instead be allocated to the Short Term Fixed Income asset class. The
Allocation Model will determine how to optimally redistribute any amounts
exceeding the above constraints to the remaining asset classes.
The
Index is rebalanced annually in March and any time the Trend Algorithm
determines that the trend for one or more asset classes has changed from upward
to downward, or vice versa. For the calendar year ended December 31, 2021, the
Index rebalanced three times in response to changes in asset classes, as
determined by the Trend Algorithm.
At
the time of each rebalance, the Index’s Risk Adjustment will determine the
proportion of the Index allocated to equity asset classes and to fixed income
asset classes. The weight for each individual asset class and Sector is
calculated at the time of the annual rebalance based on the expected rate of
return for each asset class (i.e., either the Market Expected Return or 0%,
depending on the asset class’ or Sector’s trend) and the market capitalization,
five-year standard deviation, and correlation of each asset class to each other
asset class determined at the time of the annual rebalance. At the time of each
rebalance other than the annual rebalance, the weight for each individual asset
class and Sector is calculated based on the expected rate of return for each
asset class (i.e., either the Market Expected Return or 0%, depending on the
asset class’ or Sector’s trend) determined at the time of the non-annual
rebalance and the market capitalization, five-year standard deviation, and
correlation of each asset class to each other asset class determined at the time
of the annual rebalance.
Asset
classes with an upward trend and the largest market capitalizations will
generally receive the largest weightings in the Index.
The
Index is owned by Premise Capital, LLC, the Fund’s investment adviser (“Premise”
or the “Adviser”), and was developed in 2016 for the purpose of launching the
Fund.
The
Fund’s Investment Strategy
The
Fund attempts to invest all, or substantially all, of its assets in the
securities that make up the Index. The Fund will generally use a “replication”
strategy to achieve its investment objective, meaning it generally will invest
in all of the component securities of the Index, but may, when the Adviser
believes it is in the best interests of the Fund, use a “representative
sampling” strategy, meaning it may invest in a sample of the securities in the
Index whose risk, return, and other characteristics are expected to closely
resemble the risk, return, and other characteristics of the Index as a
whole.
To
the extent the Index concentrates (i.e., holds 25% or more of its total assets) in
the securities of a particular industry or group of related industries, the Fund
will concentrate its investments to approximately the same extent as the
Index.
Principal Investment Risks
The
principal risks of investing in the Fund are summarized below. The principal
risks are presented in alphabetical order to facilitate finding particular risks
and comparing them with other funds. Each risk summarized below is considered a
“principal risk” of investing in the Fund, regardless of the order in which it
appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield, total return and/or ability to meet its
objectives. For more information about the risks of investing in the Fund, see
the section in the Fund’s Prospectus titled “Additional Information About the
Fund.”
•Currency
Exchange Rate Risk.
The Fund may invest in Underlying ETFs that invest primarily in equity
securities denominated in non-U.S. currencies. Changes in currency exchange
rates and the relative value of non-U.S. currencies may affect the value of the
Underlying ETFs and the value of your Shares. Currency exchange rates can be
very volatile and can change quickly and unpredictably. As a result, the value
of an investment in the Fund may change quickly and without warning and you may
lose money.
•Emerging
Markets Risk.
The Fund may invest in Underlying ETFs that invest primarily in companies
organized in emerging market nations. Investments in securities and instruments
traded in emerging markets, or that provide exposure to such securities or
markets, can involve additional risks relating to political, economic, public
health, or regulatory conditions not associated with investments in U.S.
securities and instruments or investments in more developed international
markets. Such conditions may impact the ability to buy, sell or otherwise
transfer such securities, adversely affect the trading market and price for such
securities and causing the Fund to decline in value.
•Equity
Market Risk.
The Fund may invest in Underlying ETFs that invest primarily in common stocks.
Common stocks are generally exposed to greater risk than other types of
securities, such as preferred stock and debt obligations, because common
stockholders generally have inferior rights to receive payment from specific
issuers. Equity securities 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 industries,
sectors, or companies in which the Fund or its Underlying ETFs invest.
Additionally, the COVID-19 pandemic has resulted in extreme and in many cases
unprecedented volatility and severe losses in financial markets in the United
States and around the world. Some sectors of the economy and individual issuers
have experienced particularly large losses. Disruptions from the pandemic
may continue for an extended period of time or reoccur in the future to a
similar or greater extent. The impact of this and other epidemics or pandemics
in the future could adversely affect Fund performance.
•ETF
Risks. The
Fund is an ETF, and, as a result of an ETF’s structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as Authorized
Participants (“APs”). In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, Shares may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading. Although
Shares are listed for trading on Cboe BZX Exchange, Inc. (the “Exchange”) and
may be traded on U.S. exchanges other than the Exchange, there can be no
assurance that Shares will trade with any volume, or at all, on any stock
exchange. In stressed market conditions, the liquidity of Shares may begin to
mirror the liquidity of the Fund’s underlying portfolio holdings, which can be
significantly less liquid than Shares, and this could lead to differences
between the market price of the Shares and the underlying value of those Shares.
•Fixed
Income Securities Risk. The
Fund may invest in Underlying ETFs that invest primarily in fixed income
securities. Fixed income securities, such as bonds and certain asset-backed
securities, involve certain risks, which include:
◦Credit
Risk. Credit
risk refers to the possibility that the issuer of a security will not be able to
make payments of interest and principal when due. Changes in an issuer’s credit
rating or the market’s perception of an issuer’s creditworthiness may also
affect the value of an investment in that issuer.
◦Event
Risk. Event
risk is the risk that corporate issuers may undergo restructurings, such as
mergers, leveraged buyouts, takeovers, or similar events financed by increased
debt. As a result of the added debt, the credit quality and market value of a
company’s bonds and/or other debt securities may decline significantly.
◦Extension
Risk. When
interest rates rise, certain obligations will be paid off by the obligor more
slowly than anticipated, causing the value of these securities to fall.
◦Interest
Rate Risk. Generally,
the value of fixed income securities will change inversely with changes in
interest rates. As interest rates rise, the market value of fixed income
securities tends to decrease. Conversely, as interest rates fall, the market
value of fixed income securities tends to increase. This risk will be greater
for long-term securities than for short-term securities. In recent periods,
governmental financial regulators, including the U.S. Federal Reserve, have
taken steps to maintain historically low interest rates, which may increase
interest rate risk. Changes in government intervention may have adverse effects
on investments, volatility, and illiquidity in debt markets.
◦Prepayment
Risk. When
interest rates fall, certain obligations will be paid off by the obligor more
quickly than originally anticipated, and the proceeds may have to be invested in
securities with lower yields.
◦Variable
and Floating Rate Instrument Risk. The
absence of an active market for these securities could make it difficult to
dispose of them if the issuer defaults.
•Foreign
Securities Risk.
The Fund may invest in Underlying ETFs that invest primarily in foreign
securities. Investments in foreign securities involve certain risks that may not
be present with investments in U.S. securities. For example, investments in
foreign securities may be subject to risk of loss due to foreign currency
fluctuations or to political or economic instability. Investments in foreign
securities also may be subject to withholding or other taxes and may be subject
to additional trading, settlement, custodial, and operational risks. These and
other factors can make investments in the Fund more volatile and potentially
less liquid than other types of investments. These risks may be enhanced for
securities of companies organized in emerging market nations.
•High-Yield
Securities Risk. The
Fund may invest in Underlying ETFs that invest primarily in high-yield
securities (also known as “junk bonds”). Although high-yield securities
generally pay higher rates of interest than investment grade bonds, high-yield
securities are speculative, high risk investments that may cause income and
principal losses for such Underlying ETFs and consequently, negatively affect
the value of the Fund’s investment in such Underlying ETFs. High-yield
securities may be issued by companies that are restructuring, are smaller and
less creditworthy, or are more highly indebted than other companies. This means
that they may have more difficulty making scheduled payments of principal and
interest. Changes in the value of high-yield securities are influenced more by
changes in the financial and business position of the issuing company than by
changes in interest rates when compared to investment grade securities. The
Fund’s exposure to high-yield securities may subject it to a substantial degree
of credit risk.
•Inflation-Protected
Security Risk.
The Fund may invest in Underlying ETFs that invest primarily in
inflation-protected securities, such as Treasury inflation-protected securities
(“TIPS”), which provide protection against inflation. Inflation-protected
securities typically decrease in value when real interest rates rise and
increase in value when real interest rates fall. Accordingly, during periods of
low inflation, no inflation or deflation, TIPS may underperform conventional
bonds.
•Investment
Company Risk.
The Fund invests primarily in shares of investment companies, such as the
Underlying ETFs. The risks of investment in investment companies typically
reflect the risks of the types of instruments in which the investment companies
invest. By investing in another investment company, the Fund becomes a
shareholder of that investment company and bears its proportionate share of the
fees and expenses of the other investment company. The Fund may be subject to
statutory and regulatory limits with respect to the amount it can invest in the
Underlying ETFs, which may adversely affect the Fund’s ability to achieve its
investment objective. Investments in ETFs are also subject to the “ETF Risks”
described above.
•Models
and Data Risk. The
Index relies heavily on proprietary quantitative models as well as information
and data supplied by third parties (“Models and Data”). When Models and
Data prove to be incorrect or incomplete, any decisions made in reliance thereon
expose the Fund to potential risks.
•Passive
Investment Risk.
The Fund invests in the securities included in, or representative of, the Index
regardless of their investment merit. The Fund does not attempt to outperform
the Index or take defensive positions in declining markets. As a result, the
Fund’s performance may be adversely affected by a general decline in the market
segments relating to the Index.
•Portfolio
Turnover Risk. The
Fund may trade all or a significant portion of the securities in its portfolio
in connection with each rebalance and reconstitution of the Index. A high
portfolio turnover rate increases transaction costs, which may increase the
Fund’s expenses. Frequent trading may also cause adverse tax consequences for
investors in the Fund due to an increase in short-term capital gains.
•REIT
Investment Risk. The
Fund may invest in Underlying ETFs that invest primarily in real estate
investment trusts (“REITs”). Investments in REITs involve unique risks. REITs
may have limited financial resources, may trade less frequently and in limited
volume, and may be more volatile than other securities. The risks of investing
in REITs include certain risks associated with the direct ownership of real
estate and the real estate industry in general, including that the value of
their underlying real estate may go down. Many factors may affect real estate
values, including the general and local economies, the amount of new
construction in a particular area, the laws and regulations (including zoning
and tax laws) affecting real estate, and the costs of owning, maintaining and
improving real estate. The availability of mortgages and changes in interest
rates may also affect real estate values. REITs are also subject to heavy cash
flow dependency, defaults by borrowers, and self-liquidation.
•Small
and Mid-Sized Company Stock Risk.
The Fund may invest in Underlying ETFs that invest primarily in the common stock
of small- or mid-sized companies. Small to mid-sized company stocks have
historically been subject to greater investment risk than large company stocks.
The prices of small- to mid-sized company stocks tend to be more volatile and
less liquid than large company stocks.
•Tracking
Error Risk. As with all index funds, the performance of
the Fund and the Index may differ from each other for a variety of reasons. For
example, the Fund incurs operating expenses and portfolio transaction costs not
incurred by the Index. In addition, the Fund may not be fully invested in the
securities of the Index at all times or may hold securities not included in the
Index.
Performance
The following
performance information indicates some of the risks of investing in the
Fund. The bar chart shows the Fund’s performance for calendar
years ended December 31. The table illustrates how the Fund’s average annual
returns for the 1-year, 5-year, and since inception periods compare with those
of a broad measure of market performance and the Index. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is available on the
Fund’s website at www.tctl.us.
Calendar Year Total Returns
During the period of time shown
in the bar chart, the Fund’s highest quarterly return
was 12.00% for the quarter ended December 31, 2020 and
the lowest quarterly return was
-21.96% for the quarter ended March 31,
2020.
Average Annual Total Returns
For the Periods Ended December 31,
2021
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| Premise
Capital Diversified Tactical ETF |
1
Year |
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5
Years |
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Since
Inception
(10/27/2016) |
| Return Before
Taxes |
15.79% |
|
7.38% |
|
7.73% |
| Return After Taxes on
Distributions |
15.57% |
|
7.00% |
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7.31% |
| Return After Taxes on Distributions and
Sale of Fund Shares |
9.53% |
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5.71% |
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5.98% |
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Premise
Capital Frontier Advantage Diversified Tactical Index
(reflects no deduction for
fees, expenses, or taxes) |
16.85% |
|
9.80% |
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10.09% |
|
Dow
Jones Moderate Portfolio Index
(reflects
no deduction for fees, expenses, or taxes) |
9.40% |
|
9.71% |
|
9.64% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an
investor’s tax situation and may differ from those shown. In certain cases, the figure
representing “Return After Taxes on Distributions and Sale of Shares” may be
higher than the other return figures for the same period. A higher after-tax
return results when a capital loss occurs upon redemption and provides an
assumed tax deduction that benefits the investor. After-tax returns shown are
not relevant to investors who hold their Shares through tax-deferred
arrangements such as an individual retirement account (“IRA”) or other
tax-advantaged accounts.
Portfolio
Management
Premise
Capital, LLC serves as investment adviser to the Fund. Britton H. Reynolds,
Portfolio Manager of Premise, has been the Fund’s portfolio manager since its
inception in 2016.
Purchase
and Sale of 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 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.tctl.us.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged account. Distributions on investments made through
tax-deferred arrangements may be taxed later upon withdrawal of assets from
those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
Additional
Information about the Index
The
Index is calculated by an independent third-party calculation agent that is not
affiliated with the Trust, the Adviser, the Fund’s administrator, custodian,
transfer agent or distributor, or any of their respective
affiliates.
The
Trend Adjustment is implemented by optimizing the Index’s allocation to each
asset class using the Allocation Model and assuming the expected rate of return
of each asset class and Sector determined to be in a downward trend is 0% and
the expected rate of return of each asset class and Sector determined to be in a
upward trend is the Market Expected Return. However, because the Allocation
Model assumes that the likelihood of a 0% return for any given asset class is
less than 100%, asset classes and Sectors
determined
to be in a downward trend are not necessarily removed from the Index (i.e.,
weighted at 0%), but rather are underweighted as a result of the Trend
Adjustment.
Additional
Information about the Fund
Investment
Objective.
The Fund’s investment objective has been adopted as a non-fundamental investment
policy and may be changed without shareholder approval upon written notice to
shareholders.
Investment
Strategy.
The Fund may invest in securities not included in the Index, but which the
Adviser believes will help the Fund track the Index. For example, the Fund may
invest in securities that are not components of the Index to reflect various
corporate actions and other changes to the Index (such as reconstitutions,
additions, and deletions). The Fund may also invest its other assets in cash and
cash equivalents, as well as in shares of ETFs not included in the Index but
that track the performance of one of the asset classes included in the Index to
improve the overall liquidity of the Fund or to avoid certain tax consequences
(e.g., wash sales).
The
Fund’s Underlying ETFs representing fixed income asset classes may invest
(depending on the applicable asset class) in foreign debt securities, debt
securities of any maturity or quality, and variable and floating rate debt
securities. The Fund’s Underlying ETFs representing equity asset classes may
invest (depending on the applicable asset class) in securities of any market
capitalization and in REITs.
Principal
Investment Risks.
This section provides additional information regarding the principal risks
described in the Fund Summary. As in the Fund Summary, the principal risks below
are presented in alphabetical order to facilitate finding particular risks and
comparing them with other funds. Each risk described below is considered a
“principal risk” of investing in the Fund, regardless of the order in which it
appears. Each of the factors below could have a negative impact on the Fund’s
performance and trading prices.
Currency
Exchange Rate Risk.
The Fund may invest in Underlying ETFs that invest primarily in equity
securities denominated in non-U.S. currencies. Changes in currency exchange
rates and the relative value of non-U.S. currencies may affect the value of the
Underlying ETFs and the value of your Shares. Currency exchange rates can be
very volatile and can change quickly and unpredictably. As a result, the value
of an investment in the Fund may change quickly and without warning and you may
lose money.
Emerging
Markets Risk.
The Fund may invest in Underlying ETFs that invest primarily in companies
organized in emerging market nations. Investments in securities and instruments
traded in developing or emerging markets, or that provide exposure to such
securities or markets, can involve additional risks relating to political,
economic, or regulatory conditions not associated with investments in U.S.
securities and instruments. For example, developing and emerging markets may be
subject to (i) greater market volatility, (ii) lower trading volume and
liquidity, (iii) greater social, political and economic uncertainty, (iv)
governmental controls on foreign investments and limitations on repatriation of
invested capital, (v) lower disclosure, corporate governance, auditing and
financial reporting standards, (vi) fewer protections of property rights, (vii)
restrictions on the transfer of securities or currency, and (viii) settlement
and trading practices that differ from those in U.S. markets. Each of these
factors may impact the ability of an Underlying ETF to buy, sell or otherwise
transfer securities, adversely affect the trading market and price for
Underlying ETF shares and cause the Fund to decline in value.
Equity
Market Risk.
The Fund may invest in Underlying ETFs that invest primarily in common stocks.
Common stocks are susceptible to general stock market fluctuations and to
volatile increases and decreases in value as market confidence in and
perceptions of their issuers change. These investor perceptions are based on
various and unpredictable factors including: expectations regarding government,
economic, monetary and fiscal policies; inflation and interest rates; economic
expansion or contraction; and global or regional political, economic and banking
crises. If you held common stock, or common stock equivalents, of any given
issuer, you would generally be exposed to greater risk than if you held
preferred stocks and debt obligations of the issuer because common stockholders,
or holders of equivalent interests, generally have inferior rights to receive
payments from issuers in comparison with the rights of preferred stockholders,
bondholders, and other creditors of such issuers.
Beginning
in the first quarter of 2020, financial markets in the United States and around
the world experienced extreme and, in many cases, unprecedented volatility and
severe losses due to the global pandemic caused by COVID-19, a novel
coronavirus. The pandemic has resulted in a wide range of social and economic
disruptions, including closed borders, voluntary or compelled quarantines of
large populations, stressed healthcare systems, reduced or prohibited domestic
or international travel, and supply chain disruptions affecting the United
States and many other countries. Some sectors of the economy and individual
issuers have experienced particularly large losses as a result of these
disruptions, and such disruptions may continue for an extended period of time or
reoccur in the future to a similar or greater extent. In response, the U.S.
government and the Federal Reserve have taken extraordinary actions to support
the domestic economy and financial markets, resulting in very low interest rates
and in some cases negative yields. It is unknown how long circumstances related
to the pandemic will persist, whether they will reoccur in the future, whether
efforts to support the economy and financial markets will be successful, and
what additional implications may follow from the pandemic. The impact of these
events and other epidemics or pandemics in the future could adversely affect
Fund performance.
ETF
Risks. The
Fund is an ETF, and, as a result of an ETF’s structure, it is exposed to the
following risks:
◦APs,
Market Makers, and Liquidity Providers Concentration Risk.
The Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares may trade at a material discount to NAV and possibly face
delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
◦Costs
of Buying or Selling Shares.
Investors buying or selling Shares in the secondary market will pay brokerage
commissions or other charges imposed by brokers, as determined by that broker.
Brokerage commissions are often a fixed amount and may be a significant
proportional cost for investors seeking to buy or sell relatively small amounts
of Shares. In addition, secondary market investors will also incur the cost of
the difference between the price at which an investor is willing to buy Shares
(the “bid” price) and the price at which an investor is willing to sell Shares
(the “ask” price). This difference in bid and ask prices is often referred to as
the “spread” or “bid-ask spread.” The bid-ask spread varies over time for Shares
based on trading volume and market liquidity, and the spread is generally lower
if Shares have more trading volume and market liquidity and higher if Shares
have little trading volume and market liquidity. Further, a relatively small
investor base in the Fund, asset swings in the Fund, and/or increased market
volatility may cause increased bid-ask spreads. Due to the costs of buying or
selling Shares, including bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small
investments.
◦Shares
May Trade at Prices Other Than NAV.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of market volatility, periods of
steep market declines, and periods when there is limited trading activity for
Shares in the secondary market, in which case such premiums or discounts may be
significant.
Because
securities held by the Underlying ETFs in which the Fund invests may trade on
foreign exchanges that are closed when the Fund’s and each Underlying ETF’s
primary listing exchange is open, there are likely to be deviations between the
current price of an Underlying ETF’s underlying security and the security’s last
quoted price from the closed foreign market. This may result in premiums and
discounts that are greater than those experienced by domestic ETFs.
◦Trading.
Although Shares are listed for trading on the Exchange and may be listed or
traded on U.S. and non-U.S. stock exchanges other than the Exchange, there can
be no assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange “circuit breaker”
rules, which temporarily halt trading on the Exchange when a decline in the
S&P 500®
Index during a single day reaches certain thresholds (e.g.,
7%, 13%, and 20%). Additional rules applicable to the Exchange may halt trading
in Shares when extraordinary volatility causes sudden, significant swings in the
market price of Shares. There can be no assurance that Shares will trade with
any volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than Shares, and this
could lead to differences between the market price of the Shares and the
underlying value of those Shares.
Fixed
Income Securities Risk.
The Fund may invest in Underlying ETFs that invest primarily in fixed income
securities. Fixed income securities, such as bonds and certain asset-backed
securities, involve certain risks, which include:
◦Credit
Risk. Credit
risk refers to the possibility that the issuer of a security will not be able to
make principal and interest payments when due. Changes in an issuer’s credit
rating or the market’s perception of an issuer’s creditworthiness may also
affect the value of the Underlying ETF’s investment in that issuer. The degree
of credit risk depends on both the financial condition of the issuer and the
terms of the obligation.
◦Event
Risk. Event
risk is the risk that corporate issuers may undergo restructurings, such as
mergers, leveraged buyouts, takeovers, or similar events financed by increased
debt. As a result of the added debt, the credit quality and market value of a
company’s bonds and/or other debt securities may decline
significantly.
◦Extension
Risk. When
interest rates rise, certain obligations will be paid off by the obligor more
slowly than anticipated, causing the value of these securities to fall. Rising
interest rates tend to extend the duration of securities, making them more
sensitive to future changes in interest rates. The value of longer-term
securities generally changes more in response to changes in interest rates than
the value of shorter-term securities. As a result, in a period of rising
interest rates, securities may exhibit additional volatility and may lose
value.
◦Interest
Rate Risk. Generally,
the value of fixed income securities will change inversely with changes in
interest rates. As interest rates rise, the market value of fixed income
securities tends to decrease. Conversely, as interest rates fall, the market
value of fixed income securities tends to increase. This risk will be greater
for long-term securities than for short-term securities. An Underlying ETF may
take steps to attempt to reduce the exposure of its portfolio to interest rate
changes; however, there can be no guarantee that the Fund will take such actions
or that the Fund will be successful in reducing the impact of interest rate
changes on the portfolio. In recent periods, governmental financial regulators,
including the U.S. Federal Reserve, have taken steps to maintain historically
low interest rates. Changes in government intervention may have adverse effects
on investments, volatility, and illiquidity in debt markets.
◦Prepayment
Risk. When
interest rates fall, certain obligations will be paid off by the obligor more
quickly than originally anticipated, and the Fund may have to invest the
proceeds in securities with lower yields. In periods of falling interest rates,
the rate of prepayments tends to increase (as does price fluctuation) as
borrowers are motivated to pay off debt and refinance at new lower rates. During
such periods, reinvestment of the prepayment proceeds by the management team
will generally be at lower rates of return than the return on the assets that
were prepaid. Prepayment reduces the yield to maturity and the average life of
the security.
◦Variable
and Floating Rate Instrument Risk. The
absence of an active market for these securities could make it difficult for the
Underlying ETF to dispose of them if the issuer defaults.
Foreign
Securities Risk.
The Fund may invest in Underlying ETFs that invest primarily in foreign
securities. Investments in foreign securities involve certain risks that may not
be present with investments in U.S. securities. For example, investments in
foreign securities may be subject to risk of loss due to foreign currency
fluctuations or to political or economic instability. There may be less
information publicly available about a foreign issuer than a U.S. issuer.
Foreign issuers may be subject to different accounting, auditing, financial
reporting and investor protection standards than U.S. issuers. Investments in
foreign securities may be subject to withholding or other taxes and may be
subject to additional trading, settlement, custodial, and operational risks.
With respect to certain countries, there is the possibility of government
intervention and expropriation or nationalization of assets. Because legal
systems differ, there is also the possibility that it will be difficult to
obtain or enforce legal judgments in certain countries. Since foreign exchanges
may be open on days when the Underlying ETF does not price its shares, the value
of the securities in the ETF’s portfolio may change on days when shareholders
will not be able to purchase or sell the Underlying ETF’s or the Fund’s shares.
Conversely, the Underlying ETF’s and the Fund’s shares may trade on days when
foreign exchanges are closed. Each of these factors can make investments in the
Fund more volatile and potentially less liquid than other types of
investments.
High-Yield
Securities Risk.
The Fund may invest and transact in Underlying ETFs that invest primarily in
unrated or lower-rated fixed income securities and other instruments, sometimes
referred to as “high yield” or “junk” bonds. Lower-rated securities may include
securities that have the lowest rating or are in default. Investing in
lower-rated or unrated securities involves special risks in addition to the
risks associated with investments in higher-rated fixed income securities,
including a high degree of credit risk. Lower-rated or unrated securities may be
regarded as predominately speculative with respect to the issuer’s continuing
ability to meet principal and interest payments. Analysis of the
creditworthiness of issuers/issues of lower-rated or unrated securities may be
more complex than for issuers/issues of higher quality debt securities.
Lower-rated or unrated securities may be more susceptible to losses and real or
perceived adverse economic and competitive industry conditions than higher-grade
securities. Securities that are in the lowest rating category are considered to
have extremely poor prospects of ever attaining any real investment standing, to
have a current identifiable vulnerability to default, and to be unlikely to have
the capacity to pay interest and repay principal. The secondary markets on which
lower-rated or unrated securities are traded may be less liquid than the market
for higher-grade securities. Less liquidity in the secondary trading markets
could adversely affect and cause large fluctuations in the value of such
investments. Adverse publicity and investor perceptions, whether or not based on
fundamental analysis, may decrease the values and liquidity of lower-rated or
unrated securities, especially in a thinly traded market. It is possible that a
major economic recession could disrupt severely the market for such securities
and may have an adverse impact on the value of such securities. In addition, it
is possible that any such economic downturn could adversely affect the ability
of the issuers of such securities to repay principal and pay interest thereon
and increase the incidence of default of such securities. Furthermore, with
respect to certain residential and commercial mortgage-backed securities, it is
difficult to obtain current reliable information regarding delinquency rates,
prepayment rates, servicing records, as well as updated cash flows. The use of
credit ratings as the sole method of evaluating lower-rated or unrated
securities can involve certain risks. For example, credit ratings evaluate the
safety of principal and interest payments, not the market value risk of
lower-rated securities. In addition, credit rating agencies may fail to change
credit ratings in a timely fashion to reflect events since the security was
rated.
Inflation-Protected
Security Risk.
The Fund may invest in Underlying ETFs that invest primarily in
inflation-protected securities, such as TIPS, which provide protection against
inflation. Inflation-protected securities typically decrease in value when real
interest rates rise and increase in value when real interest rates fall.
Accordingly, during periods of low inflation, no inflation or deflation, TIPS
may underperform conventional bonds.
Investment
Company Risk.
The Fund invests primarily in shares of investment companies, such as the
Underlying ETFs, that invest in a wide range of instruments designed to track
the performance of a particular securities market index (or sector of an index).
The risks of investment in these securities typically reflect the risks of the
types of instruments in which the investment company invests. When the Fund
invests in investment company securities, shareholders of the Fund bear
indirectly their proportionate share of their fees and expenses, as well as
their share of the Fund’s fees and expenses. As a result, an investment by the
Fund in an investment company could cause the Fund’s operating expenses (taking
into account indirect expenses such as the fees and expenses of the investment
company) to be higher and, in turn, performance to be lower than if it were to
invest directly in the instruments underlying the investment company.
Investments in ETFs are also subject to the “ETF Risks” described above.
Models
and Data Risk. When
Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon expose the Index and the Fund to potential risks. For example,
by relying on Models and Data, the Index may overweight asset classes that are
trending downward or underweight asset classes that are trending
upward.
Some
of the models used to construct the Index are predictive in nature. The use of
predictive models has inherent risks. For example, such models may incorrectly
forecast future behavior, leading to potential losses. In addition, in
unforeseen or certain low-probability scenarios (often involving a market
disruption of some kind), such models may produce unexpected results, which can
result in losses for the Fund. Furthermore, because predictive models are
usually constructed based on historical data supplied by third parties, the
success of relying on such models may depend heavily on the accuracy and
reliability of the supplied historical data.
Passive
Investment Risk.
The Fund invests in the securities included in, or representative of, the Index
regardless of their investment merit. The Fund does not attempt to outperform
the Index or take defensive positions in declining markets. As a result, the
Fund’s performance may be adversely affected by a general decline in the market
segments relating to the Index. The returns from the types of securities in
which the Fund invests may underperform returns from the various general
securities markets or different asset classes. This may cause the Fund to
underperform other investment vehicles that invest in different asset classes.
Different types of securities (for example, large-, mid- and
small-capitalization stocks) tend to go through cycles of doing better – or
worse – than the general securities markets. In the past, these periods have
lasted for as long as several years.
Portfolio
Turnover Risk. The
Fund may trade all or a significant portion of the securities in its portfolio
in connection with each rebalance and reconstitution of the Index. A high
portfolio turnover rate increases transaction costs, which may increase the
Fund’s expenses. Frequent trading may also cause adverse tax consequences for
investors in the Fund due to an increase in short-term capital
gains.
REIT
Investment Risk.
The Fund may invest in Underlying ETFs that invest primarily in REITs.
Investments in REITs involve unique risks. REITs may have limited financial
resources, may trade less frequently and in limited volume, and may be more
volatile than other securities. In addition, to the extent the Fund holds
interests in REITs, it is expected that investors in the Fund will bear two
layers of asset-based management fees and expenses (directly at the Fund level
and indirectly at the REIT level). The risks of investing in REITs include
certain risks associated with the direct ownership of real estate and the real
estate industry in general. These include risks related to general, regional and
local economic conditions; fluctuations in interest rates and property tax
rates; shifts in zoning laws, environmental regulations and other governmental
action such as the exercise of eminent domain; cash flow dependency; increased
operating expenses; lack of availability of mortgage funds; losses due to
natural disasters; overbuilding; losses due to casualty or condemnation; changes
in property values and rental rates; and other factors.
In
addition to these risks, residential/diversified REITs and commercial equity
REITs may be affected by changes in the value of the underlying property owned
by the trusts, while mortgage REITs may be affected by the quality of any credit
extended. Further, REITs are dependent upon management skills and generally may
not be diversified. REITs are also subject to heavy cash flow dependency,
defaults by borrowers and self-liquidation. In addition, REITs could possibly
fail to qualify for the beneficial tax treatment available to REITs under the
U.S. Internal Revenue Code of 1986, as amended (the “Code”), or to maintain
their exemptions from registration under the Investment Company Act of 1940, as
amended (the “1940 Act”). The Fund expects that dividends received from a
REIT and distributed to Fund shareholders generally will be taxable to the
shareholder as ordinary income. The above factors may also adversely affect a
borrower’s or a lessee’s ability to meet its obligations to the REIT. In the
event of a default by a borrower or lessee, the REIT may experience delays in
enforcing its rights as a mortgagee or lessor and may incur substantial costs
associated with protecting investments.
Small
and Mid-Sized Company Risk.
The Fund may invest in Underlying ETFs that invest primarily in the common stock
of small- or mid-sized companies. Small and mid-sized companies may be more
vulnerable to adverse issuer, market, political, or economic developments than
securities of larger-capitalization companies. The securities of small-and
mid-sized capitalization companies generally trade in lower volumes and are
subject to greater and more unpredictable price changes than larger
capitalization stocks or the stock market as a whole. Some smaller
capitalization companies have limited product lines, markets, and financial and
managerial resources and tend to concentrate on fewer geographical markets
relative to larger capitalization companies. There is typically less publicly
available information concerning smaller-capitalization companies than for
larger, more established companies. Smaller-capitalization companies also may be
particularly sensitive to changes in interest rates, government regulation,
borrowing costs and earnings.
Tracking
Error Risk.
As with all index funds, the performance of the Fund and the Index may vary
somewhat for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by the Index. In addition,
the Fund may not be fully invested in the securities of the Index at all times
or may hold securities not included in the Index.
Portfolio
Holdings Information
Information
about the Fund’s daily portfolio holdings is available at www.tctl.us.
A complete description of the Fund’s policies and procedures with respect to the
disclosure of the Fund’s portfolio holdings is available in the Fund’s Statement
of Additional Information (“SAI”).
Management
Investment
Adviser
Premise
Capital, LLC, serves as the investment adviser and has overall responsibility
for the general management and administration of the Fund. Premise is a
registered investment adviser with offices located at 300 East 5th Avenue, Suite
265, Naperville, Illinois 60563, that provides investment advisory services to
separately managed accounts, as well as the Fund. The Adviser also arranges for
transfer agency, custody, fund administration, distribution and all other
services necessary for the Fund to operate. For the services it provides to the
Fund, the Fund pays the Adviser a unified management fee, which is calculated
daily and paid monthly, at an annual rate of 0.75% of the Fund’s average daily
net assets.
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, dividends and other
expenses on securities sold short, taxes, brokerage commissions and other
expenses incurred in placing orders for the purchase and sale of securities and
other investment instruments, acquired fund fees and expenses, accrued deferred
tax liability, extraordinary expenses, and distribution (12b-1) fees and
expenses.
The
basis for the Board’s approval of the Fund’s Investment Advisory Agreement is
available in the Fund’s Semi-Annual
Report
to Shareholders for the period ended March 31, 2021.
Portfolio
Manager
Britton
H. Reynolds has been a Portfolio Manager for Premise since its inception in 2012
and has been involved in the creation of the Adviser’s investment models and
methodology. He earned his B.S. degree in economics from Florida Southern
College.
The
Fund’s SAI provides additional information about the Portfolio Manager’s
compensation structure, other accounts managed by the Portfolio Manager, and the
Portfolio Manager’s ownership of Shares.
How
to Buy and Sell Shares
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.
Most
investors buy and sell Shares in secondary market transactions through brokers.
Shares are listed for trading on the secondary market on the Exchange and can be
bought and sold throughout the trading day like other publicly traded
securities.
When
buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the bid-ask spread on
your transactions. In addition, because secondary market transactions occur at
market prices, you may pay more than NAV when you buy Shares and receive less
than NAV when you sell those Shares.
Book
Entry.
Shares are held in book-entry form, which means that no stock certificates are
issued. The Depository Trust Company (“DTC”) or its nominee is the record owner
of all outstanding Shares.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares. DTC’s
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other institutions that directly or indirectly
maintain a custodial relationship with DTC. As a beneficial owner of Shares, you
are not entitled to receive physical delivery of stock certificates or to have
Shares registered in your name, and you are not considered a registered owner of
Shares. Therefore, to exercise any right as an owner of Shares, you must rely
upon the procedures of DTC and its participants. These procedures are the same
as those that apply to any other securities that you hold in book entry or
“street name” through your brokerage account.
Frequent
Purchases and Redemptions of Shares.
The Fund imposes no restrictions on the frequency of purchases and redemptions
of Shares. In determining not to approve a written, established policy, the
Board evaluated the risks of market timing activities by Fund shareholders.
Purchases and redemptions by APs, who are the only parties that may purchase or
redeem Shares directly with the Fund, are an essential part of the ETF process
and help keep Share trading prices in line with NAV. As such, the Fund
accommodates frequent purchases and redemptions by APs. However, the Board has
also determined that frequent purchases and redemptions for cash may increase
tracking error and portfolio transaction costs and may lead to the realization
of capital gains. To minimize these potential consequences of frequent purchases
and redemptions, the Fund employs fair value pricing and may impose transaction
fees on purchases and redemptions of Creation Units to cover the custodial and
other costs incurred by the Fund in effecting trades. In addition, the Fund and
the Adviser reserve the right to reject any purchase order at any time.
Determination
of Net Asset Value.
The Fund’s NAV is calculated as of the scheduled close of regular trading on the
New York Stock Exchange (“NYSE”), generally 4:00 p.m. Eastern time, each
day the NYSE is open for business. The NAV is calculated by dividing the Fund’s
net assets by its Shares outstanding.
In
calculating its NAV, the Fund generally values its assets on the basis of market
quotations, last sale prices, or estimates of value furnished by a pricing
service or brokers who make markets in such instruments. If such information is
not available for a security held by the Fund or is determined to be unreliable,
the security will be valued at fair value estimates under guidelines established
by the Board (as described below).
Fair
Value Pricing.
The Board has adopted procedures and methodologies to fair value Fund securities
whose market prices are not “readily available” or are deemed to be unreliable.
For example, such circumstances may arise when: (i) a security has been
de-listed or has had its trading halted or suspended; (ii) a security’s
primary pricing source is unable or unwilling to provide a price; (iii) a
security’s primary trading market is closed during regular market hours; or
(iv) a security’s value is materially affected by events occurring after
the close of the security’s primary trading market. Generally, when fair valuing
a security, the Fund will take into account all reasonably available information
that may be relevant to a particular valuation including, but not limited to,
fundamental analytical data regarding the issuer, information relating to the
issuer’s business, recent trades or offers of the security, general and/or
specific market conditions and the specific facts giving rise to the need to
fair value the security. Fair value determinations are made in good faith and in
accordance with the fair value methodologies included in the Board-adopted
valuation procedures. Due to the subjective and variable nature of fair value
pricing, there can be no assurance that the Adviser will be able to obtain the
fair value assigned to the security upon the sale of such security.
Investments
by
Registered Investment Companies
Section 12(d)(1)
of the 1940 Act restricts investments by registered investment companies in the
securities of other investment companies, including Shares. Although the SEC has
adopted a rule under the 1940 Act permitting registered investment companies
that enter into an agreement with the Trust (“Investing Funds”) to invest in
series of the Trust beyond the limits of Section 12(d)(1) subject to certain
terms and conditions, such regulatory relief is not applicable to the Fund.
Accordingly, Investing Funds must adhere to the limits set forth in Section
12(d)(1) when investing in the Fund.
Delivery
of Shareholder Documents – Householding
Householding
is an option available to certain investors of the Fund. Householding is a
method of delivery, based on the preference of the individual investor, in which
a single copy of certain shareholder documents can be delivered to investors who
share the same address, even if their accounts are registered under different
names. Householding for the Fund is available through certain broker-dealers. If
you are interested in enrolling in householding and receiving a single copy of
prospectuses and other shareholder documents, please contact your broker-dealer.
If you are currently enrolled in householding and wish to change your
householding status, please contact your broker-dealer.
Dividends,
Distributions, and Taxes
Dividends
and Distributions.
The Fund intends to pay out dividends, if any, and distribute any net realized
capital gains to its shareholders at least annually. The Fund will declare and
pay capital gain distributions, if any, in cash. Distributions in cash may be
reinvested automatically in additional whole Shares only if the broker through
whom you purchased Shares makes such option available. Your broker is
responsible for distributing the income and capital gain distributions to
you.
Taxes.
The following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in the Fund. Your investment
in the Fund may have other tax implications. Please consult your tax advisor
about the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws.
The
Fund intends to elect and qualify each year for treatment as a regulated
investment company (“RIC”) under the Code. If it meets certain minimum
distribution requirements, a RIC is not subject to tax at the fund level on
income and gains from investments that are timely distributed to shareholders.
However, the Fund’s failure to qualify as a RIC or to meet minimum distribution
requirements would result (if certain relief provisions were not available) in
fund-level taxation and, consequently, a reduction in income available for
distribution to shareholders.
Unless
your investment in Shares is made through a tax-exempt entity or tax-advantaged
account, such as an IRA plan, you need to be aware of the possible tax
consequences when the Fund makes distributions, when you sell your Shares listed
on the Exchange, and when you purchase or redeem Creation Units (APs
only).
Taxes
on Distributions.
The Fund intends to distribute, at least annually, substantially all of its net
investment income and net capital gains. For federal income tax purposes,
distributions of investment income are generally taxable as ordinary income or
qualified dividend income. Taxes on distributions of capital gains (if any) are
determined by how long the Fund owned the investments that generated them,
rather than how long a shareholder has owned his or her Shares. Sales of assets
held by the Fund for more than one year generally result in long-term capital
gains and losses, and sales of assets held by the Fund for one year or less
generally result in short-term capital gains and losses. Distributions of the
Fund’s net capital gain (the excess of net long-term capital gains over net
short-term capital losses) that are reported by the Fund as capital gain
dividends (“Capital Gain Dividends”) will be taxable as long-term capital gains,
which for non-corporate shareholders are subject to tax at reduced rates of up
to 20% (lower rates apply to individuals in lower tax brackets). Distributions
of short-term capital gain will generally be taxable as ordinary income.
Dividends and distributions are generally taxable to you whether you receive
them in cash or reinvest them in additional Shares.
Distributions
reported by the Fund as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided holding period and other requirements are met. “Qualified dividend
income” generally is income derived from dividends paid by U.S. corporations or
certain foreign corporations that are either incorporated in a U.S. possession
or eligible for tax benefits under certain U.S. income tax treaties. In
addition, dividends that the Fund received in respect of stock of certain
foreign corporations may be qualified dividend income if that stock is readily
tradable on an established U.S. securities market. Corporate shareholders may be
entitled to a dividends received deduction for the portion of dividends they
receive from the Fund that are attributable to dividends received by the Fund
from U.S. corporations, subject to certain limitations.
Shortly
after the close of each calendar year, you will be informed of the amount and
character of any distributions received from the Fund.
The
Fund may invest in Underlying ETFs that invest in REITs. The Tax Cuts and Jobs
Act (“Tax Act”) treats “qualified REIT dividends” (i.e., ordinary REIT dividends
other than capital gain dividends and portions of REIT dividends designated as
qualified dividend income eligible for capital gain tax rates) as eligible for a
20% deduction by non-corporate taxpayers. This deduction, if allowed in full,
equates to a maximum effective tax rate of 29.6% (37% top rate applied to income
after 20% deduction). The Tax Act does not contain a provision permitting RICs,
such as certain Underlying ETFs and the Fund, to pass the special character of
this income through to their shareholders. Currently, direct investors in REITs
will enjoy the lower rate, but investors in RICs that invest in such REITs,
directly or indirectly through another TIC such as certain Underlying ETFs, will
not. It is uncertain whether a future technical corrections bill will address
this issue to enable RICs to pass through the special character of “qualified
REIT dividends” to shareholders.
U.S.
individuals with income exceeding specified thresholds are subject to a 3.8% tax
on all or a portion of their “net investment income,” which includes interest,
dividends, and certain capital gains (generally including capital gains
distributions and capital gains realized on the sale of Shares). This 3.8% tax
also applies to all or a portion of the undistributed net investment income of
certain shareholders that are estates and trusts.
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are generally
taxable even if they are paid from income or gains earned by the Fund before
your investment (and thus were included in the Shares’ NAV when you purchased
your Shares).
You
may wish to avoid investing in the Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable even though
it may economically represent a return of a portion of your investment.
If
the Fund’s distributions exceed its earnings and profits, all or a portion of
the distributions made for a taxable year may be recharacterized as a return of
capital to shareholders. A return of capital distribution will generally not be
taxable, but will reduce each shareholder’s cost basis in Shares and result in a
higher capital gain or lower capital loss when the Shares are sold. After a
shareholder’s basis in Shares has been reduced to zero, distributions in excess
of earnings and profits in respect of those Shares will be treated as gain from
the sale of the Shares.
If
you are neither a resident nor a citizen of the United States or if you are a
foreign entity, distributions (other than Capital Gain Dividends) paid to you by
the Fund will generally be subject to a U.S. withholding tax at the rate of 30%,
unless a lower treaty rate applies. Gains from the sale or other disposition of
your Shares generally are not subject to U.S. taxation, unless you are a
nonresident alien individual who is physically present in the U.S. for 183 days
or more per year. The Fund may, under certain circumstances, report all or a
portion of a dividend as an “interest-related dividend” or a “short-term capital
gain dividend,” which would generally be exempt from this 30%
U.S. withholding tax, provided certain other requirements are met.
Different tax consequences may result if you are a foreign shareholder engaged
in a trade or business within the United States or if a tax treaty applies.
Under
legislation generally known as “FATCA” (the Foreign Account Tax Compliance Act),
the Fund is required to withhold 30% of certain ordinary dividends it pays to
shareholders that are foreign entities and that fail to meet prescribed
information reporting or certification requirements.
The
Fund (or a financial intermediary, such as a broker, through which a shareholder
owns Shares) generally is required to withhold and remit to the U.S. Treasury a
percentage of the taxable distributions and sale or redemption proceeds paid to
any shareholder who fails to properly furnish a correct taxpayer identification
number, who has underreported dividend or interest income, or who fails to
certify that he, she or it is not subject to such withholding.
Taxes
When Shares Are Sold on the Exchange.
Any
capital gain or loss realized upon a sale of Shares generally is treated as a
long-term capital gain or loss if Shares have been held for more than one year
and as a short-term capital gain or loss if Shares have been held for one year
or less. However, any capital loss on a sale of Shares held for six months or
less is treated as long-term capital loss to the extent of Capital Gain
Dividends paid with respect to such Shares. Any loss realized on a sale will be
disallowed to the extent Shares of the Fund are acquired, including through
reinvestment of dividends, within a 61-day period beginning 30 days before and
ending 30 days after the disposition of Shares. The ability to deduct capital
losses may be limited.
The
cost basis of Shares of the Fund acquired by purchase will generally be based on
the amount paid for the Shares and then may be subsequently adjusted for other
applicable transactions as required by the Code. The difference between the
selling price and the cost basis of Shares generally determines the amount of
the capital gain or loss realized on the sale or exchange of Shares. Contact the
broker through whom you purchased your Shares to obtain information with respect
to the available cost basis reporting methods and elections for your account.
Taxes
on Purchases and Redemptions of Creation Units.
An
AP having the U.S. dollar as its functional currency for U.S. federal income tax
purposes who exchanges securities for Creation Units generally recognizes a gain
or a loss. The gain or loss will be equal to the difference between the value of
the Creation Units at the time of the exchange and the exchanging AP’s aggregate
basis in the securities delivered, plus the amount of any cash paid for the
Creation Units. An AP who exchanges Creation Units for securities will generally
recognize a gain or loss equal to the difference between the exchanging AP’s
basis in the Creation Units and the aggregate U.S. dollar market value of the
securities received, plus any cash received for such Creation Units. The
Internal Revenue Service may assert, however, that a loss that is realized upon
an exchange of securities for Creation Units may not be currently deducted under
the rules governing “wash sales” (for an AP who does not mark-to-market their
holdings), or on the basis that there has been no significant change in economic
position. APs exchanging securities should consult their own tax advisor with
respect to whether wash sale rules apply and when a loss might be
deductible.
Any
gain or loss realized upon a creation or redemption of Creation Units will be
treated as capital or ordinary gain or loss, depending on the circumstances. Any
capital gain or loss realized upon redemption of Creation Units is generally
treated as long-term capital gain or loss if Shares have been held for more than
one year and as a short-term capital gain or loss if Shares have been held for
one year or less.
The
Fund may include a payment of cash in addition to, or in place of, the delivery
of a basket of securities upon the redemption of Creation Units. The Fund may
sell portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause the Fund to recognize investment income and/or capital
gains or losses that it might not have recognized if it had completely satisfied
the redemption in-kind. As a result, the Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
Foreign
Taxes.
To the extent the Fund invests in foreign securities, it may be subject to
foreign withholding taxes with respect to dividends or interest the Fund
received from sources in foreign countries.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in the Fund. It is not a substitute for
personal tax advice. You also may be subject to state and local tax on Fund
distributions and sales of Shares. Consult your personal tax advisor about the
potential tax consequences of an investment in Shares under all applicable tax
laws. For more information, please see the section entitled “Federal Income
Taxes” in the SAI.
Distribution
The
Distributor, Quasar Distributors, LLC, is a broker-dealer registered with the
SEC. The Distributor distributes Creation Units for the Fund on an agency basis
and does not maintain a secondary market in 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 address is 111 East Kilbourn
Avenue, Suite 2200, Milwaukee, Wisconsin 53202.
The
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, the Fund is authorized to
pay an amount up to 0.25% of its average daily net assets each year for certain
distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Fund, and there are no plans to impose
these fees. However, in the event Rule 12b-1 fees are charged in the future,
because the fees are paid out of 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.
Premium/Discount
Information
Information
regarding how often Shares traded on the Exchange at a price above (i.e.,
at a premium) or below (i.e.,
at a discount) the NAV of the Fund is available, free of charge, on the Fund’s
website at www.tctl.us.
Additional
Notices
Shares
are not sponsored, endorsed, or promoted by the Exchange. The Exchange makes no
representation or warranty, express or implied, to the owners of Shares 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 Exchange is not responsible
for, nor has it participated in, the determination of the compilation or the
calculation of the Index, nor in the determination of the timing, prices, or
quantities of Shares to be issued, nor in the determination or calculation of
the equation by which Shares are redeemable. The Exchange has no obligation or
liability to owners of Shares in connection with the administration, marketing,
or trading of the Shares.
The
Exchange does not guarantee the accuracy and/or the completeness of the Index or
the data included therein. The Exchange makes no warranty, express or implied,
as to results to be obtained by the Fund, owners of Shares, or any other person
or entity from the use of the Index or the data included therein. The Exchange
makes no express or implied warranties, and hereby expressly disclaims 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 Exchange have any liability for any lost
profits or indirect, punitive, special, or consequential damages even if
notified of the possibility thereof.
The
Adviser, the Exchange, and the Fund make no representation or warranty, express
or implied, to the owners of Shares or any member of the public regarding the
advisability of investing in securities generally or in the Fund particularly or
the ability of the Index to track general stock market performance. The Fund and
the Adviser do not guarantee the accuracy, completeness, or performance of the
Index or the data included therein and shall have no liability in connection
with the Index or Index calculation. The index calculation agent maintains and
calculates the Index used by the Fund. The index calculation agent shall have no
liability for any errors or omissions in calculating the Index.
The
Adviser owns the Index and the Index methodology and is a licensor of the Index
to the index receipt agent. The Adviser has contracted with the index
calculation agent to maintain and calculate the Index used by the Fund. The
index calculation agent shall have no liability for any errors or omissions in
calculating the Index.
Financial
Highlights
The
financial highlights table is intended to help you understand the Fund’s
financial performance for the Fund’s five most recent fiscal years (or the life
of the Fund, if shorter). Certain information reflects financial results for a
single Fund share. The total returns in the table represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by Cohen & Company, Ltd., the Fund’s independent registered public
accounting firm, whose report, along with the Fund’s financial statements, is
included in the Fund’s annual report, which is available upon request.
Premise
Capital Diversified Tactical ETF
|
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FINANCIAL
HIGHLIGHTS
For
a capital share outstanding throughout the year/period |
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended
September 30,
2021 |
|
Year
Ended
September 30,
2020 |
|
Year
Ended
September
30,
2019 |
|
Year
Ended
September
30,
2018 |
|
|
Period
Ended
September
30,
2017(1) |
|
| Net
asset value, beginning of year/period |
$ |
26.99 |
|
|
$ |
31.03 |
|
|
$ |
30.96 |
|
|
$ |
28.95 |
|
|
|
$ |
25.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| INCOME
(LOSS) FROM INVESTMENT OPERATIONS: |
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)(2)(7) |
0.33 |
|
|
0.36 |
|
|
0.48 |
|
|
0.46 |
|
|
|
0.41 |
|
|
| Net
realized and unrealized gain (loss) on investments |
5.68 |
|
|
(3.73) |
|
|
(0.15) |
|
|
1.95 |
|
|
|
3.70 |
|
|
| Total
from investment operations |
6.01 |
|
|
(3.37) |
|
|
0.33 |
|
|
2.41 |
|
|
|
4.11 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| DISTRIBUTIONS
TO SHAREHOLDERS: |
|
|
|
|
|
|
|
|
|
|
|
| Distributions
from: |
|
|
|
|
|
|
|
|
|
|
|
| Net
investment income |
(0.32) |
|
|
(0.67) |
|
|
(0.26) |
|
|
(0.40) |
|
|
|
(0.16) |
|
|
| Total
distributions to shareholders |
(0.32) |
|
|
(0.67) |
|
|
(0.26) |
|
|
(0.40) |
|
|
|
(0.16) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Net
asset value, end of year/period |
$ |
32.68 |
|
|
$ |
26.99 |
|
|
$ |
31.03 |
|
|
$ |
30.96 |
|
|
|
$ |
28.95 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Total
return |
22.37 |
% |
|
-11.24 |
% |
|
1.14 |
% |
|
8.39 |
% |
|
|
16.50 |
% |
(3) |
|
|
|
|
|
|
|
|
|
|
|
|
| SUPPLEMENTAL
DATA: |
|
|
|
|
|
|
|
|
|
|
|
| Net
assets at end of year/period (000’s) |
$ |
39,215 |
|
|
$ |
51,951 |
|
|
$ |
44,998 |
|
|
$ |
35,610 |
|
|
|
$ |
14,474 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| RATIOS
TO AVERAGE NET ASSETS: |
|
|
|
|
|
|
|
|
|
|
|
|
Expenses
to average net assets(4) |
0.75 |
% |
|
0.75 |
% |
|
0.75 |
% |
|
0.77 |
% |
(6) |
|
0.85 |
% |
(5) |
|
Net
investment income (loss) to average net assets(7) |
1.06 |
% |
|
1.26 |
% |
|
1.61 |
% |
|
1.52 |
% |
|
|
1.61 |
% |
(5) |
|
Portfolio
turnover rate(8) |
52 |
% |
|
224 |
% |
|
313 |
% |
|
195 |
% |
|
|
69 |
% |
(3) |
|
|
|
|
|
|
| (1) |
Commencement
of operations on October 27, 2016. |
| (2) |
Calculated
based on average shares outstanding during the period. |
| (3) |
Not
annualized. |
| (4) |
Does
not include expenses of the investment companies in which the Fund
invests. |
| (5) |
Annualized. |
| (6) |
Effective
January 31, 2018, the Adviser reduced its management fee from 0.85% to
0.75%. |
| (7) |
Recognition
of net investment income by the Fund is affected by the timing of
declarations of dividends by the underlying investment companies in which
the Fund invests. The ratio does not include net investment income of the
underlying investment companies in which the Fund invests. |
| (8) |
Excludes
the impact of in-kind transactions. |
Premise
Capital Diversified Tactical ETF
|
|
|
|
|
|
|
|
|
|
|
|
|
Adviser
and
Index
Provider |
Premise
Capital, LLC
300
East 5th Avenue, Suite 265
Naperville,
Illinois 60563 |
Custodian |
U.S.
Bank National Association
1555
N. Rivercenter Drive, Suite 302
Milwaukee,
Wisconsin 53212 |
|
Transfer
Agent,
Fund
Accountant
and
Fund
Administrator |
U.S.
Bancorp Fund Services, LLC
615
East Michigan Street
Milwaukee,
Wisconsin 53202 |
Distributor |
Quasar
Distributors, LLC
111
East Kilbourn Avenue, Suite 2200
Milwaukee,
Wisconsin 53202 |
|
Independent
Registered
Public
Accounting
Firm |
Cohen
& Company, Ltd.
342
North Water Street, Suite 830
Milwaukee,
Wisconsin 53202 |
Legal
Counsel |
Morgan,
Lewis & Bockius LLP
1111
Pennsylvania Avenue, NW
Washington,
D.C. 20004-2541 |
Investors
may find more information about the Fund in the following
documents:
Statement
of Additional Information: The
Fund’s SAI provides additional details about the investments of the Fund and
certain other additional information. A current SAI dated January 31, 2022,
as supplemented from time to time, is on file with the SEC and is herein
incorporated by reference into this Prospectus. It is legally considered a part
of this Prospectus.
Annual/Semi-Annual
Reports: Additional
information about the Fund’s investments is available in the Fund’s annual and
semi-annual reports to shareholders. In the annual
report,
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund’s performance.
You
can obtain free copies of these documents, request other information or make
general inquiries about the Fund by contacting the Fund at c/o U.S. Bank Global
Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or by calling
1-800-617-0004.
Shareholder
reports and other information about the Fund are also available:
•Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov; or
•Free
of charge from the Fund’s Internet web site at www.tctl.us,
or
(SEC
Investment Company Act File No. 811-22668)
