ck0001432353-20221130
Global X Carbon Credits Strategy ETF
NYSE
Arca: NTRL
Prospectus
April 11,
2023
The
Securities and Exchange Commission (“SEC”) and the Commodity Futures Trading
Commission (“CFTC”) have not approved or disapproved these securities or passed
upon the adequacy of this Prospectus. Any representation to the contrary is a
criminal offense.
Shares
in the Fund (defined below) are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other agency of the U.S. Government, nor are shares
deposits or obligations of any bank. Such shares in the Fund involve investment
risks, including the loss of principal.
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As
permitted by regulations adopted by the SEC, paper copies of the Fund's
shareholder reports will no longer be sent by mail, unless you
specifically request paper copies of the reports from your financial
intermediary (such as a broker-dealer or bank). Instead, shareholder
reports will be available on the Fund’s website
(www.globalxetfs.com/explore), and you will be notified by mail each time
a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you
will not be affected by this change and you need not take any action. You
may elect to receive shareholder reports and other communications from the
Funds electronically anytime by contacting your financial intermediary.
You may elect to receive all future Fund shareholder reports in paper free
of charge. Please contact your financial intermediary to inform them that
you wish to continue receiving paper copies of Fund shareholder reports
and for details about whether your election to receive reports in paper
will apply to all funds held with your financial
intermediary. |
TABLE
OF CONTENTS
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FUND
SUMMARY |
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ADDITIONAL
INFORMATION ABOUT THE FUND |
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A
FURTHER DISCUSSION OF PRINCIPAL RISKS |
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A
FURTHER DISCUSSION OF OTHER RISKS |
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PORTFOLIO
HOLDINGS INFORMATION |
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FUND
MANAGEMENT |
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DISTRIBUTOR |
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BUYING
AND SELLING FUND SHARES |
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FREQUENT
TRADING |
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DISTRIBUTION
AND SERVICE PLAN |
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DIVIDENDS
AND DISTRIBUTIONS |
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TAXES |
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DETERMINATION
OF NET ASSET VALUE |
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PREMIUM/DISCOUNT
AND SHARE INFORMATION |
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INFORMATION
REGARDING THE INDEX AND THE INDEX PROVIDER |
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OTHER
SERVICE PROVIDERS |
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ADDITIONAL
INFORMATION |
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FINANCIAL
HIGHLIGHTS |
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OTHER
INFORMATION |
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Global
X Carbon Credits Strategy ETF
Ticker:
NTRL Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The Global X Carbon Credits
Strategy ETF ("Fund") seeks to provide investment results that correspond
generally to the price and yield performance, before fees and expenses, of the
ICE Global Carbon Futures Index ("Underlying
Index").
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“Shares”) of
the Fund. You may pay other fees, such as brokerage commissions and other fees
to financial intermediaries, which are not reflected in the tables and examples
below.
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: |
0.39% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses:1 |
0.00% |
Total
Annual Fund Operating Expenses: |
0.39% |
1 Other Expenses are based
on estimated amounts for the current fiscal
year.
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund's operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
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One
Year |
Three
Years |
$40 |
$125 |
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. This is a new fund and does not yet have
a portfolio turnover rate to disclose.
PRINCIPAL INVESTMENT
STRATEGIES
Under
normal circumstances, the Fund invests, on a consolidated basis with the Global
X Subsidiary (as defined below), in long positions included in the ICE Global
Carbon Futures Index (the "Underlying Index") as well as in investments that
have economic characteristics that are similar to the economic characteristics
of such component positions, such that the notional exposure to the Underlying
Index is at least 80% of the Fund’s net assets, plus borrowings for investment
purposes (if any), as described in further detail below. The Fund's 80%
investment policy is non-fundamental and requires 60 days prior written notice
to shareholders before it can be changed.
The
Underlying Index is designed to provide exposure to the price of carbon
emissions through a long-only basket of carbon credit futures contracts. Carbon
credit futures are a means of providing exposure to carbon credits (also known
as carbon allowances) which are government-issued permits that allow a company
or entity to emit a specific quantity of carbon dioxide equivalent into the
atmosphere. Generally speaking, a carbon futures contract represents a lot
(typically 1,000) of the respective carbon credits. The value of the Underlying
Index is expected to increase if the value of the underlying basket of carbon
credit futures increases, and to decrease if the value of the underlying basket
of carbon credit futures decreases. The value of the underlying carbon credit
futures is expected to be driven primarily by supply and demand of the carbon
credits linked to the respective carbon credit futures contract. For example, if
the cost of carbon emissions increases (e.g. new regulation that increases
carbon emission restrictions) in the jurisdiction of one of the carbon credit
regimes that is reflected in the Underlying Index, the demand for those carbon
credits would be expected to increase. All else equal, this increased demand
would be
expected
to increase the price of the carbon credit futures linked to those carbon
credits, causing the Underlying Index to increase in value. In contrast, if the
cost of carbon emissions decreases (e.g. new regulation that decreases carbon
emission restrictions) in the jurisdiction of one of the carbon credit regimes
reflected in the Underlying Index, the demand for those carbon credits would be
expected to decrease. All else equal, this decreased demand would be expected to
decrease the price of the carbon credit futures linked to those carbon credits,
causing the Underlying Index to decrease in value.
The
Underlying Index seeks to provide exposure to the most actively traded carbon
credit futures that require “physical delivery” of emission allowances and that
are issued under “cap and trade” regimes, as determined by ICE Data Indices, LLC
(the “Index Provider”). A cap and trade regime is a market-based mechanism that
governments or regulatory bodies use to reduce carbon dioxide and other
greenhouse gases from entering the atmosphere. A cap and trade program is
designed to set a geographic limit on the amount of carbon dioxide that can be
emitted into the atmosphere by specific sectors of the economy. This limit
declines on an annual basis, with the intention of reducing the overall amount
of carbon dioxide emitted over time. Companies and other entities that are
obliged to comply within a specific cap and trade program must either reduce
their emissions below their allowable annual limit, or use additional carbon
credits which at least equal their emissions above their annual limit to comply
with the program. As of March 30, 2023, the Underlying Index consists of a
long-only basket of the following contracts (collectively, the
“Contracts”):
1.ICE
EUA Futures Contracts (“EUA Contracts”) - Each EUA Contract is euro-denominated
and represents a lot of 1,000 Carbon Emission Allowances (“EUAs”) that are
deliverable to or from the Union Registry under the European Union Emissions
Trading System. Each EUA is an entitlement to emit one metric ton of carbon
dioxide equivalent gas.
2.ICE
UK Allowance Futures Contracts (“UKA Contracts”) - Each UKA Contract is
pound-denominated and represents a lot of 1,000 UK Allowances (“UKAs”) that are
deliverable to or from the UK Emissions Trading Registry under the UK Emissions
Trading Scheme. Each UKA is an entitlement to emit one metric ton of carbon
dioxide equivalent gas.
3.ICE
California Carbon Allowance Futures Contracts (“CCA Contracts”) - Each CCA
Contract is dollar-denominated and represents a lot of 1,000 California Carbon
Allowances (“CCAs”) that are physically delivered greenhouse gas emissions
allowances issued by the California Air Resources Board or a linked program
under California Assembly Bill 32 "California Global Warming Solutions Act of
2006" and its associated regulations, rules and amendments, all together known
as the "California Cap and Trade Program". Each CCA is an entitlement to emit
one metric ton of carbon dioxide equivalent gas.
4.ICE
Regional Greenhouse Gas Initiative Futures Contracts (“RGGI Contracts”) - Each
RGGI Contract is dollar-denominated and represents a lot of 1,000 RGGI
Allowances (“RGGIs”) that are physically delivered greenhouse gas emissions
allowances issued by each state in the RGGI program. The Regional Greenhouse Gas
Initiative (RGGI) is a cooperative effort among the states of Connecticut,
Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York,
Rhode Island, Vermont and Virginia to cap and reduce power sector carbon dioxide
emissions. Each RGGI is an entitlement to emit one short ton of carbon dioxide
gas.
As
the global carbon credit market grows, additional carbon credit futures
contracts will be evaluated by the Index Provider for potential inclusion in the
Underlying Index.
The
Underlying Index is rebalanced annually, with the futures contract weights set
at the end of August and with the futures rolling process occurring over a
three-month period (the “Roll Period”), running from the first to the fifteenth
business day of the months of September, October, and November. The EUA and UKA
Contracts roll in one-third increments per month over the three-month Roll
Period, from the current year December expiration contract month to the next
year December expiration contract month. The CCA and RGGI Contracts roll in
one-third increments per month over the three-month Roll Period, from the
current year vintage/current year December expiration contract month to the next
year vintage/next year December expiration contract month. As of March 30, 2023,
the Underlying Index had four constituents.
As
of March 30, 2023, at the annual rebalance, the EUA Contracts have a maximum
weighting of 50%, the RGGI Contracts have a minimum weighting of 5%, and there
are no weight constraints for the UKA Contracts or the CCA contracts. The
rebalancing contract weights are calculated based on the total dollar volume of
the contracts utilizing closing settlement prices, contract sizes (all currently
in units of 1,000), and daily volumes, as determined by the Index Provider. The
total dollar volume is measured by the Index Provider based on the current year
December expiration EUA Contracts, current year December expiration UKA
Contracts, current year vintage/current year December expiration CCA Contracts,
and current year vintage/current year December expiration RGGI Contracts. As of
March 30, 2023, the weights in the Underlying Index for the EUA Contracts, UKA
Contracts, CCA Contracts and the RGGI Contracts, were 55.9%, 22.2%, 17.6%, and
4.2%, respectively.
The
Fund seeks to gain exposure to carbon credit futures, in whole or in part,
through investments in a subsidiary organized in the Cayman Islands, namely the
Global X Carbon Credit Strategy Subsidiary Limited (the “Global X Subsidiary”).
The Global
X
Subsidiary is wholly-owned and controlled by the Fund. The Fund’s investment in
the Global X Subsidiary may not exceed 25% of the Fund’s total assets at each
quarter-end of the Fund’s fiscal year. The Fund’s investment in the Global X
Subsidiary is intended to provide the Fund with exposure to carbon credit
futures while enabling the Fund to satisfy source-of-income requirements that
apply to regulated investment companies (“RICs”) under the Internal Revenue Code
of 1986, as amended (the “Code”). Except as noted, references to the investment
strategies and risks of the Fund include the investment strategies and risks of
the Global X Subsidiary.
The
Underlying Index is sponsored by the Index Provider, which is an organization
that is independent of, and unaffiliated with, the Fund and Global X Management
Company LLC, the investment adviser for the Fund ("Adviser"). In addition, any
determinations related to the constituents of the Underlying Index are made
independent of the Fund's portfolio managers. The Index Provider determines the
relative weightings of the futures contracts in the Underlying Index and
publishes information regarding the market value of the Underlying
Index.
The
Adviser 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
outperform the Underlying Index and does not seek temporary defensive positions
when markets decline or appear overvalued.
The
Fund generally uses a representative sampling strategy with respect to the
Underlying Index. "Representative sampling" is an indexing strategy that
involves investing in a representative sample of securities (including indirect
investments through underlying ETFs) that collectively has an investment profile
similar to the Underlying Index in terms of key risk factors, performance
attributes and other characteristics. The Adviser expects that, over time, the
correlation between the Fund's performance and that of the Underlying Index,
before fees and expenses, will exceed 95%. A correlation percentage of 100%
would indicate perfect correlation.
While
the Fund will generally seek to obtain exposure to the same carbon credit
futures contracts that are included in the Underlying Index, the Fund and
Subsidiary may not replicate the Underlying Index. For example, the Fund may
invest in carbon credit futures with different maturity dates, the Fund may
weight the carbon credit futures differently, and/or the Fund may purchase
carbon credit futures on different dates than the rebalancing date. The Fund may
also invest in other instruments that are consistent with its investment
objective but which are not included in the Underlying Index. For example, the
Fund may invest in emission allowances issued under a cap and trade regime,
options on futures contracts, swap contracts, and other investment companies and
notes, which may or may not be exchange-traded. The debt instruments in which
the Fund intends to invest indirectly, through short-term bond funds and
exchange-traded funds (“ETFs”), include government securities and corporate or
other non-government fixed-income securities with maturities of up to 12 months.
The Fund may also invest in cash and cash equivalents, including money market
funds and repurchase agreements.
The Fund concentrates its investments
(i.e., holds 25% or more of its total assets) in a particular industry or group
of industries to approximately the same extent that the Underlying Index is
concentrated. To the extent the Underlying Index is concentrated in a particular
industry, the Fund is expected to be concentrated in that industry (using the
notional value of any futures in which it invests). The Fund is classified as
“non-diversified,” which means it may invest a larger percentage of its assets
in a smaller number of issuers than a diversified
fund.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund's performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund's net asset value ("NAV"),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Fund
section of this Prospectus and in the Statement of Additional Information
("SAI"). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Asset
Class Risk:
Securities and other assets in the Underlying Index or otherwise held in the
Fund's portfolio may underperform in comparison to the general securities
markets, a particular securities market or other asset classes.
Carbon
Credit Futures Risk: The
use of carbon credit futures contracts is subject to special risk
considerations. The primary risks associated with the use of futures contracts
include: (a) an imperfect correlation between the change in market value of the
reference asset and the price of the futures contract; (b) possible lack of a
liquid secondary market for a futures contract and the resulting inability to
close a futures contract when desired; (c) losses caused by
unanticipated
market movements, which are potentially unlimited; (d) the inability to predict
correctly the direction of market prices, interest rates, currency exchange
rates and other economic factors; and (e) if the Fund has insufficient cash, it
may have to sell securities or financial instruments from its portfolio to meet
daily variation margin requirements, which may lead to the Fund selling
securities or financial instruments at a loss. As a futures contract the Fund
owns approaches its settlement date, the Fund may sell that futures contract and
reinvest the proceeds in a similar contract with a more distant settlement date.
This process is referred to as “rolling” a futures contract. The successful use
of such a strategy depends upon the Adviser’s skill and experience. Although the
Fund will attempt to roll from an expiring futures contract to another contract
that the Adviser believes will generate the greatest yield for the Fund, the
Fund nevertheless may incur a cost to “roll” the contract. In a commodity
futures market where current month expiring contracts trade at a lower price
than next month’s contract, a situation referred to as “contango,” then, absent
the impact of the overall movement in commodity prices, the Fund may experience
an adverse impact because it would be selling less expensive contracts and
buying more expense contracts. In the event of a prolonged period of contango,
and absent the impact of rising or falling commodity prices, there could be a
significant negative impact on the Fund when it “rolls” its futures contract
positions.
Derivatives
Risk:
The Fund may gain exposure to different asset classes by investing in different
types of derivative instruments. Derivatives can be more sensitive to changes in
interest rates or to sudden fluctuations in market prices than conventional
securities, which can result in greater losses for the Fund. In addition, the
prices of the derivative instruments and the prices of underlying securities,
interest rates or currencies they are designed to reflect may not move together
as expected. A risk of the Fund’s use of derivatives is that the fluctuations in
their values may not correlate perfectly with the relevant reference index.
Derivatives are usually traded on margin, which may subject the Fund to margin
calls. Margin calls may force the Fund to liquidate assets.
ETF
Investment Risk:
While the risks of owning shares of an underlying ETF generally reflect the
risks of owning the underlying securities of the index the ETF is designed to
track, lack of liquidity in the underlying ETF can result in its value being
more volatile than the underlying portfolio securities. Because the value of an
underlying ETF's shares depends on the demand in the market, the Adviser may not
be able to liquidate the Fund’s holdings in those shares at the most optimal
time, thereby adversely affecting the Fund’s performance. An underlying ETF may
experience tracking error in relation to the index tracked by the underlying
ETF, which could contribute to tracking error for the Fund. In addition, an
underlying ETF's shares may trade at a premium or discount to NAV.
In
addition, investments in the securities of underlying ETFs may involve
duplication of advisory fees and certain other expenses. The Fund will pay
brokerage commissions in connection with the purchase and sale of shares of the
underlying ETFs, which could result in greater expenses to the Fund. By
investing in an underlying ETF, the Fund becomes a shareholder thereof. As a
result, Fund shareholders indirectly bear the Fund’s proportionate share of the
fees and expenses indirectly paid by shareholders of the underlying ETF, in
addition to the fees and expenses Fund shareholders indirectly bear in
connection with the Fund’s own operations.
If
the underlying ETF fails to achieve its investment objective, the value of the
Fund’s investment may decline, adversely affecting the Fund’s performance.
Additionally, some ETFs are not registered under the Investment Company Act of
1940 (“1940 Act”) and therefore, are not subject to the regulatory scheme and
investor protections of the 1940 Act.
Fixed
Income Securities Risk: A
rise in interest rates typically causes bond prices to fall. The longer the
average maturity or duration of the bonds held by the Fund, the more sensitive
it will likely be to interest-rate fluctuations. An unexpected event could
interfere with an issuer’s ability to make timely interest or principal payments
or that causes market speculation about the issuer’s ability to make such
payments, which could cause the credit quality and market value of an issuer’s
bonds and/or other debt securities to decline significantly.
Carbon
Emission Allowance and Cap and Trade Risk: There
is no assurance that cap and trade regimes will continue to exist. Cap and trade
regimes are designed to reduce certain types of pollution by putting a price on
carbon emissions, but the approach may not prove to be an effective method of
reduction in Greenhouse Gas ("GHG") emissions and/or in achieving climate change
objectives. As a result, or due to other factors, cap and trade regimes may be
terminated or may not be renewed upon their expiration. In addition, new
technologies may arise that may diminish or eliminate the need for cap and trade
markets. Ultimately, the cost of emissions credits is determined by the cost of
actually reducing emissions levels. If the price of emissions credits becomes
too high, it will be more economical for companies to develop or invest in green
technologies, thereby suppressing the demand for credits and adversely affecting
the price of the Fund. Cap and trade regimes set emission limits (i.e., the
right to emit a certain quantity of GHG emissions), which can be allocated or
auctioned to the parties regulated under the regime up to the total emissions
cap. This allocation may be larger or smaller than is needed for a stable price
of
credits
and can lead to large price volatility, which could affect the value of the
Fund. Depending upon the industries covered under each cap and trade mechanism
represented in the Index, unpredictable demand for their products and services
can affect the value of GHG emissions credits. For example, very mild winters or
very cool summers can decrease demand for electric utilities and therefore
require fewer carbon credits to offset reduced production and GHG
emissions.
Regulatory
risk related to changes in regulation and enforcement of cap and trade regimes
could adversely affect the Fund. If fines or other penalties for non-compliance
are not enforced, incentives to purchase GHG credits will deteriorate, which
could result in a decline in the price of emissions credits and a drop in the
value of the Fund. In addition, as cap and trade markets develop, new regulation
with respect to these markets may arise, which could have a negative effect on
the value and liquidity of the cap and trade markets and the Fund.
Cash
Transaction Risk:
Unlike most exchange-traded funds ("ETFs"), the Fund intends to effect a
significant portion of creations and redemptions for cash, rather than in-kind
securities. As a result, an investment in the Fund may be less tax-efficient
than an investment in a more conventional ETF. Moreover, cash transactions may
have to be carried out over several days if the securities market is relatively
illiquid and may involve considerable brokerage fees and taxes. These factors
may result in wider spreads between the bid and the offered prices of the Fund’s
Shares than for more conventional ETFs.
Commodity
Pool Registration Risk: Under
amended regulations promulgated by the CFTC, the Fund and the Subsidiary will be
considered commodity pools upon commencement of operations, and therefore each
will be subject to regulation under the Commodity Exchange Act and CFTC rules.
Global X will register as a commodity pool operator and will manage the Fund and
the Subsidiary in accordance with CFTC rules, as well as the rules that apply to
registered investment companies. Commodity pools are subject to additional laws,
regulations and enforcement policies, all of which may potentially increase
compliance costs and may affect the operations and financial performance of the
Fund and the Subsidiary. Additionally, positions in futures and other contracts
may have to be liquidated at disadvantageous times or prices to prevent the Fund
from exceeding any applicable position limits established by the CFTC. Such
actions may subject the Fund to substantial losses.
Currency
Risk:
The Fund may invest in securities denominated in foreign currencies. Because the
Fund's NAV is determined in U.S. dollars, the Fund's NAV could decline if
currencies of the underlying securities depreciate against the U.S. dollar or if
there are delays or limits on repatriation of such currencies. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the Fund's NAV may change quickly and without warning, which could have
a significant negative impact on the Fund.
Custody
Risk:
The Fund may hold foreign securities and cash with foreign banks, agents, and
securities depositories appointed by the Fund's custodian. Investments in
emerging markets may be subject to even greater custody risks than investments
in more developed markets. Less developed markets are more likely to experience
problems with the clearing and settling of trades and the holding of securities
by local banks, agents and depositories.
Focus
Risk:
To the extent that the Underlying Index focuses in investments related to a
particular industry or group of industries, the Fund will also focus its
investments to approximately the same extent. Similarly, if the Underlying Index
has significant exposure to one or more sectors, the Fund’s investments will
likely have significant exposure to such sectors. In such event, the Fund’s
performance will be particularly susceptible to adverse events impacting such
industry or sector, which may include, but are not limited to, the following:
general economic conditions or cyclical market patterns that could negatively
affect supply and demand; competition for resources; adverse labor relations;
political or world events; obsolescence of technologies; and increased
competition or new product introductions that may affect the profitability or
viability of companies in a particular industry or sector. As a result, the
value of the Fund’s investments may rise and fall more than the value of shares
of a fund that invests in securities of companies in a broader range of
industries or sectors.
Foreign
Securities Risk:
The Fund may invest, within U.S. regulations, in foreign securities. The Fund's
investments in foreign securities can be riskier than U.S. securities
investments. Investments in the securities of foreign issuers (including
investments in ADRs and GDRs) are subject to the risks associated with investing
in those foreign markets, such as heightened risks of inflation or
nationalization. The prices of foreign securities and the prices of U.S.
securities have, at times, moved in opposite directions. In addition, securities
of foreign issuers may lose value due to political, economic and geographic
events affecting a foreign issuer or market. During periods of social, political
or economic instability in a country or region, the value of a foreign security
traded on U.S. exchanges could be affected by, among other things, increasing
price volatility, illiquidity, or the closure of the primary market on which the
security (or the security underlying the ADR or GDR) is traded. You may lose
money due to political, economic and geographic events affecting a foreign
issuer or market. Where all or a portion of the Fund's underlying securities
trade in a market that is closed when the market in which the Fund's shares are
listed and trading is open, there may be differences between the last quote from
the security’s closed foreign market and the value of the security
during
the Fund’s domestic trading day. This in turn could lead to differences between
the market price of the Fund’s shares and the underlying value of those shares.
Geographic
Economic Exposure Risk: The
constituents held by the Fund may have partners, suppliers and/or customers
located in various geographic regions, and the geographic regions in which Fund
constituents are located may have trading partners in other geographic regions.
As a result, an economic downturn in one or more of these regions may impact the
performance of the constituents in which the Fund invests, even if the Fund does
not invest directly in companies located in such region. The risks related to
such regions may include:
California
Economic Risk: Because
the Fund will gain exposure to carbon credit futures issued under the California
Carbon Allowance “cap and trade” program, the Fund’s performance also may be
negatively impacted by factors affecting California. For example, natural
disasters may disrupt the local, state or regional economy or certain sectors of
the economy and may impact the prices of such carbon credit futures.
California’s budget and fiscal operations face certain structural impediments
and rely on revenue sources which have been historically sensitive to the
economic environment. California’s diverse economy is the largest in the United
States and one of the largest in the world with major components including high
technology, trade, entertainment, manufacturing, tourism, construction,
agriculture and services. Any downturn in these sectors or related industries
may adversely affect the economy of the state and the prices of such carbon
credit futures.
European
Economic Risk: Because
the Fund will gain exposure to carbon credit futures issued under the European
Union Emissions Trading System “cap and trade” program, the Fund’s performance
also may be negatively impacted by factors affecting the European Union. The
economies of Europe are highly dependent on each other, both as key trading
partners and, in many cases, as fellow members maintaining the euro. Decreasing
European imports, new trade regulations, changes in exchange rates, a recession
in Europe, or a slowing of economic growth in this region could have an adverse
impact on the securities in which the Fund invests. Reduction in trading
activity among European countries may cause an adverse impact on each nation’s
individual economies. The Economic and Monetary Union of the European Union (the
“EU”) requires compliance with restrictions on inflation rates, deficits,
interest rates, debt levels and fiscal and monetary controls, each of which may
significantly affect every country in Europe, including those countries that are
not members of the EU. Decreasing imports or exports, changes in governmental or
EU regulations on trade, changes in the exchange rate of the euro, the default
or threat of default by an EU member country on its sovereign debt, and
recessions in an EU member country may have a significant adverse effect on the
economies of EU member countries and their trading partners. The European
financial markets have historically experienced volatility and adverse trends
due to concerns about economic downturns or rising government debt levels in
several European countries, including, but not limited to, Austria, Belgium,
Cyprus, France, Greece, Ireland, Italy, Portugal, Spain and Ukraine. These
events have adversely affected the exchange rate of the euro and may continue to
significantly affect European countries.
Responses
to financial problems by European governments, central banks and others,
including austerity measures and reforms, may not produce the desired results,
may result in social unrest, may limit future growth and economic recovery or
may have other unintended consequences. Further defaults or restructurings by
governments and other entities of their debt could have additional adverse
effects on economies, financial markets and asset valuations around the world.
In addition, one or more countries may abandon the euro and/or withdraw from the
EU. In a referendum held on June 23, 2016, the United Kingdom resolved to leave
the European Union, which departure has become known as “Brexit”. Brexit
introduced significant uncertainties and instability in the financial markets as
the United Kingdom negotiated its departure from the European Union. The United
Kingdom officially stopped being a member of the European Union on January 31,
2020. Prior to the end of the “transition period” for Brexit, the European Union
and the United Kingdom ratified the EU-UK Trade and Cooperation Agreement (TCA),
which lays out the terms of the United Kingdom's future cooperation with the
European Union. The political, economic and legal consequences of Brexit and the
TCA are not yet fully known. Secessionist movements, such as the Catalan
movement in Spain and the independence movement in Scotland, as well as
governmental or other responses to such movements, may also create instability
and uncertainty in the region. In addition, the national politics of countries
in the EU have been unpredictable and subject to influence by varying political
groups and ideologies. The governments of EU countries may be subject to change
and such countries may experience social and political unrest. Unanticipated or
sudden political or social developments may result in sudden and significant
investment losses. The occurrence of terrorist incidents throughout Europe also
could impact financial markets. The impact of these events is not clear but
could be significant and far-reaching and could adversely affect the value and
liquidity of the Fund’s investments.
Economies
of certain Eastern European countries rely heavily on the export of commodities,
including oil and gas, and certain metals. As a result, such economies will be
impacted by international commodity prices and are particularly
vulnerable
to global demand for these products. Acts of terrorism in certain Eastern
European countries may cause uncertainty in their financial markets and
adversely affect the performance of the issuers to which the Fund has exposure.
The securities markets in Eastern European countries are substantially smaller
and inexperienced, with less government supervision and regulation of stock
exchanges and are less liquid and more volatile than securities markets in the
United States or Western European countries. Other risks related to the
economies of Eastern European include: the absence of legal structures governing
private and foreign investments and private property; the possibility of
expropriation; certain national policies which may restrict the capital market
activity, including, without limitation, restrictions on investing in issuers or
industries deemed sensitive to relevant national interests.
North
American Economic Risk: A
decrease in imports or exports, changes in trade regulations or an economic
recession in any North American country can have a significant economic effect
on the entire North American region and on some or all of the North American
countries to which the Fund has economic exposure. The U.S. is Canada's and
Mexico's largest trading and investment partner. The Canadian and Mexican
economies are significantly affected by developments in the U.S. economy. Since
the implementation of the North American Free Trade Agreement (“NAFTA”) in 1994
among Canada, the U.S. and Mexico, total merchandise trade among the three
countries has increased. However, political developments in the U.S., including
the renegotiation of NAFTA and imposition of tariffs by the U.S., may have
implications for the trade arrangements among the U.S., Mexico and Canada, which
could negatively affect the value of securities held by the Fund. Policy and
legislative changes in any of the three countries may have a significant effect
on North American economies generally, as well as on the value of certain
securities held by the Fund.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
International
Closed Market Trading Risk: To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other exchange-traded funds
("ETFs").
Liquidity
Risk:
The Fund’s investments are subject to liquidity risk, which exists when an
investment is or becomes difficult or impossible to purchase or sell at an
advantageous time and price. If a transaction is particularly large or if the
relevant market is or becomes illiquid, it may not be possible to initiate a
transaction or liquidate a position, which may cause the Fund to suffer
significant losses and difficulties in meeting redemptions. Liquidity risk may
be the result of, among other things, market turmoil, the reduced number and
capacity of traditional market participants, or the lack of an active trading
market. Markets for securities or financial instruments could be disrupted by a
number of events, including, but not limited to, an economic crisis, natural
disasters, new legislation or regulatory changes inside or outside the U.S.
Liquid investments may become less liquid after being purchased by the Fund,
particularly during periods of market stress. In addition, if a number of
securities held by the Fund stop trading, it may have a cascading effect and
cause the Fund to halt trading. Volatility in market prices will increase the
risk of the Fund being subject to a trading halt. Certain countries in which the
Fund may invest may be subject to extended settlement delays and/or foreign
holidays, during which the Fund will unlikely be able to convert holdings to
cash.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2023,
central banks had already increased interest rates at the fastest rate on
record, and it is unknown how long this trend will continue and when inflation
will return to target levels. This increases the risk that monetary policy may
provide less support should economic growth slow. Additionally, China’s shift
away from a zero-COVID policy creates both opportunities and risks, causing
uncertainty for global economic growth. Market risk factors may result in
increased volatility and/or decreased liquidity in the securities markets. The
Fund’s NAV could decline over short periods due to short-term market movements
and over longer periods during market downturns.
New
Fund Risk: The
Fund is a new fund, with no operating history, which may result in additional
risks for investors in the Fund. There can be no assurance that the Fund will
grow to or maintain an economically viable size, in which case the Board of
Trustees may determine to liquidate the Fund. While shareholder interests will
be the paramount consideration, the timing of any liquidation may not be
favorable to certain individual shareholders. New funds are also subject to
Large Shareholder Risk.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to reduce these operational risks
through controls and procedures. However, these measures do not address every
possible risk and may be inadequate for those risks that they are intended to
address.
Passive
Investment Risk:
The Fund is not actively managed, and the Adviser does not attempt to take
defensive positions in declining markets. Unlike many investment companies, the
Fund does not seek to outperform its Underlying Index. Therefore, it would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk:
There is no guarantee that the Fund will achieve a high degree of correlation to
the Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk:
The Fund may not fully replicate its Underlying Index and may hold securities
not included in its Underlying Index. The Adviser’s investment strategy, the
implementation of which is subject to a number of constraints, may cause the
Fund to underperform the market or its relevant benchmark or adversely affect
the ability of the Fund to achieve its investment objective.
Tracking
Error Risk:
Tracking error may occur because of differences between the instruments held in
the Fund's portfolio and those included in the Underlying Index, pricing
differences, transaction costs incurred by the Fund, the Fund's holding of
uninvested cash, size of the Fund, differences in timing of the accrual of or
the valuation of dividends or interest, tax gains or losses, changes to the
Underlying Index or the costs to the Fund of complying with various new or
existing regulatory requirements. This risk may be heightened during times of
increased market volatility or other unusual market conditions. Tracking error
also may result because the Fund incurs fees and expenses, while the Underlying
Index does not.
Potential
Substantial After-Tax Tracking Error From Index Performance Risk:
The Fund will be subject to taxation on its taxable income. The NAV of Shares
will also be reduced by the accrual of any deferred tax liabilities. The
Underlying Index, however, is calculated without any deductions for taxes. As a
result, the Fund’s performance could differ significantly from the Underlying
Index even if the pretax performance of the Fund and the performance of the
Underlying Index are closely correlated. The performance of the Fund may diverge
from that of the Underlying Index.
Regulatory
Risk:
The Fund is subject to the risk that a change in U.S. law and related
regulations will impact the way the Fund operates, increase the particular costs
of the Fund’s operations and/or change the competitive landscape. Additional
legislative or regulatory changes could occur that may materially and adversely
affect the Fund.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, Shares may be more
likely to trade at a premium or discount to NAV and/or at wider intraday bid-ask
spreads, and possibly face trading halts and/or delisting from an exchange.
Authorized Participants Concentration Risk may be heightened because the Fund
invests in non-U.S. securities.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. In stressed market
conditions, the market for the Shares may become less liquid in response to the
deteriorating liquidity of the Fund’s portfolio. This adverse effect on the
liquidity of the Shares, as well as disruptions to creations and redemptions,
the existence of extreme market volatility or potential lack of assets in the
Fund or an active trading market for Shares may result in Shares trading at a
significant premium or discount to NAV. If a shareholder purchases Shares at a
time when the market price is at a premium to the NAV or sells Shares at a time
when the market price is at a discount to the NAV, the shareholder may sustain
losses. The NAV of the Fund is calculated at the end of each business day and
fluctuates with changes in the market value of the Fund’s holdings. The trading
price of the Fund’s shares fluctuates, in some cases materially, throughout
trading hours in response to changes in the Fund’s NAV.
Subsidiary
Investment Risk:
Changes in the laws of the United States and/or the Cayman Islands, under which
the Fund and the Global X Subsidiary are organized, respectively, could result
in the inability of the Global X Subsidiary to operate as intended and could
negatively affect the Fund and its shareholders.
Tax
Risk:
The Fund expects to obtain exposure to carbon credits by purchasing listed
futures contracts. The Fund intends to invest in such contracts, in whole or in
part, indirectly through the Global X Subsidiary. In order for the Fund to
qualify as a RIC, the Fund must, amongst other requirements detailed in the SAI,
derive at least 90% of its gross income each taxable year from qualifying
income. Income from listed carbon credits futures contracts in which the Fund
invests directly may not be considered qualifying income. The Fund will seek to
limit such income so as to qualify as a RIC. Failure to comply with the
requirements for qualification as a RIC would have significant negative tax
consequences to Fund shareholders.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Turnover
Risk: The
Fund may engage in frequent and active trading, which may significantly increase
the Fund’s portfolio turnover rate. At
times, the Fund may have a portfolio turnover rate substantially greater than
100%. For example, a portfolio turnover rate of 300%
is equivalent to the Fund buying and selling all of its securities three times
during the course of a year. A
high portfolio turnover rate would result in
high brokerage costs for the Fund, may result in higher taxes when shares are
held in a taxable account and lower Fund performance.
U.S.
Government Obligations Risk:
U.S. government obligations may differ in their interest rates, maturities,
times of issuance and other characteristics. Similar to other issuers, changes
to the financial condition or credit rating of the U.S. government may cause the
value of the Fund's investments in U.S. government obligations to
decline.
Valuation
Risk:
The sales price 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 Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). 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.
Volatility
Risk:
The Fund may have investments that appreciate or decrease significantly in value
over short periods of time. This may cause the Fund’s net asset value per share
to experience significant appreciations or decreases in value over short periods
of time.
PERFORMANCE
INFORMATION
The Fund does not have a full calendar year
of performance. Once the Fund
has completed a full calendar year of operations, a bar chart and table will be
included that will provide some indication of the risks of investing in the Fund
by showing the variability of the Fund's returns and comparing the Fund's
performance to the Underlying Index. The Fund's performance is not
necessarily indicative of how the Fund will perform in the
future.
Updated
performance information will be available online at
www.globalxetfs.com.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC.
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; and Sandy Lu, CFA
(“Portfolio Managers”). Messrs. To, Xie and Lu and Ms. Chan and Ms. Yang have
been Portfolio Managers of the Fund since 2023.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
"Authorized Participants" (as defined in the SAI) who have entered into
agreements with the Fund's distributor, SEI Investments Distribution Co.
("Distributor"), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called "Creation Units". The Fund will issue or redeem Creation
Units in return for a basket of cash and/or securities that the Fund specifies
any day that the national securities exchanges are open for business (“Business
Day”). An investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares of the Fund (bid) and
the lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account ("IRA"), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary's website for more
information.
ADDITIONAL
INFORMATION ABOUT THE FUND
This
Prospectus contains information about investing in the Fund. Please read this
Prospectus carefully before you make any investment decisions. Shares of the
Fund are listed for trading on a national securities exchange. The market price
for a Share of the Fund may be different from the Fund's most recent NAV. ETFs
are funds that trade like other publicly-traded securities. The Fund is designed
to track the Underlying Index. Similar to shares of an index mutual fund, each
Share of the Fund represents an ownership interest in an underlying portfolio of
securities. Unlike shares of a mutual fund, which can be bought and redeemed
from the issuing fund by all shareholders at a price based on NAV, Shares of the
Fund may be purchased or redeemed directly from the Fund at NAV solely by
Authorized Participants and only in Creation Unit increments. Also, unlike
shares of a mutual fund, Shares of the Fund are listed on a national securities
exchange and trade in the secondary market at market prices that change
throughout the day. The Fund is designed to be used as part of broader asset
allocation strategies. Accordingly, an investment in the Fund should not
constitute a complete investment program. An index is a financial calculation,
based on a grouping of financial instruments, and is not an investment product,
while the Fund is an actual investment portfolio. The performance of the Fund
and its Underlying Index may vary for a number of reasons, including transaction
costs, non-U.S. currency valuations, asset valuations, corporate actions (such
as mergers and spin-offs), timing variances and differences between the Fund's
portfolio and the Underlying Index resulting from the Fund's legal restrictions
(such as diversification requirements) that apply to the Fund but not to the
Underlying Index.
The
investment objective of the Fund is to seek to provide investment results that
correspond generally to the price and yield performance, before fees and
expenses, of the Underlying Index. Under normal circumstances, the Fund invests,
on a consolidated basis with the Global X Subsidiary (as defined below), in long
positions included in the ICE Global Carbon Futures Index (the "Underlying
Index") as well as in investments that have economic characteristics that are
similar to the economic characteristics of such component positions, such that
the notional exposure to the Underlying Index is at least 80% of the Fund’s net
assets, plus borrowings for investment purposes (if any). The Fund's 80%
investment policy is non-fundamental and requires 60 days prior written notice
to shareholders before it can be changed. The Fund generally uses a
representative sampling strategy with respect to the Underlying Index.
"Representative sampling" is an indexing strategy that involves investing in a
representative sample of securities (including indirect investments through
underlying ETFs) that collectively has an investment profile similar to the
Underlying Index in terms of key risk factors, performance attributes and other
characteristics. These include country weightings, market capitalization and
other financial characteristics of securities. The Fund may sell securities that
are represented in its Underlying Index in anticipation of their removal from
such Underlying Index or purchase securities not represented in its Index in
anticipation of their addition to such Underlying Index. The Fund's investment
objective and its Underlying Index may be changed without shareholder approval
upon at least 60 days prior written notice to shareholders.
A
FURTHER DISCUSSION OF PRINCIPAL RISKS
The
Fund is subject to various risks, including the principal risks noted below, any
of which may adversely affect the Fund's NAV, trading price, yield, total return
and ability to meet its investment objective. You could lose all or part of your
investment in the Fund, and the Fund could underperform other
investments.
Asset
Class Risk
The
returns from the types of securities and/or assets in which the Fund invests may
under-perform returns from the various general securities markets or different
asset classes. The assets in the Underlying Index may under-perform investments
that track other markets, segments, sectors or assets. Different types of assets
tend to go through cycles of out-performance and under-performance in comparison
to the general securities markets.
Carbon
Credit Futures Risk
The
use of carbon credit futures contracts is subject to special risk
considerations. The primary risks associated with the use of futures contracts
include: (a) an imperfect correlation between the change in market value of the
reference asset and the price of the futures contract; (b) possible lack of a
liquid secondary market for a futures contract and the resulting inability to
close a futures contract when desired; (c) losses caused by unanticipated market
movements, which are potentially unlimited; (d) the inability to predict
correctly the direction of market prices, interest rates, currency exchange
rates and other economic factors; and (e) if the Fund has insufficient cash, it
may have to sell securities or financial instruments from its portfolio to meet
daily variation margin requirements, which may lead to the Fund selling
securities or financial instruments at a loss. As a futures contract the Fund
owns approaches its settlement date, the Fund may sell that futures contract and
reinvest the proceeds in a similar contract with a more distant settlement date.
This process is referred to as “rolling” a futures contract. The successful use
of such a strategy
depends
upon the Adviser’s skill and experience. Although the Fund will attempt to roll
from an expiring futures contract to another contract that the Adviser believes
will generate the greatest yield for the Fund, the Fund nevertheless may incur a
cost to “roll” the contract. In a commodity futures market where current month
expiring contracts trade at a lower price than next month’s contract, a
situation referred to as “contango,” then, absent the impact of the overall
movement in commodity prices, the Fund may experience an adverse impact because
it would be selling less expensive contracts and buying more expense contracts.
In the event of a prolonged period of contango, and absent the impact of rising
or falling commodity prices, there could be a significant negative impact on the
Fund when it “rolls” its futures contract positions.
Derivatives
Risk
Derivatives
risk is the risk that loss may result from the Fund’s investments in options,
futures and swap contracts, which may be leveraged and are types of derivatives.
Investments in leveraged instruments may result in losses exceeding the amounts
invested. The Fund may use these instruments to help it track its Underlying
Index. Compared to conventional securities, derivatives can be more sensitive to
changes in interest rates or to sudden fluctuations in market prices and thus
the Fund’s losses may be greater if it invests in derivatives than if it invests
only in conventional securities.
Derivative
instruments may be leveraged, which may result in losses exceeding the amounts
invested. Risks of these instruments include:
•That
prices of the instruments and the prices of underlying securities, interest
rates or currencies they are designed to reflect do not move together as
expected; a risk of the Fund’s use of derivatives is that the fluctuations in
their values may not correlate perfectly with its Underlying Index;
•The
possible absence of a liquid secondary market for any particular instrument and,
for exchange traded instruments, possible exchange-imposed price fluctuation
limits, either of which may make it difficult or impossible to close out a
position when desired;
•That
adverse price movements in an instrument can result in a loss substantially
greater than the Fund’s initial investment in that instrument (in some cases,
the potential loss is unlimited);
•Particularly
in the case of privately-negotiated instruments, that the counterparty will not
perform its obligations, which could leave the Fund worse off than if it had not
entered into the position;
•The
inability to close out certain hedged positions to avoid adverse tax
consequences, and the fact that some of these instruments may have uncertain tax
implications for the Fund;
•The
fact that “speculative position limits” imposed by the CFTC and certain futures
exchanges on net long and short positions may require the Fund to limit or
unravel positions in certain types of instruments; and
•The
high levels of volatility some of these instruments may exhibit, in some cases
due to the high levels of leverage an investor may achieve with
them.
ETF
Investment Risk
The
Fund may hold ETFs to gain exposure to certain asset classes. As a result, the
Fund may be subject to the same risks as the underlying ETFs. While the risks of
owning shares of an underlying ETF generally reflect the risks of owning the
underlying securities the ETF is designed to track, lack of liquidity in an
underlying ETF can result in its value being more volatile than the underlying
portfolio securities. Because the value of an underlying ETF's shares depends on
the demand in the market, the Adviser may not be able to liquidate the Fund’s
holdings in those shares at the most optimal time, thereby adversely affecting
the Fund’s performance. An underlying ETF may experience tracking error in
relation to the index tracked by the underlying ETF, which could contribute to
tracking error for the Fund. In addition, an underlying ETF's shares may trade
at a premium or discount to NAV.
In
addition, investments in the securities of underlying ETFs may involve
duplication of advisory fees and certain other expenses. The Fund will pay
brokerage commissions in connection with the purchase and sale of shares of
underlying ETFs, which could result in greater expenses to the Fund. By
investing in an underlying ETF, the Fund becomes a shareholder thereof. As a
result, Fund shareholders indirectly bear the Fund’s proportionate share of the
fees
and expenses indirectly paid by shareholders of the underlying ETF, in addition
to the fees and expenses Fund shareholders indirectly bear in connection with
the Fund’s own operations. In addition, certain of the underlying ETFs may hold
common portfolio positions, thereby reducing the diversification benefits of an
asset allocation style.
If
an underlying ETF fails to achieve its investment objective, the value of the
Fund’s investment may decline, adversely affecting the Fund’s performance.
Additionally, some ETFs are not registered under the 1940 Act and therefore, are
not subject to the regulatory scheme and investor protections of the 1940 Act.
A
complete list of each underlying ETF held by the Fund can be found daily on the
Trust’s website. Each investor should review the complete description of the
principal risks of each underlying ETF prior to investing in the
Fund.
Fixed
Income Securities Risk
A
rise in interest rates typically causes bond prices to fall. The longer the
average maturity or duration of the bonds held by the Fund, the more sensitive
it will likely be to interest-rate fluctuations. An unexpected event could
interfere with an issuer’s ability to make timely interest or principal payments
or that causes market speculation about the issuer’s ability to make such
payments, which could cause the credit quality and market value of an issuer’s
bonds and/or other debt securities to decline significantly.
Carbon
Emission Allowance and Cap and Trade Risk
There
is no assurance that cap and trade regimes will continue to exist. Cap and trade
was designed to attempt to put a cap on pollution by putting a price on carbon
emissions, but the approach may not prove to be an effective method of reduction
in Green House Gases emissions and or in achieving climate change objectives. As
a result or due to other factors, cap and trade regimes may be terminated or may
not be renewed upon their expiration. New technologies may arise that may
diminish or eliminate the need for cap and trade markets. Ultimately, the cost
of emissions credits is determined by the cost of actually reducing emissions
levels. If the price of credits becomes too high, it will be more economical for
companies to develop or invest in green technologies, thereby suppressing the
demand for credits and adversely affecting the price of the Fund. Cap and trade
regimes set emission limits (i.e., the right to emit a certain quantity of GHG
emissions), which can be allocated or auctioned to the parties regulated under
the regime up to the total emissions cap. This allocation may be larger or
smaller than is needed for a stable price of credits and can lead to large price
volatility, which could affect the value of the Fund. Depending upon the
industries covered under each cap and trade mechanism represented in the Index,
unpredictable demand for their products and services can affect the value of GHG
emissions credits. For example, very mild winters or very cool summers can
decrease demand for electric utilities and therefore require fewer carbon
credits to offset reduced production and GHG emissions.
Regulatory
risk related to changes in regulation and enforcement of cap and trade regimes
could adversely affect market behavior. If fines or other penalties for
non-compliance are not enforced, incentives to purchase GHG credits will
deteriorate, which could result in a decline in the price of emissions credits
and a drop in the value of the Fund. In addition, as cap and trade markets
develop, new regulation with respect to these markets may arise, which could
have a negative effect on the value and liquidity of the cap and trade markets
and the Fund.
Cash
Transaction Risk
Unlike
most ETFs, the Fund intends to effect a significant portion of creations and
redemptions for cash, rather than in-kind securities. As a result, an investment
in the Fund may be less tax-efficient than an investment in a more conventional
ETF. ETFs generally are able to make in-kind redemptions and avoid being taxed
on gain on the distributed portfolio securities at the Fund level. Because the
Fund currently intends to effect redemptions for cash, rather than in-kind
distributions, it may be required to sell portfolio securities in order to
obtain the cash needed to distribute redemption proceeds. If the Fund recognizes
gain on these sales, this generally will cause the Fund to recognize gain it
might not otherwise have recognized, or to recognize such gain sooner than would
otherwise be required if it were to distribute portfolio securities in-kind. The
Fund generally intends to distribute these gains to shareholders to avoid being
taxed on this gain at the Fund level and otherwise comply with the special tax
rules that apply to it. This strategy may cause shareholders to be subject to
tax on gains they would not otherwise be subject to, or at an earlier date than,
if they had made an investment in a different ETF. Moreover, cash transactions
may have to be carried out over several days if the securities market is
relatively illiquid and may involve considerable brokerage fees and taxes. These
factors may result in wider spreads between the bid and the offered prices of
the Fund’s Shares than for more conventional ETFs. To the extent that the
maximum additional variable charge for cash creation or cash redemption
transactions is insufficient to cover the transaction costs of purchasing or
selling portfolio securities, the Fund’s performance could be negatively
impacted.
Commodity
Pool Registration Risk
Under
amended regulations promulgated by the CFTC, the Fund and the Subsidiary will be
considered commodity pools upon commencement of operations, and therefore each
will be subject to regulation under the Commodity Exchange Act and CFTC rules.
Global X will register as a commodity pool operator and will manage the Fund and
the Subsidiary in accordance with CFTC rules, as well as the rules that apply to
registered investment companies. Commodity pools are subject to additional laws,
regulations and enforcement policies, all of which may potentially increase
compliance costs and may affect the operations and financial performance of the
Fund and the Subsidiary. Additionally, positions in futures and other contracts
may have to be liquidated at disadvantageous times or prices to prevent the Fund
from exceeding any applicable position limits established by the CFTC. Such
actions may subject the Fund to substantial losses.
Currency
Risk
Foreign
currencies are subject to risks, which include changes in the debt level and
trade deficit of the country issuing the foreign currency; inflation rates of
the United States and the country issuing the foreign currency; investors’
expectations concerning inflation rates; interest rates of the United States and
the country issuing the foreign currency; investors’ expectations concerning
interest rates; investment and trading activities of mutual funds, hedge funds
and currency funds; and global or regional political, economic or financial
events and situations.
In
addition, a foreign currency in which the Fund invests may not maintain its
long-term value in terms of purchasing power in the future. When the price of a
foreign currency in which the Fund invests declines, it may have an adverse
impact on the Fund.
Foreign
exchange rates are influenced by the factors identified above and may also be
influenced by: changing supply and demand for a particular currency; monetary
policies of governments (including exchange control programs, restrictions on
local exchanges or markets and limitations on foreign investment in a country or
on investment by residents of a country in other countries); changes in balances
of payments and trade; trade restrictions; and currency devaluations and
revaluations. Also, governments from time to time intervene in the currency
markets, directly and by regulation, in order to influence prices directly.
These events and actions are unpredictable. The resulting volatility in the
USD/foreign currency exchange rate could materially and adversely affect the
performance of the Fund.
Custody
Risk
Custody
risk refers to risks in the process of clearing and settling trades and in the
holding of securities by local banks, agents and depositories. Low trading
volumes and volatile prices in less developed markets make trades harder to
complete and settle. Local agents are held only to the standard of care of the
local markets. Governments or trade groups may compel local agents to hold
securities in designated depositories that are subject to independent
evaluation. Generally, the less developed a country’s securities market, the
greater the likelihood of custody problems occurring.
Focus
Risk
In
following its methodology, the Underlying Index may be focused to a significant
degree in securities of issuers in a particular industry or group of industries
and/or may have significant exposure to one or more sectors. To the extent that
the Underlying Index focuses in the securities of issuers in such an area, the
Fund will also focus its investments to approximately the same extent. In such
event, the Fund’s performance will be particularly susceptible to adverse events
impacting such industry or sector, and the Fund will face greater risk than if
it were diversified broadly over numerous such areas. Such heightened risks, any
of which may adversely affect the companies in which the Fund invests, may
include, but are not limited to, the following: general economic conditions or
cyclical market patterns that could negatively affect supply and demand;
competition for resources; adverse labor relations; political or world events;
obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in a
particular industry or sector. In addition, at times, such industry, group of
industries or sector may be out of favor and underperform other such categories
or the market as a whole.
Foreign
Securities Risk
The
Fund’s assets may be invested within the equity markets of countries outside of
the United States. These markets are subject to special risks associated with
foreign investment, including, but not limited to: lower levels of liquidity and
market efficiency; greater securities price volatility; exchange rate
fluctuations and exchange controls; less availability of public information
about issuers; limitations on foreign ownership of securities; imposition of
withholding or other taxes; imposition
of
restrictions on the expatriation of the assets of the Fund; restrictions placed
on U.S. investors by U.S. regulations governing foreign investments; higher
transaction and custody costs and delays in settlement procedures; difficulties
in enforcing contractual obligations; lower levels of regulation of the
securities market; weaker accounting, disclosure and reporting requirements; and
legal principles relating to corporate governance and directors’ fiduciary
duties and liabilities. Shareholder rights under the laws of some foreign
countries may not be as favorable as U.S. laws. Thus, a shareholder may have
more difficulty in asserting its rights or enforcing a judgment against a
foreign company than a shareholder of a comparable U.S. company. Investment of
more than 25% of the Fund’s total assets in securities located in one country or
region will subject the Fund to increased country or region risk with respect to
that country or region. Where all or a portion of the Fund's underlying
securities trade in a market that is closed when the market in which the Fund's
shares are listed and trading is open, there may be differences between the last
quote from the security’s closed foreign market and the value of the security
during the Fund’s domestic trading day. This in turn could lead to differences
between the market price of the Fund’s shares and the underlying value of those
shares.
Geographic
Economic Exposure Risk
The
constituents held by the Fund may have partners, suppliers and/or customers
located in various geographic regions, and the geographic regions in which Fund
constituents are located may have trading partners in other geographic regions.
As a result, an economic downturn in one or more of these regions may impact the
performance of the constituents in which the Fund invests, even if the Fund does
not invest directly in companies located in such region. The risks related to
such regions may include:
California
Economic Risk
Because
the Fund will gain exposure to carbon credit futures issued under the California
Carbon Allowance “cap and trade” program, the Fund’s performance also may be
negatively impacted by factors affecting California. For example, natural
disasters may disrupt the local, state or regional economy or certain sectors of
the economy and may impact the prices of such carbon credit futures.
California’s budget and fiscal operations face certain structural impediments
and rely on revenue sources which have been historically sensitive to the
economic environment. California’s diverse economy is the largest in the United
States and one of the largest in the world with major components including high
technology, trade, entertainment, manufacturing, tourism, construction,
agriculture and services. Any downturn in these sectors or related industries
may adversely affect the economy of the state and the prices of such carbon
credit futures.
European
Economic Risk
The
economies of Europe are highly dependent on each other, both as key trading
partners and, in many cases, as fellow members maintaining the euro. Decreasing
European imports, new trade regulations, changes in exchange rates, a recession
in Europe, or a slowing of economic growth in this region could have an adverse
impact on the securities in which the Fund invests. Reduction in trading
activity among European countries may cause an adverse impact on each nation’s
individual economies. The Economic and Monetary Union of the European Union (the
“EU”) requires compliance with restrictions on inflation rates, deficits,
interest rates, debt levels and fiscal and monetary controls, each of which may
significantly affect every country in Europe, including those countries that are
not members of the EU. Decreasing imports or exports, changes in governmental or
EU regulations on trade, changes in the exchange rate of the euro, the default
or threat of default by an EU member country on its sovereign debt, and
recessions in an EU member country may have a significant adverse effect on the
economies of EU member countries and their trading partners. The European
financial markets have historically experienced volatility and adverse trends
due to concerns about economic downturns or rising government debt levels in
several European countries, including, but not limited to, Austria, Belgium,
Cyprus, France, Greece, Ireland, Italy, Portugal, Spain and Ukraine. These
events have adversely affected the exchange rate of the euro and may continue to
significantly affect European countries.
Responses
to financial problems by European governments, central banks and others,
including austerity measures and reforms, may not produce the desired results,
may result in social unrest, may limit future growth and economic recovery or
may have other unintended consequences. Further defaults or restructurings by
governments and other entities of their debt could have additional adverse
effects on economies, financial markets and asset valuations around the world.
In addition, one or more countries may abandon the euro and/or withdraw from the
EU. In a referendum held on June 23, 2016, the United Kingdom resolved to leave
the European Union, which departure has become known as “Brexit”. Brexit
introduced significant uncertainties and instability in the financial markets as
the United Kingdom negotiated its departure from the European Union. The United
Kingdom officially stopped being a member of the European Union on January 31,
2020. Prior to the end of the “transition period” for Brexit, the European Union
and
the United Kingdom ratified the EU-UK Trade and Cooperation Agreement (TCA),
which lays out the terms of the United Kingdom's future cooperation with the
European Union. The political, economic and legal consequences of Brexit and the
TCA are not yet fully known. Secessionist movements, such as the Catalan
movement in Spain and the independence movement in Scotland, as well as
governmental or other responses to such movements, may also create instability
and uncertainty in the region. In addition, the national politics of countries
in the EU have been unpredictable and subject to influence by varying political
groups and ideologies. The governments of EU countries may be subject to change
and such countries may experience social and political unrest. Unanticipated or
sudden political or social developments may result in sudden and significant
investment losses. In February 2022, Russia launched an invasion of Ukraine,
which led to disruptions of gas supplies and inflows of refugees to Europe, and
significant risk of European governments being pulled into armed conflict with
Russia. Furthermore, sanctions by the EU against Russia were met with sanctions
against the EU by Russia. The economic fallout of the war in Ukraine has had and
will likely continue to have a negative impact on the economic stability of
Europe. The occurrence of terrorist incidents throughout Europe also could
impact financial markets. The impact of these events is not clear but could be
significant and far-reaching and could adversely affect the value and liquidity
of the Fund’s investments.
Economies
of certain Eastern European countries rely heavily on the export of commodities,
including oil and gas, and certain metals. As a result, such economies will be
impacted by international commodity prices and are particularly vulnerable to
global demand for these products. Oil and gas infrastructure in Eastern Europe
is at significant risk of being targeted as part of strategic offensives in the
Russia-Ukraine war and it is extremely difficult to predict when such attacks
may occur. Acts of terrorism in certain Eastern European countries may cause
uncertainty in their financial markets and adversely affect the performance of
the issuers to which the Fund has exposure. The securities markets in Eastern
European countries are substantially smaller and inexperienced, with less
government supervision and regulation of stock exchanges and are less liquid and
more volatile than securities markets in the United States or Western European
countries. Other risks related to the economies of Eastern European include: the
absence of legal structures governing private and foreign investments and
private property; the possibility of expropriation; certain national policies
which may restrict the capital market activity, including, without limitation,
restrictions on investing in issuers or industries deemed sensitive to relevant
national interests.
North
American Economic Risk
A
decrease in imports or exports, changes in trade regulations or an economic
recession in any North American country can have a significant economic effect
on the entire North American region and on some or all of the North American
countries to which the Fund has economic exposure. The U.S. is Canada's and
Mexico's largest trading and investment partner. The Canadian and Mexican
economies are significantly affected by developments in the U.S. economy. Since
the implementation of the North American Free Trade Agreement (“NAFTA”) in 1994
among Canada, the U.S. and Mexico, total merchandise trade among the three
countries has increased. However, political developments in the U.S., including
the renegotiation of NAFTA and imposition of tariffs by the U.S., may have
implications for the trade arrangements among the U.S., Mexico and Canada, which
could negatively affect the value of securities held by the Fund. Policy and
legislative changes in any of the three countries may have a significant effect
on North American economies generally, as well as on the value of certain
securities held by the Fund.
International
Closed Market Trading Risk
To
the extent that the underlying investments held by the Fund trade on foreign
exchanges that may be closed when the securities exchange on which the Fund’s
Shares trade is open, there are likely to be deviations between the current
price of such an underlying security and the last quoted price for the
underlying security (i.e., the Fund’s quote from the closed foreign market).
These deviations could result in premiums or discounts to the Fund’s NAV that
may be greater than those experienced by other ETFs.
Liquidity
Risk
The
Fund’s investments are subject to liquidity risk, which exists when an
investment is or becomes difficult or impossible to purchase or sell at an
advantageous time and price. If a transaction is particularly large or if the
relevant market is or becomes illiquid, it may not be possible to initiate a
transaction or liquidate a position, which may cause the Fund to suffer
significant losses and difficulties in meeting redemptions. Liquidity risk may
be the result of, among other things, market turmoil, the reduced number and
capacity of traditional market participants, or the lack of an active trading
market. Markets for securities or financial instruments could be disrupted by a
number of events, including, but not limited to, an economic crisis, natural
disasters, new legislation or regulatory changes inside or outside the U.S.
Liquid investments may become less liquid after being purchased by the Fund,
particularly during periods of market stress. In addition, if a number of
securities held by the
Fund
stop trading, it may have a cascading effect and cause the Fund to halt trading.
Volatility in market prices will increase the risk of the Fund being subject to
a trading halt. Certain countries in which the Fund may invest may be subject to
extended settlement delays and/or foreign holidays, during which the Fund will
unlikely be able to convert holdings to cash.
Market
Risk
Market
risk is the risk that the value of the securities in which the Fund invests may
go up or down in response to the prospects of individual issuers and/or general
economic conditions. Turbulence in the financial markets and reduced liquidity
may negatively affect issuers, which could have an adverse effect on the Fund.
If the securities held by the Fund experience poor liquidity, the Fund may be
unable to transact at advantageous times or prices, which may decrease the
Fund’s returns. In addition, there is a risk that policy changes by central
governments and governmental agencies, including the Federal Reserve or the
European Central Bank, which could include increasing interest rates, could
cause increased volatility in financial markets and lead to higher levels of
Fund redemptions from Authorized Participants, which could have a negative
impact on the Fund. Furthermore, local, regional or global events such as war,
acts of terrorism, the spread of infectious illness or other public health
issues, recessions, or other events could have a significant impact on the Fund
and its investments and trading of its Shares. For example, at the start of
2023, central banks had already increased interest rates at the fastest rate on
record, the unknown is the length of time they remain restrictive and when
inflation returns to target levels. This increases the risk that monetary policy
may provide less support should economic growth slow. Additionally, China’s
shift away from their zero-COVID policy creates both opportunities and risks,
establishing China as the wildcard for global economic growth. Market risk
factors may result in increased volatility and/or decreased liquidity in the
securities markets. The Fund’s NAV could decline over short periods due to
short-term market movements and over longer periods during market
downturns.
New
Fund Risk
The
Fund is a new fund, with no operating history, which may result in additional
risks for investors in the Fund. There can be no assurance that the Fund will
grow to or maintain an economically viable size, in which case the Board of
Trustees may determine to liquidate the Fund. While shareholder interests will
be the paramount consideration, the timing of any liquidation may not be
favorable to certain individual shareholders. From time to time an Authorized
Participant, a third-party investor, the Adviser or another affiliate of the
Adviser or the Fund may invest in the Fund and hold its investment for a
specific period of time in order to facilitate commencement of the Fund’s
operations or for the Fund to achieve size or scale. There can be no assurance
that any such entity would not redeem its investment or that the size of the
Fund would be maintained at such levels which could negatively impact the
Fund.
Non-Diversification
Risk
The
Fund is classified as a “non-diversified” investment company under the 1940 Act.
This means that the Fund may invest most of its assets in securities issued by
or representing a small number of companies. As a result, the Fund may be more
susceptible to the risks associated with these particular companies, or to a
single economic, political or regulatory occurrence affecting these companies.
Operational
Risk
The
Fund is exposed to operational risk arising from a number of factors, including
but not limited to human error, processing and communication errors, errors of
the Fund's service providers, counterparties or other third-parties, failed or
inadequate processes and technology or systems failures.
With
the increased use of technologies such as the internet to conduct business, the
Fund, Authorized Participants, service providers and the relevant listing
exchange are susceptible to operational, information security and related
“cyber” risks both directly and through their service providers. Similar types
of cyber security risks are also present for issuers of securities in which the
Fund invests, which could result in material adverse consequences for such
issuers and may cause the Fund’s investment in such portfolio companies to lose
value. Unlike many other types of risks faced by the Fund, these risks typically
are not covered by insurance. In general, cyber incidents can result from
deliberate attacks or unintentional events. Cyber incidents include, but are not
limited to, gaining unauthorized access to digital systems (e.g., through
“hacking” or malicious software coding) for purposes of misappropriating assets
or sensitive information, corrupting data, or causing operational disruption.
Cyber-attacks may also be carried out in a manner that does not require gaining
unauthorized access, such as causing denial-of-service attacks on websites
(i.e., efforts to make network services unavailable to intended users).
Recently, geopolitical tensions may have increased the scale and sophistication
of deliberate attacks, particularly those from nation-states or from entities
with nation-state backing. Cyber security failures by or breaches of the systems
of the Adviser and the Fund’s distributor and other service providers
(including, but not limited to, the Index Provider, fund accountants,
custodians, transfer
agents
and administrators), market makers, Authorized Participants, or the issuers of
securities in which the Fund invests, have the ability to cause disruptions and
impact business operations, potentially resulting in: financial losses,
interference with the Fund’s ability to calculate its NAV, disclosure of
confidential trading information, impediments to trading, submission of
erroneous trades or erroneous creation or redemption orders, the inability of
the Fund or its service providers to transact business, violations of applicable
privacy and other laws, regulatory fines, penalties, reputational damage,
reimbursement or other compensation costs, or additional compliance costs. In
addition, cyber-attacks may render records of Fund assets and transactions,
shareholder ownership of Fund Shares, and other data integral to the functioning
of the Fund inaccessible or inaccurate or incomplete. Substantial costs may be
incurred by the Fund in order to resolve or prevent cyber incidents in the
future. While the Fund has established business continuity plans in the event
of, and risk management systems to prevent, such cyber-attacks, there are
inherent limitations in such plans and systems, including the possibility that
certain risks have not been identified and that prevention and remediation
efforts will not be successful. Furthermore, the Fund cannot control the cyber
security plans and systems put in place by service providers to the Fund,
issuers in which the Fund invests, the Index Provider, market makers or
Authorized Participants. The Fund and its shareholders could be negatively
impacted as a result.
The
Fund and the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate for those risks that they are intended to address.
Passive
Investment Risk
The
Fund is not actively managed and may be affected by a general decline in market
segments relating to the Underlying Index. The Fund invests in securities
included in, or representative of, the Underlying Index regardless of their
investment merits, and the Adviser does not otherwise attempt to take defensive
positions in declining markets. Unlike many investment companies, the Fund does
not seek to outperform its Underlying Index. Therefore, the Fund would not
necessarily buy or sell a security unless that security is added or removed,
respectively, from the Underlying Index, even if that security generally is
underperforming. Additionally, if a constituent of the Underlying Index were
removed, even outside of a regular rebalance of the Underlying Index, the
Adviser anticipates that the Fund would sell such security. Maintaining
investments in securities regardless of market conditions or the performance of
individual securities could cause the Fund’s return to be lower than if the Fund
employed an active strategy.
Index-Related
Risk
There
is no guarantee that the Fund will achieve a high degree of correlation to the
Underlying Index and therefore achieve its investment objective. Market
disruptions and regulatory restrictions could have an adverse effect on the
Fund’s ability to adjust its exposure to the required levels in order to track
the Underlying Index. Errors in index data, index computations and/or the
construction of the Underlying Index in accordance with its methodology may
occur from time to time and may not be identified and corrected by the Index
Provider for a period of time or at all, which may have an adverse impact on the
Fund and its shareholders.
Management
Risk
The
Fund may not fully replicate its Underlying Index and may hold securities not
included in its Underlying Index. Therefore, the Fund is subject to management
risk. That is, the Adviser’s investment strategy, the implementation of which is
subject to a number of constraints, may cause the Fund to underperform the
market or its relevant benchmark or adversely affect the ability of the Fund to
achieve its investment objective. While the Fund is passively managed,
implementation of the Fund’s principal investment strategy may result in
tracking error risk, which is described below. The ability of the Adviser to
successfully implement the Fund’s investment strategies will influence the
Fund’s performance significantly.
Tracking
Error Risk
Tracking
error is the divergence of the Fund's performance from that of the Underlying
Index. Tracking error may occur because of differences between the securities
and other instruments held in the Fund's portfolio and those included in the
Underlying Index, pricing differences (including differences between a
security's price at the local market close and the Fund's valuation of a
security at the time of calculation of the Fund's NAV), transaction costs
incurred by the Fund, the Fund's holding of uninvested cash, differences in
timing of the accrual of or the valuation of dividends or interest, tax gains or
losses, changes to the Underlying Index or the costs to the Fund of complying
with various new or existing regulatory requirements. This risk may be
heightened during times of increased market volatility or other unusual market
conditions. Tracking error also may result because the Fund incurs fees and
expenses,
while the Underlying Index does not. ETFs that track indices with significant
weight in emerging markets issuers may experience higher tracking error than
other ETFs that do not track such indices.
Potential
Substantial After-Tax Tracking Error From Index Performance Risk
The
Fund will be subject to taxation on its taxable income. The NAV of Shares will
also be reduced by the accrual of any deferred tax liabilities. The Underlying
Index, however, is calculated without any deductions for taxes. As a result, the
Fund’s after tax performance could differ significantly from the Underlying
Index even if the pretax performance of the Fund and the performance of the
Underlying Index are closely correlated.
Regulatory
Risk
The
Fund is subject to the risk that a change in U.S. law and related regulations
will impact the way the Fund operates, increase the particular costs of the
Fund’s operations and/or change the competitive landscape. Additional
legislative or regulatory changes could occur that may materially and adversely
affect the Fund.
Risks
Associated with Exchange-Traded Funds
As
an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk
The
Fund has a limited number of financial institutions that may act as Authorized
Participants. Only Authorized Participants who have entered into agreements with
the Fund's distributor may engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, such as in times of market stress, and no other
Authorized Participant is able to step forward to create and redeem in either of
those cases, Shares may trade like closed-end fund shares at a discount to NAV
and/or at wider intraday bid-ask spreads, and may possibly face trading halts
and/or delisting from the Exchange.
Large
Shareholder Risk
Certain
shareholders, including an Authorized Participant, the Adviser or an affiliate
of the Adviser, may own a substantial amount of the Fund’s Shares. Additionally,
from time to time an Authorized Participant, a third-party investor, the
Adviser, or an affiliate of the Adviser may invest in the Fund and hold its
investment for a specific period of time in order to facilitate commencement of
the Fund’s operations or to allow the Fund to achieve size or scale.
Redemptions by large shareholders could have a significant negative impact on
the Fund. If a large shareholder were to redeem all, or a large portion, of its
Shares, there is no guarantee that the Fund will be able to maintain sufficient
assets to continue operations in which case the Board of Trustees may determine
to liquidate the Fund. In addition, transactions by large shareholders may
account for a large percentage of the trading volume on the Exchange and may,
therefore, have a material upward or downward effect on the market price of the
Shares.
Market
Trading Risks and Premium/Discount Risks
Absence
of Active Market
Although
Shares of the Fund are or will be listed for trading on a U.S. exchange and may
be listed on certain foreign exchanges, there can be no assurance that an active
trading market for the Shares will develop or be maintained.
Risks
of Secondary Listings
The
Fund's Shares may be listed or traded on U.S. and non-U.S. exchanges other than
the U.S. exchange where the Fund’s primary listing is maintained. There can be
no assurance that the Fund’s Shares will continue to trade on any such exchange
or in any market or that the Fund's Shares will continue to meet the
requirements for listing or trading on any exchange or in any market. The Fund's
Shares may be less actively traded in certain markets than others, and investors
are subject to the execution and settlement risks and market standards of the
market where they or their brokers direct their trades for execution. Certain
information available to investors who trade Shares on a U.S. exchange during
regular U.S. market hours may not be available to investors who trade in other
markets, which may result in secondary market prices in such markets being less
efficient.
Secondary
Market Trading Risk
Only
Authorized Participants who have entered into agreements with the Fund's
distributor may engage in creation or redemption transactions directly with the
Fund. Shares of the Fund may trade in the secondary market on days when the Fund
does not accept orders to purchase or redeem Shares from Authorized
Participants. On such days, Shares may trade in the secondary market with more
significant premiums or discounts than might be experienced on days when the
Fund accepts purchase and redemption orders.
Secondary
market trading in Fund Shares may be halted by a stock exchange because of
market conditions or other reasons. In addition, trading in Fund Shares on a
stock exchange or in any market may be subject to trading halts caused by
extraordinary market volatility pursuant to "circuit breaker" rules on the stock
exchange or market. There can be no assurance that the requirements necessary to
maintain the listing or trading of Fund Shares will continue to be met or will
remain unchanged.
Shares
of the Fund May Trade at Prices Other Than NAV
Shares
of the Fund may trade at, above or below NAV. The per share NAV of the Fund will
fluctuate with changes in the market value of the Fund’s holdings. The trading
prices of Shares will fluctuate in accordance with changes in the Fund's NAV as
well as market supply and demand. The trading prices of the Fund's Shares may
deviate significantly from NAV during periods of market volatility or when the
Fund has relatively few assets or experiences a lower trading volume. In
stressed market conditions, the market for the Shares may become less liquid in
response to the deteriorating liquidity of the Fund’s portfolio. Any of these
factors may lead to the Fund's Shares trading at a premium or discount to NAV.
While the creation/redemption feature is designed to make it likely that Shares
normally will trade close to the Fund’s NAV, market prices are not expected to
correlate exactly with the Fund's NAV due to timing reasons as well as market
supply and demand factors. In addition, disruptions to creations and redemptions
or the existence of extreme market volatility may result in trading prices that
differ significantly from NAV. If a shareholder purchases at a time when the
market price is at a premium to the NAV or sells at a time when the market price
is at a discount to the NAV, the shareholder may sustain losses.
Since
foreign exchanges may be open on days when the Fund does not price 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 Shares.
Costs
of Buying or Selling Fund Shares
Buying
or selling Fund Shares involves two types of costs that apply to all securities
transactions. When buying or selling Shares of the Fund through a broker, you
will likely incur a brokerage commission or other charges imposed by brokers as
determined by that broker. In addition, you may incur the cost of the "spread" -
that is, the difference between what professional investors are willing to pay
for Fund Shares (the "bid" price) and the market price at which they are willing
to sell Fund Shares (the "ask" price). Because of the costs inherent in buying
or selling Fund Shares, frequent trading may detract significantly from
investment results and an investment in Fund Shares may not be advisable for
investors who anticipate regularly making small investments.
Subsidiary
Investment Risk
Changes
in the laws of the United States and/or the Cayman Islands, under which the Fund
and the Global X Subsidiary are organized, respectively, could result in the
inability of the Global X Subsidiary to operate as intended and could negatively
affect the Fund and its shareholders.
Tax
Risk
The
Fund expects to obtain exposure to carbon credits indirectly because the Global
X Subsidiary will purchase listed futures contracts through the Global X
Subsidiary. The Fund intends to invest in such futures contracts, in whole or in
part, indirectly through the Global X Subsidiary. In order for the Fund to
qualify as a RIC, the Fund must, amongst other requirements detailed in the SAI,
derive at least 90% of its gross income each taxable year from qualifying
income. Income from listed carbon credits futures contracts in which the Fund
might otherwise invest directly might not be considered qualifying income. The
Fund will seek to limit such income through the Global X Subsidiary so as to
qualify as a RIC. Failure to comply with the requirements for qualification as a
RIC would have significant negative tax consequences to Fund
shareholders.
Trading
Halt Risk
An
exchange or market may close or issue trading halts on specific securities, or
the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Turnover
Risk
The
Fund may engage in frequent and active trading, which may significantly increase
the Fund’s portfolio turnover rate. At times, the Fund may have a portfolio
turnover rate substantially greater than 100%. For example, a portfolio turnover
rate of 300% is equivalent to the Fund buying and selling all of its securities
three times during the course of a year. A high portfolio turnover rate would
result in high brokerage costs for the Fund, may result in higher taxes when
shares are held in a taxable account and lower Fund performance.
U.S.
Government Obligations Risk
Obligations
of U.S. Government agencies and authorities receive varying levels of support
and may not be backed by the full faith and credit of the U.S. Government, which
could affect the Fund’s ability to recover should they default. No assurance can
be given that the U.S. Government will provide financial support to its agencies
and authorities if it is not obligated by law to do so. Additionally, market
prices and yields of securities supported by the full faith and credit of the
U.S. government may decline or be negative for short or long periods of
time.
Valuation
Risk
The
sales price 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 Underlying
Index, particularly for securities that trade in low value or volatile markets
or that are valued using a fair value methodology (such as during trading
halts). Because non-U.S. exchanges may be open on days when the Fund does not
price its Shares, the value of the securities in the Fund's portfolio may change
on days when shareholders will not be able to purchase or sell the Fund's
Shares.
Volatility
Risk
The
Fund may have investments that appreciate or decrease significantly in value
over short periods of time. This may cause your investment in the Fund to
experience significant appreciations or decreases in value over short periods of
time.
A
FURTHER DISCUSSION OF OTHER RISKS
The
Fund may also be subject to certain other risks associated with its investments
and investment strategies.
Leverage
Risk
Under
the 1940 Act, the Fund is permitted to borrow from a bank up to 33 1/3% of its
net assets for short term or emergency purposes. The Fund may borrow money at
fiscal quarter end to maintain the required level of diversification to qualify
as a regulated investment company ("RIC") for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"). As a result, the Fund may be exposed to
the risks of leverage, which may be considered a speculative investment
technique. Leverage magnifies the potential for gain and loss on amounts
invested and therefore increases the risks associated with investing in the
Fund. If the value of the Fund's assets increases, then leveraging would cause
the Fund's NAV to increase more sharply than it would have had the Fund not
leveraged. Conversely, if the value of the Fund's assets decreases, leveraging
would cause the Fund's NAV to decline more sharply than it otherwise would have
had the Fund not leveraged. The Fund may incur additional expenses in connection
with borrowings.
Qualification
as a Regulated Investment Company Risk
The
Fund must meet a number of diversification requirements to qualify as a RIC
under Section 851 of the Code and, if qualified, to continue to qualify. If the
Fund experiences difficulty in meeting those requirements for any fiscal
quarter, it might enter into borrowings in order to increase the portion of the
Fund’s total assets represented by cash, cash items, and U.S. government
securities shortly thereafter and, as of the close of the following fiscal
quarter, to attempt to meet the requirements.
However,
the Fund may incur additional expenses in connection with any such borrowings,
and increased investments by the Fund in cash, cash items, and U.S. government
securities (whether the Fund makes such investments from borrowings) are likely
to reduce the Fund’s return to investors.
Tax
Treaty Reclaims Uncertainty
When
the Fund receives dividend and interest income (if any) from issuers in certain
countries, such distributions may be subject to partial withholding by local tax
authorities in order to satisfy potential local tax obligations. The Fund may
file claims to recover such withholding tax in jurisdictions where withholding
tax reclaim is possible, which may be the case as a result of bilateral treaties
between the United States and local governments. Whether or when the Fund will
receive a withholding tax refund in the future is within the control of the tax
authorities in such countries. Where the Fund expects to recover withholding tax
based on a continuous assessment of probability of recovery, the NAV of the Fund
generally includes accruals for such tax refunds. The Fund continues to evaluate
tax developments for potential impact to the probability of recovery. If the
likelihood of receiving refunds materially decreases, for example due to a
change in tax regulation or approach, accruals in the Fund’s NAV for such
refunds may need to be written down partially or in full, which will adversely
affect that Fund’s NAV. Investors in the Fund at the time an accrual is written
down will bear the impact of any resulting reduction in NAV regardless of
whether they were investors during the accrual period. Conversely, if the Fund
receives a tax refund that has not been previously accrued, investors in the
Fund at the time the claim is successful will benefit from any resulting
increase in the Fund’s NAV. Investors who sold their shares prior to such time
will not benefit from such NAV increase.
PORTFOLIO
HOLDINGS INFORMATION
A
description of the policies and procedures of Global X Funds®
(the "Trust") with respect to the disclosure of the Fund's portfolio securities
is available in the Fund's Statement of Additional Information ("SAI"). The top
holdings of the Fund and Fund Fact Sheets providing information regarding the
Fund's top holdings can be found at www.globalxetfs.com/explore/(click on the
name of your Fund) and may be requested by calling 1-888-493-8631.
FUND
MANAGEMENT
Investment
Adviser
Global
X Management Company LLC (the "Adviser") serves as the investment adviser and
the administrator for the Fund. Subject to the supervision of the Board of
Trustees, the Adviser is responsible for managing the investment activities of
the Fund and the Fund's business affairs and other administrative matters. The
Adviser has been a registered investment adviser since 2008. The Adviser is a
Delaware limited liability company with its principal offices located at 605 3rd
Avenue, 43rd Floor, New York, New York 10158. As of March 31, 2023, the Adviser
provided investment advisory services for assets of approximately $39.2
billion.
Pursuant
to a Supervision and Administration Agreement and subject to the general
supervision of the Board of Trustees, the Adviser provides, or causes to be
furnished, all supervisory, administrative and other services reasonably
necessary for the operation of the Fund and also bears the costs of various
third-party services required by the Fund, including audit, certain custody,
portfolio accounting, legal, transfer agency and printing costs. The Supervision
and Administration Agreement also requires the Adviser to provide investment
advisory services to the Fund pursuant to an Investment Advisory
Agreement.
The
Fund pays the Adviser a fee ("Management Fee") in return for providing
investment advisory, supervisory and administrative services under an all-in fee
structure. The Fund will pay a monthly Management Fee to the Adviser at the
annual rate set forth in the table below (stated as a percentage of the Fund's
average daily net assets).
|
|
|
|
|
|
Fund |
Management
Fee |
Global
X Carbon Credits Strategy ETF |
0.39% |
In
addition, the Fund bears other fees and expenses that are not covered by the
Supervision and Administration Agreement, which may vary and will affect the
total expense ratio of the Fund, such as taxes, brokerage fees, commissions and
other transaction expenses, interest and extraordinary expenses (such as
litigation and indemnification expenses). The Adviser may earn a profit on the
Management Fee paid by the Fund. Also, the Adviser, and not the shareholders of
the Fund, would benefit from any price decreases in third-party services,
including decreases resulting from an increase in net assets.
The
Adviser or its affiliates may pay compensation out of profits derived from the
Adviser's Management Fee or other resources and not as an additional charge to
the Fund, to certain financial institutions (which may include banks, securities
dealers
and other industry professionals) for the sale and/or distribution of Fund
Shares or the retention and/or servicing of Fund investors and Fund Shares
("revenue sharing"). These payments are in addition to any other fees described
in the fee table or elsewhere in the Prospectus or SAI. Examples of "revenue
sharing" payments include, but are not limited to, payments to financial
institutions for "shelf space" or access to a third party platform or fund
offering list or other marketing programs, including, but not limited to,
inclusion of the Fund on preferred or recommended sales lists, mutual fund
"supermarket" platforms and other formal sales programs; granting the Adviser
access to the financial institution's sales force; granting the Adviser access
to the financial institution's conferences and meetings; assistance in training
and educating the financial institution's personnel; and obtaining other forms
of marketing support. The level of revenue sharing payments made to financial
institutions may be a fixed fee or based upon one or more of the following
factors: gross sales, current assets and/or number of accounts of the Fund
attributable to the financial institution, or other factors as agreed to by the
Adviser and the financial institution or any combination thereof. The amount of
these revenue sharing payments is determined at the discretion of the Adviser,
from time to time, may be substantial, and may be different for different
financial institutions depending upon the services provided by the financial
institution. Such payments may provide an incentive for the financial
institution to make Shares of the Fund available to its customers and may allow
the Fund greater access to the financial institution's customers.
Approval
of Advisory Agreement
Discussions
regarding the basis for the Board of Trustees' approval of the Supervision and
Administration Agreement and the related Investment Advisory Agreement for the
Fund will be available in the Fund's first shareholder report, either the
Semi-Annual Report or Annual Report to shareholders for the period ended May 31
or November 30, respectively.
Portfolio
Management
The
Portfolio Managers who are currently responsible for the day-to-day management
of the Fund's portfolio are Nam To, Wayne Xie, Kimberly Chan, Vanessa Yang and
Sandy Lu.
Nam
To:
Nam To, CFA, Portfolio Manager, joined the Adviser in July 2017. Prior to that,
Mr. To was a Global Economics Research Analyst at Bunge Limited from 2014 to
2017. Mr. To received his Bachelor of Arts in Philosophy and Economics from
Cornell University in 2014.
Wayne
Xie:
Wayne Xie, Director of Portfolio Management, joined the Adviser in July 2018 as
a Portfolio Management Associate. Previously, Mr. Xie was an Analyst at VanEck
Associates on the Equity ETF Investment Management team from 2010 to 2018 and a
Portfolio Administrator at VanEck Associates from 2007 to 2010. Mr. Xie received
his Bachelor of Science from the State University of New York at Buffalo in
2002.
Kimberly
Chan:
Kimberly Chan, Portfolio Manager, joined the Adviser in June 2018. Previously,
Ms. Chan was a U.S. Associate Trader at Credit Agricole from 2016 to 2018, and
an Investment Analyst at MetLife Investments from 2015 to 2016. Ms. Chan
received her Bachelor of Science from New York University in 2015.
Vanessa
Yang:
Vanessa Yang, Portfolio Manager, joined the Adviser in 2016 as a Portfolio
Administrator. She was appointed to the portfolio management team in June 2019.
Previously, Ms. Yang was a Portfolio Administrator at VanEck Associates from
2011 to 2014. Ms. Yang received her MS in Financial Engineering from Drucker
School of Management in 2010 and her BS in Economics from Guangdong University
of Foreign Studies in 2008.
Sandy
Lu:
Sandy Lu, CFA, Portfolio Manager, joined the Adviser in September 2021.
Previously, Mr. Lu was a Portfolio Analyst and Junior Portfolio Manager at PGIM
Fixed Income from 2014 to 2021, and a Fixed Income Portfolio Analyst at Lincoln
Financial Group from 2010 to 2014. Mr. Lu received his Bachelor of Science in
Economics from the Wharton School of the University of Pennsylvania. He earned
his CFA designation in September 2015, and holds the Series 3
license.
The
SAI provides additional information about the Portfolio Managers' compensation
structure, other accounts managed by the Portfolio Managers, and the Portfolio
Managers' ownership of Shares of the Fund.
DISTRIBUTOR
SEI
Investments Distribution Co. ("Distributor") distributes Creation Units for the
Fund on an agency basis. The Distributor 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 One Freedom Valley Drive, Oaks, PA 19456. The Distributor
is not affiliated with the Adviser.
BUYING
AND SELLING FUND SHARES
Shares
of the Fund trade on a national securities exchange and in the secondary market
during the trading day. Shares can be bought and sold throughout the trading day
like other shares of publicly-traded securities. There is no minimum investment
for purchases made on a national securities exchange. When buying or selling
Shares through a broker, you will incur customary brokerage commissions and
charges. In addition, you will also incur the cost of the "spread," which is the
difference between what professional investors are willing to pay for Shares
(the "bid" price) and the price at which they are willing to sell Shares (the
"ask" price). The commission is frequently a fixed amount and may be a
significant proportional cost for investors seeking to buy or sell small amounts
of Shares. The spread with respect to Shares varies over time based on the
Fund's trading volume and market liquidity, and is generally lower if the Fund
has significant trading volume and market liquidity and higher if the Fund has
little trading volume and market liquidity. Because of the costs of buying and
selling Shares, frequent trading may reduce investment return.
Shares
of the Fund may be acquired or redeemed directly from the Fund only by
Authorized Participants (as defined in the SAI) and only in Creation Units or
multiples thereof, as discussed in the "Creations and Redemptions" section in
the SAI.
Shares
generally trade in the secondary market in amounts less than a Creation Unit.
Shares of the Fund trade under the trading symbol listed for the Fund in the
Fund Summary section of this Prospectus.
The
Fund is listed on a national securities exchange, which is open for trading
Monday through Friday and is closed on weekends and the following holidays, as
observed: New Year's Day, Martin Luther King, Jr. Day, Presidents' Day, Good
Friday, Memorial Day, Juneteenth National Independence Day, Independence Day,
Labor Day, Thanksgiving Day, and Christmas Day.
Book
Entry
Shares
of the Fund 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 and is recognized as the owner of all Shares for
all purposes. 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. Participants include DTC, 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 rights 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 securities that you hold in
book entry or "street name" form.
FREQUENT
TRADING
Unlike
frequent trading of shares of a traditional open-end mutual fund (i.e., not
exchange-traded shares), frequent trading of Shares on the secondary market does
not disrupt portfolio management, increase the Fund's trading costs, lead to
realization of capital gains, or otherwise harm Fund shareholders because these
trades do not involve the Fund directly. A few institutional investors are
authorized to purchase and redeem the Fund's Shares directly with the Fund. When
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 the Fund intended 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 securities, reflecting the
fact that the Fund's trading costs increase in those circumstances, although
transaction fees are subject to certain limits and therefore may not cover all
related costs incurred by the Fund. For these reasons, the Board of Trustees 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.
DISTRIBUTION
AND SERVICE PLAN
The
Board of Trustees of the Trust has adopted a Distribution and Services Plan
("Plan") pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund is
authorized to pay distribution fees in connection with the sale and distribution
of its Shares and pay service fees in connection with the provision of ongoing
services to shareholders of each class and the maintenance of shareholder
accounts in an amount up to 0.25% of its average daily net assets each
year.
No
Rule 12b-1 fees are currently paid by the Fund, and there are no current plans
to impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because these fees are paid out of the Fund's assets on an ongoing
basis, these fees
will
increase the cost of your investment in the Fund. By purchasing Shares subject
to distribution fees and service fees, you may pay more over time than you would
by purchasing Shares with other types of sales charge arrangements. Long-term
shareholders may pay more than the economic equivalent of the maximum front-end
sales charge permitted by the rules of FINRA. The net income attributable to
Shares will be reduced by the amount of distribution fees and service fees and
other expenses of the Fund.
DIVIDENDS
AND DISTRIBUTIONS
Dividends
from net investment income, including any net foreign currency gains, generally
are declared and paid at least annually and any net realized capital gains are
distributed at least annually. In order to improve tracking error or comply with
the distribution requirements of the Code, dividends may be declared and paid
more frequently than annually for the Fund.
Dividends
and other distributions on Shares are distributed on a pro rata basis to
beneficial owners of such Shares. Dividend payments are made through DTC
participants to beneficial owners then of record with proceeds received from the
Fund. Dividends and security gain distributions are distributed in U.S. dollars
and cannot be automatically reinvested in additional Shares.
No
dividend reinvestment service is provided by the Trust. Broker-dealers may make
available the DTC book-entry Dividend Reinvestment Service for use by beneficial
owners of the Fund for reinvestment of their dividend distributions. Beneficial
owners should contact their broker to determine the availability and costs of
the service and the details of participation therein. Brokers may require
beneficial owners 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
purchased in the secondary market.
TAXES
The
following is a summary of certain tax considerations that may be relevant to an
investor in the Fund. Except where otherwise indicated, the discussion relates
to investors who are individual United States citizens or residents and is based
on current tax law. You should consult your tax advisor for further information
regarding federal, state, local and/or foreign tax consequences relevant to your
specific situation.
Distributions.
The Fund receives income and gains on its investments. The income, less expenses
incurred in the operation of the Fund, constitutes the Fund's net investment
income from which dividends may be paid to you. The Fund intends to qualify as a
RIC under the Code for federal tax purposes and to distribute to shareholders
substantially all of its net investment income and net capital gain each year.
Except as otherwise noted below, you will generally be subject to federal income
tax on the Fund's distributions to you. For federal income tax purposes, Fund
distributions attributable to short-term capital gains and net investment income
are taxable to you as ordinary income. Distributions attributable to net capital
gains (the excess of net long-term capital gains over net short-term capital
losses) of the Fund generally are taxable to you as long-term capital gains.
This is true no matter how long you own your Shares or whether you take
distributions in cash or additional Shares. The maximum long-term capital gain
rate applicable to individuals is 20%.
Distributions
of "qualifying dividends" will also generally be taxable to you at long-term
capital gain rates as long as certain requirements are met. In general, if 95%
or more of the gross income of the Fund (other than net capital gain) consists
of dividends received from domestic corporations or "qualified" foreign
corporations ("qualifying dividends"), then all distributions received by
individual shareholders of the Fund will be treated as qualifying dividends. But
if less than 95% of the gross income of the Fund (other than net capital gain)
consists of qualifying dividends, then distributions received by individual
shareholders of the Fund will be qualifying dividends only to the extent they
are derived from qualifying dividends earned by the Fund. For the lower rates to
apply, you must have owned your Shares for at least 61 days during the 121-day
period beginning on the date that is 60 days before the Fund's ex-dividend date
(and the Fund will need to have met a similar holding period requirement with
respect to the Shares of the corporation paying the qualifying dividend). The
amount of the Fund's distributions that qualify for this favorable treatment may
be reduced as a result of the Fund's securities lending activities (if any), a
high portfolio turnover rate or investments in debt securities or
"non-qualified" foreign corporations. In addition, whether distributions
received from foreign corporations are qualifying dividends will depend on
several factors including the country of residence of the corporation making the
distribution. Accordingly, distributions from many of the Fund's holdings may
not be qualifying dividends.
A
portion of distributions paid to shareholders that are corporations may also
qualify for the dividends-received deduction for corporations, subject to
certain holding period requirements and debt financing limitations. The amount
of the dividends
qualifying
for this deduction may, however, be reduced as a result of the Fund's securities
lending activities, by a high portfolio turnover rate or by investments in debt
securities or foreign corporations.
Distributions
from the Fund will generally be taxable to you in the year in which they are
paid, with one exception. Dividends and distributions declared by the Fund in
October, November or December and paid in January of the following year are
taxed as though they were paid on December 31.
You
should note that if you buy Shares of the Fund shortly before it makes a
distribution, the distribution will be fully taxable to you even though, as an
economic matter, it simply represents a return of a portion of your investment.
This adverse tax result is known as "buying into a dividend."
You
will be informed of the amount of your ordinary income dividends, qualifying
dividend income, and capital gain distributions at the time they are paid, and
you will be advised of the tax status for federal income tax purposes shortly
after the close of each calendar year. If you have not held Shares for a full
year, the Fund may designate and distribute to you, as ordinary income or
capital gain, a percentage of income that is not equal to the actual amount of
such income earned during the period of your investment in the
Fund.
The
Fund's investments in partnerships, including in partnerships defined as
Qualified Publicly Traded Partnerships for tax purposes, may result in the Fund
being subject to state, local or foreign income, franchise or withholding tax
liabilities.
Excise
Tax Distribution Requirements.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
RIC's "required distribution" for the calendar year ending within the RIC's
taxable year over the "distributed amount" for such calendar year. The term
"required distribution" means the sum of (a) 98% of ordinary income (generally
net investment income) for the calendar year, (b) 98.2% of capital gain (both
long-term and short-term) for the one-year period ending on October 31 (or
December 31, if the Fund so elects), and (c) the sum of any untaxed,
undistributed net investment income and net capital gains of the RIC for prior
periods. The term "distributed amount" generally means the sum of (a) amounts
actually distributed by the Fund from its current year's ordinary income and
capital gain net income and (b) any amount on which the Fund pays income tax for
the taxable year ending in the calendar year. Although the Fund intends to
distribute its net investment income and net capital gains so as to avoid excise
tax liability, the Fund may determine that it is in the interest of shareholders
to distribute a lesser amount. The Fund intends to declare and pay these amounts
in December (or in January, which must be treated by you as received in
December) to avoid these excise taxes, but can give no assurances that its
distributions will be sufficient to eliminate all such taxes.
Foreign
Currencies.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the Fund accrues interest or other receivables or
accrues expenses or other liabilities denominated in a foreign currency, and the
time the Fund actually collects such receivables or pays such liabilities, are
treated as ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies, from the disposition of debt securities
denominated in a foreign currency, or from the disposition of a forward foreign
currency contract which are attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the asset and the date of
disposition also are treated as ordinary income or loss. These gains or losses,
referred to under the Code as "section 988" gains or losses, increase or
decrease the amount of the Fund's investment company taxable income available to
be distributed to its shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund's net capital gain.
Foreign
Taxes.
The Fund will be subject to foreign withholding taxes with respect to certain
payments received from sources in foreign countries. If at the close of the
taxable year more than 50% in value of the Fund's assets consists of stock in
foreign corporations, the Fund will be eligible to make an election to treat a
proportionate amount of those taxes as constituting a distribution to each
shareholder, which would allow you either (subject to certain limitations) (1)
to credit that proportionate amount of taxes against your U.S. Federal income
tax liability as a foreign tax credit or (2) to take that amount as an itemized
deduction. If the Fund is not eligible or chooses not to make this election, it
will be entitled to deduct such taxes in computing the amounts it is required to
distribute.
Sales
and Exchanges.
The sale of Shares is a taxable event on which a gain or loss is recognized. The
amount of gain or loss is based on the difference between your tax basis in
Shares and the amount you receive for them upon disposition. Generally, you will
recognize long-term capital gain or loss if you have held your Shares for over
one year at the time you sell or exchange them. Gains and losses on Shares held
for one year or less will generally constitute short-term capital gains, except
that a loss on Shares held six months or less will be re-characterized as a
long-term capital loss to the extent of any long-term capital gain distributions
that you have received on the Shares. A loss realized on a sale or exchange of
Shares may be disallowed under the so-called "wash sale" rules to the extent the
Shares disposed of are replaced with other Shares of that same Fund within a
period
of
61 days beginning 30 days before and ending 30 days after the Shares are
disposed of, such as pursuant to a dividend reinvestment in Shares of the Fund.
If disallowed, the loss will be reflected in an adjustment to the basis of the
Shares acquired.
Taxes
on Purchase and Redemption of Creation Units.
An Authorized Participant who exchanges equity securities for Creation Units
generally will recognize a gain or a loss. The gain or loss will be equal to the
difference between the market value of the Creation Units at the time of
purchase (plus any cash received by the Authorized Participant as part of the
issue) and the Authorized Participant's aggregate basis in the securities
surrendered (plus any cash paid by the Authorized Participant as part of the
issue). An Authorized Participant who exchanges Creation Units for equity
securities generally will recognize a gain or loss equal to the difference
between the Authorized Participant's basis in the Creation Units (plus any cash
paid by the Authorized Participant as part of the redemption) and the aggregate
market value of the securities received (plus any cash received by the
Authorized Participant as part of the redemption). The Internal Revenue Service
(the "IRS"), however, may assert that a loss realized upon an exchange of
securities for Creation Units cannot be deducted currently under the rules
governing "wash sales," or on the basis that there has been no significant
change in economic position. Persons exchanging securities should consult their
own tax advisor with respect to whether the wash sale rules apply and when a
loss might be deductible.
IRAs
and Other Tax-Qualified Plans.
The one major exception to the preceding tax principles is that distributions
on, and sales, exchanges and redemptions of, Shares held in an IRA or other
tax-qualified plan are not currently taxable but may be taxable when funds are
withdrawn from the tax qualified plan unless the Shares were purchased with
borrowed funds.
Medicare
Tax. An
additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from the
Fund and net gains from redemptions or other taxable dispositions of Fund
Shares) of U.S. individuals, estates and trusts to the extent that such person's
"modified adjusted gross income" (in the case of an individual) or "adjusted
gross income" (in the case of an estate or trust) exceeds a threshold amount.
This Medicare tax, if applicable, is reported by you on, and paid with, your
federal income tax return.
Backup
Withholding.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury backup withholding at the applicable rate on dividends and gross sales
proceeds paid to any shareholder (i) who has either provided an incorrect tax
identification number or no number at all, (ii) who is subject to backup
withholding by the IRS, or (iii) who has failed to certify to the Fund, when
required to do so, that he or she is not subject to backup withholding or is an
"exempt recipient."
Cost
Basis Reporting. Federal
law requires that shareholders' cost basis, gain/loss, and holding period be
reported to the IRS and to shareholders on the Consolidated Form 1099s when
"covered" securities are sold. Covered securities are any RIC and/or dividend
reinvestment plan shares acquired on or after January 1, 2012.
For
those securities defined as "covered" under current IRS cost basis tax reporting
regulations, accurate cost basis and tax lot information must be maintained for
tax reporting purposes. This information is not required for Shares that are not
"covered." The Fund and its service providers do not provide tax advice. You
should consult independent sources, which may include a tax professional, with
respect to any decisions you may make with respect to choosing a tax lot
identification method. Shareholders should contact their financial
intermediaries with respect to reporting of cost basis and available elections
for their accounts.
State
and Local Taxes.
You may also be subject to state and local taxes on income and gain attributable
to your ownership of Shares. You should consult your tax advisor regarding the
tax status of distributions in your state and locality.
U.S.
Tax Treatment of Foreign Shareholders.
A non-U.S. shareholder generally will not be subject to U.S. withholding tax on
gain from the redemption of Shares or on capital gain dividends (i.e., dividends
attributable to long-term capital gains of the Fund) unless, in the case of a
shareholder who is a non-resident alien individual, the shareholder is present
in the United States for 183 days or more during the taxable year and certain
other conditions are met. Non-U.S. shareholders generally will be subject to
U.S. withholding tax at a rate of 30% (or a lower treaty rate, if applicable) on
distributions by the Fund of net investment income, other ordinary income, and
the excess, if any, of net short-term capital gain over net long-term capital
loss for the year, unless the distributions are effectively connected with a
U.S. trade or business of the shareholder. Exemptions from U.S. withholding tax
are provided for certain capital gain dividends paid by the Fund from net
long-term capital gains, if any, interest-related dividends paid by the Fund
from its qualified net interest income from U.S. sources and short-term capital
gain dividends if such amounts are reported by the Fund. Non-U.S. shareholders
are subject to special U.S. tax certification requirements to avoid backup
withholding and claim any treaty benefits. Non-U.S. shareholders should consult
their tax advisors regarding the U.S. and foreign tax consequences of investing
in the Fund.
Other
Reporting and Withholding Requirements. Under
the Foreign Account Tax Compliance Act ("FATCA"), a 30% withholding tax is
imposed on income dividends paid by the Fund to certain foreign entities,
referred to as foreign financial
institutions
or nonfinancial foreign entities, that fail to comply (or be deemed compliant)
with extensive reporting and withholding requirements designed to inform the
U.S. Department of the Treasury of U.S.-owned foreign investment accounts. After
December 31, 2018, FATCA withholding also would have applied to certain capital
gain distributions, return of capital distributions and the proceeds arising
from the sale of Fund Shares, however based on proposed regulations issued by
the IRS, which may be relied upon currently, such withholding is no longer
required unless final regulations provide otherwise (which is not expected).
Information about a shareholder in the Fund may be disclosed to the IRS,
non-U.S. taxing authorities or other parties as necessary to comply with FATCA.
Withholding also may be required if a foreign entity that is a shareholder of
the Fund fails to provide the appropriate certifications or other documentation
concerning its status under FATCA.
Consult
Your Tax Professional.
Your investment in the Fund could have additional tax consequences. You should
consult your tax professional for information regarding all tax consequences
applicable to your investments in the Fund. More tax information relating to the
Fund is also provided in the SAI. This short summary is not intended as a
substitute for careful tax planning.
DETERMINATION
OF NET ASSET VALUE
The
Fund calculates its NAV as of the regularly scheduled close of business of the
Exchange (normally 4:00 p.m. Eastern time) on each day that the Exchange is open
for business, based on prices at the time of closing, provided that any assets
or liabilities denominated in currencies other than the U.S. dollar shall be
translated into U.S. dollars at the prevailing market rates on the date of
valuation as quoted by one or more major banks or dealers that make a two-way
market in such currencies (or a data service provider based on quotations
received from such banks or dealers). The NAV of the Fund is calculated by
dividing the value of the net assets of the Fund (i.e., the value of its total
assets less total liabilities) by the total number of outstanding Shares,
generally rounded to the nearest cent. The price of Fund Shares is based on
market price, and because ETF shares trade at market prices rather than NAV,
Shares may trade at a price greater than NAV (a premium) or less than NAV (a
discount).
In
calculating the Fund's NAV, the Fund's investments are generally valued using
market valuations. A market valuation generally means a valuation (i) obtained
from an exchange or a major market maker (or dealer), (ii) based on a price
quotation or other equivalent indication of value supplied by an exchange, a
pricing service, or a major market maker (or dealer), or (iii) based on
amortized cost, provided the amortized cost is approximately the value on
current sale of the security. In the case of shares of funds that are not traded
on an exchange, a market valuation means such fund's published NAV per share.
The Fund may use various pricing services or discontinue the use of any pricing
service.
In
the event that current market valuations are not readily available or such
valuations do not reflect current market values, the affected investments will
be valued using fair value pricing pursuant to the pricing policy and procedures
approved by the Board of Trustees. A price obtained from a pricing service based
on such pricing service's valuation matrix may be used to fair value a security.
The frequency with which the Fund's investments are valued using fair value
pricing is primarily a function of the types of securities and other assets in
which the Fund invests pursuant to its investment objective, strategies and
limitations.
Investments
that may be valued using fair value pricing include, but are not limited to: (i)
an unlisted security related to corporate actions; (ii) a restricted security
(i.e., one that may not be publicly sold without registration under the
Securities Act of 1933, as amended (the "Securities Act")); (iii) a security
whose trading has been suspended or which has been de-listed from its primary
trading exchange; (iv) a security that is thinly traded; (v) a security in
default or bankruptcy proceedings for which there is no current market
quotation; (vi) a security affected by currency controls or restrictions; and
(vii) a security affected by a significant event (i.e., an event that occurs
after the close of the markets on which the security is traded but before the
time as of which the Fund's NAV is computed and that may materially affect the
value of the Fund's investments). Examples of events that may be "significant
events" are government actions, natural disasters, armed conflict, acts of
terrorism, and significant market fluctuations.
Valuing
the Fund's investments using fair value pricing will result in using prices for
those investments that may differ from current market valuations. Use of fair
value prices and certain current market valuations could result in a difference
between the prices used to calculate the Fund's NAV and the prices used by the
Fund's Underlying Index, which, in turn, could result in a difference between
the Fund's performance and the performance of the Fund's Underlying
Index.
Because
foreign markets may be open on different days than the days during which a
shareholder may purchase Shares, the value of the Fund's investments may change
on days when shareholders are not able to purchase Shares. Additionally, due to
varying holiday schedules, redemption requests made on certain dates may result
in a settlement period exceeding seven calendar days.
The
value of assets denominated in foreign currencies is converted into U.S. dollars
using exchange rates deemed appropriate by the Adviser. Any use of a different
rate from the rates used by the Index Provider may adversely affect the Fund's
ability to track its Underlying Index.
The
right of redemption may be suspended or the date of payment postponed with
respect to the Fund (1) for any period during which the NYSE Arca or listing
exchange is closed (other than customary weekend and holiday closings), (2) for
any period during which trading on the NYSE Arca or listing exchange is
suspended or restricted, (3) for any period during which an emergency exists as
a result of which disposal of the Fund's portfolio securities or determination
of its NAV is not reasonably practicable, or (4) in such other circumstances as
the SEC permits.
Subject
to oversight by the Board of Trustees, the Adviser, as “valuation designee,”
performs fair value determinations of Fund investments. In addition, the
Adviser, as the valuation designee, is responsible for periodically assessing
any material risks associated with the determination of the fair value of a
Fund's investments; establishing and applying fair value methodologies; testing
the appropriateness of fair value methodologies; and overseeing and evaluating
third-party pricing services. The Adviser has established a fair value committee
to assist with its designated responsibilities as valuation
designee.
PREMIUM/DISCOUNT
AND SHARE INFORMATION
Once
available, information regarding how often the Shares of the Fund traded on a
national securities exchange at a price above (i.e., at a premium to) or below
(i.e., at a discount to) the NAV of the Fund; the Fund’s per share NAV, and the
median bid-ask spread of the Shares can be found at
www.globalxetfs.com.
INFORMATION
REGARDING THE INDEX AND THE INDEX PROVIDER
ICE
Global Carbon Futures Index
The
ICE Global Carbon Futures Index is designed to provide exposure to the price of
carbon emissions through a long-only basket of carbon credit futures contracts.
Carbon credit futures are a means of providing exposure to carbon credits (also
known as carbon allowances) which are government-issued permits that allow a
company or entity to emit a specific quantity of carbon dioxide equivalent into
the atmosphere. Generally speaking, a carbon futures contract represents a lot
(typically 1,000) of the respective carbon credits. The value of the ICE Global
Carbon Futures Index is expected to increase if the value of the underlying
basket of carbon credit futures increases, and to decrease if the value of the
underlying basket of carbon credit futures decreases. The value of the
underlying carbon credit futures is expected to be driven primarily by supply
and demand of the carbon credits linked to the respective carbon credit futures
contract. For example, if the cost of carbon emissions increases (e.g. new
regulation that increases carbon emission restrictions) in the jurisdiction of
one of the carbon credit regimes that is reflected in the ICE Global Carbon
Futures Index, the demand for those carbon credits would be expected to
increase. All else equal, this increased demand would be expected to increase
the price of the carbon credit futures linked to those carbon credits, causing
the ICE Global Carbon Futures Index to increase in value. In contrast, if the
cost of carbon emissions decreases (e.g. new regulation that decreases carbon
emission restrictions) in the jurisdiction of one of the carbon credit regimes
reflected in the Underlying Index, the demand for those carbon credits would be
expected to decrease. All else equal, this decreased demand would be expected to
decrease the price of the carbon credit futures linked to those carbon credits,
causing the ICE Global Carbon Futures Index to decrease in value.
The
ICE Global Carbon Futures Index seeks to provide exposure to the most actively
traded carbon credit futures that require “physical delivery” of emission
allowances and that are issued under “cap and trade” regimes, as determined by
ICE Data Indices, LLC. A cap and trade regime is a market-based mechanism that
governments or regulatory bodies use to reduce carbon dioxide and other
greenhouse gases from entering the atmosphere. A cap and trade program is
designed to set a geographic limit on the amount of carbon dioxide that can be
emitted into the atmosphere by specific sectors of the economy. This limit
declines on an annual basis, with the intention of reducing the overall amount
of carbon dioxide emitted over time. Companies and other entities that are
obliged to comply within a specific cap and trade program must either reduce
their emissions below their allowable annual limit, or use additional carbon
credits which at least equal their emissions above their annual limit to comply
with the program. As of March 30, 2023, the ICE Global Carbon Futures Index
consists of a long-only basket of the following contracts (collectively, the
“Contracts”):
1.ICE
EUA Futures Contracts (“EUA Contracts”) - Each EUA Contract is euro-denominated
and represents a lot of 1,000 Carbon Emission Allowances (“EUAs”) that are
deliverable to or from the Union Registry under the European Union Emissions
Trading System. Each EUA is an entitlement to emit one metric ton of carbon
dioxide equivalent gas.
2.ICE
UK Allowance Futures Contracts (“UKA Contracts”) - Each UKA Contract is
pound-denominated and represents a lot of 1,000 UK Allowances (“UKAs”) that are
deliverable to or from the UK Emissions Trading Registry under the UK Emissions
Trading Scheme. Each UKA is an entitlement to emit one metric ton of carbon
dioxide equivalent gas.
3.ICE
California Carbon Allowance Futures Contracts (“CCA Contracts”) - Each CCA
Contract is dollar-denominated and represents a lot of 1,000 California Carbon
Allowances (“CCAs”) that are physically delivered greenhouse gas emissions
allowances issued by the California Air Resources Board or a linked program
under California Assembly Bill 32 "California Global Warming Solutions Act of
2006" and its associated regulations, rules and amendments, all together known
as the "California Cap and Trade Program". Each CCA is an entitlement to emit
one metric ton of carbon dioxide equivalent gas.
4.ICE
Regional Greenhouse Gas Initiative Futures Contracts (“RGGI Contracts”) - Each
RGGI Contract is dollar-denominated and represents a lot of 1,000 RGGI
Allowances (“RGGIs”) that are physically delivered greenhouse gas emissions
allowances issued by each state in the RGGI program. The Regional Greenhouse Gas
Initiative (RGGI) is a cooperative effort among the states of Connecticut,
Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, New York,
Rhode Island, Vermont and Virginia to cap and reduce power sector carbon dioxide
emissions. Each RGGI is an entitlement to emit one short ton of carbon dioxide
gas.
As
the global carbon credit market grows, additional carbon credit futures
contracts will be evaluated by ICE Data Indices, LLC for potential inclusion in
the ICE Global Carbon Futures Index.
The
ICE Global Carbon Futures Index is rebalanced annually, with the futures
contract weights set at the end of August and with the futures rolling process
occurring over a three-month period (the “Roll Period”), running from the first
to the fifteenth business day of the months of September, October, and November.
The EUA and UKA Contracts roll in one-third increments per month over the
three-month Roll Period, from the current year December expiration contract
month to the next year December expiration contract month. The CCA and RGGI
Contracts roll in one-third increments per month over the three-month Roll
Period, from the current year vintage/current year December expiration contract
month to the next year vintage/next year December expiration contract month. As
of March 30, 2023, the ICE Global Carbon Futures Index had four constituents.
As
of March 30, 2023, at the annual rebalance, the EUA Contracts have a maximum
weighting of 50%, the RGGI Contracts have a minimum weighting of 5%, and there
are no weight constraints for the UKA Contracts or the CCA contracts. The
rebalancing contract weights are calculated based on the total dollar volume of
the contracts utilizing closing settlement prices, contract sizes (all currently
in units of 1,000), and daily volumes, as determined by the Index Provider. The
total dollar volume is measured by the Index Provider based on the current year
December expiration EUA Contracts, current year December expiration UKA
Contracts, current year vintage/current year December expiration CCA Contracts,
and current year vintage/current year December expiration RGGI Contracts. As of
March 30, 2023, the weights in the ICE Global Carbon Futures Index for the EUA
Contracts, UKA Contracts, CCA Contracts and the RGGI Contracts, were 55.9%,
22.2%, 17.6%, and 4.2%, respectively.
Disclaimer
Source
ICE Data Indices, LLC (“ICE Data”), is used with permission. ICE®
is a service/trade mark of ICE Data Indices, LLC or its affiliates and has been
licensed, along with the ICE Global Carbon Futures Index (the “Index”) for use
by Global X Management Company LLC (the “LICENSEE”) in connection with the
Global X Carbon Credits Strategy ETF (the “Product”). Neither the LICENSEE,
Global X Funds (the “Trust”) nor the Product, as applicable, is sponsored,
endorsed, sold or promoted by ICE Data Indices, LLC, its affiliates or its Third
Party Suppliers (“ICE Data and its Suppliers”). ICE Data and its Suppliers make
no representations or warranties regarding the advisability of investing in
securities generally, in the Product particularly, the Trust or the ability of
the Index to track general stock market performance. ICE Data’s only
relationship to LICENSEE is the licensing of certain trademarks and trade names
and the Index or components thereof. The Index is determined, composed and
calculated by ICE Data without regard to the LICENSEE or the Product or its
holders. ICE Data has no obligation to take the needs of the Licensee or the
holders of the Product into consideration in determining, composing or
calculating the Index. ICE Data is not responsible for and has not participated
in the determination of the timing of, prices of, or quantities of the Product
to be issued or in the determination or calculation of the equation by which the
Product is to be priced, sold, purchased, or redeemed. Except for certain custom
index calculation services, all information provided by ICE Data is general in
nature and not tailored to the needs of LICENSEE or any other person, entity or
group of persons. ICE Data has no obligation or liability in connection with the
administration, marketing, or trading of the Product. ICE Data is not an
investment advisor. Inclusion of a security within an index is not a
recommendation by ICE Data to buy, sell, or hold such security, nor is it
considered to be investment advice.
ICE
DATA AND ITS SUPPLIERS DISCLAIM ANY AND ALL WARRANTIES AND REPRESENTATIONS,
EXPRESS AND/OR IMPLIED, INCLUDING ANY WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR
PURPOSE
OR USE, INCLUDING THE INDICES, INDEX DATA AND ANY INFORMATION INCLUDED IN,
RELATED TO, OR DERIVED THEREFROM (“INDEX DATA”). ICE DATA AND ITS SUPPLIERS
SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY WITH RESPECT TO THE ADEQUACY,
ACCURACY, TIMELINESS OR COMPLETENESS OF THE INDICES AND THE INDEX DATA, WHICH
ARE PROVIDED ON AN “AS IS” BASIS AND YOUR USE IS AT YOUR OWN RISK.
OTHER
SERVICE PROVIDERS
SEI
Investments Global Funds Services is the sub-administrator for the
Fund.
The
Bank of New York Mellon is the custodian and transfer agent for the
Fund.
Stradley
Ronon Stevens & Young, LLP serves as counsel for the Trust and the Trust's
Independent Trustees.
PricewaterhouseCoopers
LLP will serve as the Fund's independent registered public accounting firm for
the fiscal year ending November 30, 2023.
ADDITIONAL
INFORMATION
The
Trust enters into contractual arrangements with various parties, including among
others, the Fund's Adviser, sub-adviser(s) (if applicable), custodian, and
transfer agent who provide services to the Fund. Shareholders are not parties to
any such contractual arrangements and are not intended beneficiaries of those
contractual arrangements, and those contractual arrangements are not intended to
create in any shareholder any right to enforce them against the service
providers or to seek any remedy under them against the service providers, either
directly or on behalf of the Trust.
This
Prospectus provides information concerning the Fund that investors should
consider in determining whether to purchase Fund Shares. Neither this Prospectus
nor the SAI is intended, or should be read, to be or give rise to an agreement
or contract between the Trust or the Fund and any investor, or to give rise to
any rights in any shareholder or other person other than any rights under
federal or state law that may not be waived.
FINANCIAL
HIGHLIGHTS
Because
the Fund had not commenced operations as of the November 30, 2022 fiscal
year end, financial highlights are not yet available.
OTHER
INFORMATION
The
Fund is not sponsored, endorsed, sold or promoted by any national securities
exchange. No national securities exchange makes any 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 Fund to achieve its objective. No national
securities exchange has any obligation or liability in connection with the
administration, marketing or trading of the Fund.
For
purposes of the 1940 Act, shares that are issued by a registered investment
company and purchases of such shares by investment companies and companies
relying on Sections 3(c)(1) or 3(c)(7) of the 1940 Act are subject to the
restrictions set forth in Section 12(d)(1) of the 1940 Act.
The
method by which Creation Units are created and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold
by the Fund on an ongoing basis, a "distribution," as such term is used in the
Securities Act, may occur at any point. Broker-dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the
examples
mentioned above should not be considered a complete description of all the
activities that could lead to a categorization as an underwriter.
Broker-dealers
who are not "underwriters" but are participating in a distribution (as
contrasted with ordinary secondary trading transactions), and thus dealing with
Shares that are part of an "unsold allotment" within the meaning of Section
4(a)(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
This is because the prospectus delivery exemption in Section 4(a)(3) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note that
dealers who are not underwriters but are participating in a distribution (as
contrasted with ordinary secondary market transactions) and thus dealing with
the Shares that are part of an overallotment within the meaning of Section
4(a)(3)(A) of the Securities Act would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
Firms that incur a prospectus delivery obligation with respect to Shares are
reminded that, under Rule 153 of the Securities Act, a prospectus delivery
obligation under Section 5(b)(2) of the Securities Act owed to an exchange
member in connection with a sale on NYSE Arca is satisfied by the fact that the
prospectus is available at NYSE Arca upon request. The prospectus delivery
mechanism provided in Rule 153 is only available with respect to transactions on
an exchange.
For
more information visit our website at
www.globalxetfs.com
or
call 1-888-493-8631
|
|
|
|
|
|
Investment
Adviser and Administrator Global
X Management Company LLC 605 3rd Avenue, 43rd Floor New York, NY
10158 |
|
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
|
|
Custodian
and Transfer Agent
The
Bank of New York Mellon
240
Greenwich Street
New
York, New York 10286
|
|
Sub-Administrator
SEI
Investments Global Funds Services
One
Freedom Valley Drive
Oaks,
PA 19456
|
|
Legal
Counsel to the Global X Funds®
and Independent Trustees
Stradley
Ronon Stevens & Young, LLP
2000
K Street N.W., Suite 700
Washington,
DC 20006
|
|
Independent
Registered Public Accounting Firm
PricewaterhouseCoopers
LLP
Two
Commerce Square, Suite 1800
2001
Market Street
Philadelphia,
PA 19103 |
|
A
Statement of Additional
Information
dated April 11, 2023, which contains more details about the Fund, is
incorporated by reference in its entirety into this Prospectus, which means that
it is legally part of this Prospectus.
Additional
information about the Fund and its investments is available in its annual and
semi-annual reports to shareholders. The annual report explains the market
conditions and investment strategies affecting the Fund's performance during its
last fiscal year.
You
can ask questions or obtain a free copy of the Fund's semi-annual and annual
report or the Statement of Additional Information by calling 1-888-493-8631.
Free copies of the Fund's semi-annual and annual report and the Statement of
Additional Information are available from our website at
www.globalxetfs.com.
Information
about the Fund, including its semi-annual and annual reports and the Statement
of Additional Information, has been filed with the SEC. It can be reviewed and
copied on the EDGAR database on the SEC's internet site (http://www.sec.gov).
You can also request copies of these materials, upon payment of a duplicating
fee, by electronic request at the SEC's e-mail address
([email protected]).
PROSPECTUS
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
April
11, 2023
Investment
Company Act File No.: 811-22209