ck0001742912-20210831
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RORO |
ATAC
US Rotation ETF |
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listed
on NYSE Arca, Inc. |
PROSPECTUS
December 29,
2021
The
U.S. Securities and Exchange Commission (“SEC”) has not approved or disapproved
of these securities or passed upon the accuracy or adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
TABLE
OF CONTENTS
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ATAC
US Rotation ETF - Fund Summary |
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Additional
Information about the Fund |
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Portfolio
Holdings Information |
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Management |
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How
to Buy and Sell Shares |
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Dividends,
Distributions, and Taxes |
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Distribution |
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Premium/Discount
Information |
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Additional
Notices |
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Financial
Highlights |
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ATAC US Rotation ETF – FUND
SUMMARY
Investment Objective
The ATAC US Rotation ETF (the
“Fund”) seeks total return.
Fees and Expenses of the
Fund
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares of the Fund
(“Shares”). You may pay other fees, such as brokerage commissions and other fees
to financial intermediaries, which are not reflected in the table and Example
below.
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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 |
1.25% |
Distribution
and/or Service (Rule 12b-1) Fees |
0.00% |
Other
Expenses |
0.00% |
Acquired
Fund Fees and Expenses 1 |
0.15% |
Total
Annual Fund Operating Expenses |
1.40% |
Less:
Fee Waiver |
(0.27)% |
Total
Annual Fund Operating Expenses After Fee Waiver 2 |
1.13% |
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1
Acquired Fund Fees and
Expenses (“AFFE”) are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the expense
ratios in the Fund’s Financial Highlights because the Financial Highlights
include only the direct operating expenses incurred by the Fund and exclude
AFFE.
2
The Fund’s investment
adviser, Toroso Investments, LLC (the “Adviser”), has agreed to reduce its
unitary management fee (which includes all expenses incurred by the Fund except
for interest charges on any borrowings, dividends and other expenses on
securities sold short, taxes, brokerage commissions and other expenses incurred
in placing orders for the purchase and sale of securities and other investment
instruments, AFFE, accrued deferred tax liability, extraordinary expenses,
distribution fees and expenses paid by the Fund under any distribution plan
adopted pursuant to Rule 12b-1 under the 1940 Act, and the unified management
fee payable to the Adviser (collectively, the “Excluded Expenses”)) to 0.98% of
the Fund’s average daily net assets through at least December 31,
2022. To the extent the Fund incurs Excluded Expenses, Total
Annual Fund Operating Expenses After Fee Waiver is greater than 0.98%. This
agreement may be terminated only by, or with the consent of, the Tidal ETF
Trust’s (the “Trust”) Board of Trustees (the “Board”), on behalf of the Fund,
upon sixty (60) days’ written notice to the Adviser. This Agreement may not be
terminated by the Adviser without the consent of the
Board.
Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund’s operating expenses remain the same. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. The management fee waiver discussed above is
reflected only through December 31, 2022. Although your actual costs may be higher
or lower, based on these assumptions your costs would
be:
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1 Year |
3
Years |
5
Years |
10
Years |
$115 |
$417 |
$740 |
$1,656 |
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 total annual fund operating expenses or
in the expense example above, affect the Fund’s performance. For the fiscal
period November 17, 2020 (commencement of operations) to August 31, 2021, the
Fund’s portfolio turnover rate was 678% of the average value of its
portfolio.
Principal Investment
Strategies
The
Fund is an actively-managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective by utilizing a systematic risk management and
rules-based strategy to direct its exposure to either (i) U.S. equity securities
or (ii) long-duration U.S. Treasury securities depending on the short-term
relative price movements of gold as compared to lumber, as described
below.
The
Adviser invests the Fund’s assets primarily in one or more ETFs (sometimes
referred to in this Prospectus as “Underlying ETFs”), or the underlying holdings
of such Underlying ETFs, by following the risk-on/risk-off signals from the ATAC
Risk-On/Risk-Off Index (the “RORO Index”), which is owned and maintained by the
Adviser. At the end of each week, the RORO Index observes the short-term
relative price movements of gold as compared to lumber. When the price of lumber
has outperformed the price of gold (“Risk-On”), the RORO Index will have 130%
exposure through one or more Underlying ETFs (or their underlying holdings) that
principally invest in a mix of U.S. small-cap and large-cap stocks. When the
price of gold has outperformed the price of lumber (“Risk-Off”), the RORO Index
will have 100% exposure through one or more Underlying ETFs (or their underlying
holdings) that principally invest in long-duration (e.g.,
20 years) U.S. Treasury securities. The Fund’s selection and individual
allocation of Underlying ETFs as a percentage of the Fund’s assets attempts to
replicate the RORO Index’s risk-on and risk-off baskets, as applicable. In
addition, the Fund may purchase a security not currently in the RORO Index,
including U.S. Treasury securities or U.S. small-cap stocks and U.S. large-cap
growth stocks that replicate the Underlying ETFs, when the Adviser believes it
is in the best interests of the Fund to do so (e.g., because such purchase would
result in cost savings or a potential tax benefit).
Risk-On
Exposure. When
the RORO Index is in a Risk-On exposure, the Fund will invest in a mix of ETFs,
including leveraged ETFs, to seek to obtain 130% exposure to broad-based U.S.
small-cap stocks and U.S. large-cap growth stocks. Underlying ETFs in which the
Fund invests are meant to replicate the RORO Index’s equivalent risk-on
positioning of equity securities when the RORO Index is in Risk-On mode, half of
which is made up of U.S. small-cap stocks and half of which is made up of U.S.
large-cap growth stocks.
To
obtain exposure in excess of 100%, the Fund expects to invest in U.S. equity
leveraged ETFs, which seek to provide investment results that match a multiple
of the performance of an underlying index (e.g., up to three times the
performance) for a single day and typically rely on derivative instruments to
seek to obtain their investment objectives. Investing in U.S. equity leveraged
ETFs allows for the gross multiplier to track that of the RORO Index when
Risk-On without the explicit use of a credit line to magnify returns. The use of
leverage may magnify the effect of any decrease or increase in the value of
these Underlying ETFs.
Risk-Off
Exposure. When
the RORO Index is in a Risk-Off exposure, the Fund seeks to invest in one or
more ETFs that principally invest in long-duration U.S. Treasury
securities.
Under
normal circumstances, at least 80% of the Fund’s net assets, plus borrowings for
investment purposes, will be invested in (i) securities that are traded
principally in the United States, (ii) securities issued or guaranteed by the
U.S. government, its agencies, or instrumentalities, or (iii) ETFs that invest,
under normal circumstances, at least 80% of their net assets, plus borrowings
for investment purposes, in the foregoing securities. Such policy has been
adopted as a non-fundamental investment policy and may be changed without
shareholder approval upon approval by the Board and 60 days’ written notice to
shareholders.
Because the RORO Index may change from
Risk-On to Risk-Off exposure as frequently as each week, the Fund may engage in
active and frequent trading and have a high portfolio turnover rate. The Fund is
considered to be non-diversified under the Investment Company Act of 1940, as
amended (the “1940 Act”), which means that it may invest more of its assets in
the securities of a single issuer or a smaller number of issuers than if it were
a diversified fund.
Principal Risks of Investing in the
Fund
The
principal risks of investing in the Fund are summarized below. The principal
risks are presented in alphabetical order to facilitate finding particular risks
and comparing them with those of other funds. Each risk summarized below is
considered a “principal risk” of investing in the Fund, regardless of the order
in which they appear. Because the Adviser invests the Fund’s assets primarily in
Underlying ETFs, the Fund is also subject to the risks associated with the
Underlying ETFs in which it invests, as described below.
As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield, total return and/or ability to meet its
investment objective. For more information about the risks of investing in the
Fund, see the section in the Fund’s Prospectus titled “Additional Information
About the Fund—Principal Risks of Investing in the
Fund.”
Associated
Risks of Short-Term Signals. Because
the Fund expects to change its exposure as frequently as each week based on
short-term price performance information, (i) the Fund’s exposure may be
affected by significant market movements at or near the end of such short-term
period that are not predictive of such asset’s performance for subsequent
periods and (ii) changes to the Fund’s exposure may lag a significant change in
an asset’s direction (up or down) if such changes first take effect at or near a
weekend. Such lags between an asset’s performance and changes to the Fund’s
exposure may result in significant underperformance relative to the broader
equity or fixed income market.
Additionally,
because the Adviser determines the exposure for the Fund based on the price
movements of gold and lumber, the Fund is exposed to the risk that such assets
or their relative price movements fail to accurately predict future performance.
Consequently, the Fund may significantly underperform relative to the broader
equity or fixed income market if the RORO Index is unsuccessful at predicting
future performance for the Underlying ETFs.
Derivatives
Risk.
The
Fund is exposed to risks associated with derivatives through its investments in
leveraged Underlying ETFs. Such Underlying ETFs may use derivative instruments,
including swap agreements and futures contracts, which derive their value from
the value of an underlying asset or index.
Derivative investments have risks, including the imperfect correlation between
the value of such instruments and the underlying assets or index; the loss of
principal, including the potential loss of amounts greater than the initial
amount invested in the derivative instrument; the possible default of the other
party to the transaction; and illiquidity of the derivative investments. If a
counterparty becomes bankrupt or otherwise fails to perform its obligations
under a derivative contract due to financial difficulties, the Underlying ETFs
may experience significant delays in obtaining any recovery under the derivative
contract in a bankruptcy or other reorganization proceeding. The derivatives
used by the Underlying ETFs may give rise to a form of leverage. The use of
leverage may exaggerate any increase or decrease in the net asset value, causing
the Underlying ETFs to be more volatile. The use of leverage may also increase
expenses and increase the impact of the Underlying ETF’s other risks. The use of
leverage may cause the Underlying ETFs to liquidate portfolio positions to
satisfy its obligations or to meet collateral segregation requirements or
regulatory requirements when it may not be advantageous to liquidate such
positions, resulting in increased volatility of returns. Certain of the
Underlying ETF’s transactions in derivatives could also affect the amount,
timing, and character of distributions to shareholders, which may result in the
Underlying ETFs realizing more short-term capital gain and ordinary income
subject to tax at ordinary income tax rates than it would if it did not engage
in such transactions, which may adversely impact the Underlying ETF’s after-tax
returns.
Equity
Market Risk. To
the extent the Fund invests in Underlying ETFs that invest in equity securities
or in equity securities directly, the Fund is subject to the risk that the
equity securities held by the Fund or such Underlying ETFs may experience
sudden, unpredictable drops in value or long periods of decline in value. This
may occur because of factors that affect securities markets generally or factors
affecting specific issuers, industries, or sectors in which the Fund or an
Underlying ETF invests. Common stocks are generally exposed to greater risk than
other types of securities, such as preferred stock and debt obligations, because
common stockholders generally have inferior rights to receive payment from
issuers.
ETF
Risk.
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that are authorized to
purchase and redeem Shares directly from the Fund (known as “Authorized
Participants” or “APs”). In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, Shares may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services; or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small
investments.
◦Shares
May Trade at Prices Other Than NAV.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of market volatility, periods of
steep market declines, and periods when there is limited trading activity for
Shares in the secondary market, in which case such premiums or discounts may be
significant.
◦Trading. Although
Shares are listed on a national securities exchange, such as NYSE Arca, Inc.
(the “Exchange”), and may be traded on U.S. exchanges other than the Exchange,
there can be no assurance that Shares will trade with
any
volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than
Shares.
Fixed
Income Risk. The
Fund invests directly or in Underlying ETFs that principally invest in
long-duration U.S. Treasury securities. The value of fixed income securities
will fluctuate with changes in interest rates. Typically, a rise in interest
rates causes a decline in the value of fixed income securities. On the other
hand, if rates fall, the value of the fixed income securities generally
increases. Fixed income securities may be subject to a greater risk of rising
interest rates due to the current period of historically low rates and the
effect of potential government fiscal policy initiatives and resulting market
reaction to those initiatives. In general, the market price of fixed income
securities with longer maturities will increase or decrease more in response to
changes in interest rates than shorter-term securities. The value of fixed
income securities may be affected by the inability of issuers to repay principal
and interest or illiquidity in debt securities markets.
General
Market Risk. Economies
and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in the Fund’s portfolio may underperform in comparison to
securities in the general financial markets, a particular financial market or
other asset classes, due to a number of factors, including inflation (or
expectations for inflation), interest rates, global demand for particular
products or resources, natural disasters or events, pandemic diseases,
terrorism, regulatory events, and government controls.
Government
Obligations Risk.
Some of the Underlying ETFs in which the Fund invests may invest in securities
issued by the U.S. government or its agencies or instrumentalities. The Fund may
also invest directly in these securities. There can be no guarantee that the
United States will be able to meet its payment obligations with respect to such
securities. Additionally, market prices and yields of securities supported by
the full faith and credit of the U.S. government or other countries may decline
or be negative for short or long periods of time.
Growth
Stocks Risk. Growth
stocks, which may be held by some of the Underlying ETFs in which the Fund
invests or in which the Fund may directly invest, tend to rise and fall with the
business cycle. When the economy is doing well, generally the value of these
companies increases; however, when there is a recession or downturn in the
economy, these companies tend to decrease in value because their goods and
services are generally not a necessity. These are typically companies that
provide consumer discretionary goods or services. The success of consumer
product manufacturers and retailers is tied closely to the performance of
domestic and international economies, interest rates, exchange rates,
competition, consumer confidence, changes in demographics, and consumer
preferences. Growth companies may depend heavily on disposable household income
and consumer spending, and may be strongly affected by social trends and
marketing campaigns.
High
Portfolio Turnover Risk. The
Fund actively and frequently trades all or a significant portion of the
securities in its portfolio. A high portfolio turnover rate increases
transaction costs, which may increase the Fund’s expenses. Frequent trading may
also cause adverse tax consequences for investors in the Fund due to an increase
in short-term capital gains.
Leveraged
ETF Risk.
Leveraged ETFs seek to provide investment results that match a multiple of the
performance of an underlying index (e.g.,
three times the performance) for a single day and rely to some degree, often
extensively, on derivatives to achieve their objectives. Thus, the Fund is
indirectly exposed to derivatives risk through its investments in these
leveraged ETFs. Further, investments in leveraged ETFs are subject to the risk
that the performance of such ETF will not correlate with the underlying index as
intended. Leveraged ETFs often “reset” daily, meaning that they are designed to
achieve their stated objectives on a daily basis. Due to the effect of
compounding, their performance over longer periods of time can differ
significantly from the performance of their underlying index or benchmark during
the same period of time. This effect can be magnified in volatile markets.
Consequently, these investment vehicles may be extremely volatile and can
potentially expose the Fund to complete loss of its investment. Leveraged ETFs
are also subject to the risks presented by traditional ETFs (see “ETF Risks”
above).
Management
Risk.
The Fund is actively-managed and may not meet its investment objective based on
the Adviser’s success or failure to implement investment strategies for the
Fund.
Market
Capitalization Risk. These
risks apply to the extent the Underlying ETFs in which the Fund invests or in
which the Fund invests directly, hold securities of large- and
small-capitalization companies.
◦Large-Capitalization
Investing. The
securities of large-capitalization companies may be relatively mature compared
to smaller companies and therefore subject to slower growth during times of
economic expansion. Large-capitalization companies may also be unable to respond
quickly to new competitive challenges, such as changes in technology and
consumer tastes.
◦Small-Capitalization
Investing.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The
securities
of small-capitalization companies generally trade in lower volumes and are
subject to greater and more unpredictable price changes than large- or
mid-capitalization stocks or the stock market as a whole. There is typically
less publicly available information concerning smaller-capitalization companies
than for larger, more established companies.
Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may
invest a greater percentage of its assets in the securities of a single issuer
or a smaller number of issuers than if it was a diversified fund. As a result, a
decline in the value of an investment in a single issuer or a small number of
issuers could cause the Fund’s overall value to decline to a greater degree than
if the Fund held a more diversified portfolio.
Recent
Market Events Risk.
U.S. and international markets have experienced significant periods of
volatility in recent years and months due to a number of economic, political and
global macro factors including the impact of COVID-19, which has resulted in
public health issues, growth concerns in the U.S. and overseas, layoffs, rising
unemployment claims, changed travel and social behaviors, and reduced consumer
spending. The lasting effects of COVID-19 on the global economy and the recovery
from COVID-19 are uncertain and may last for an extended period of time. These
developments as well as other events could result in further market volatility
and negatively affect financial asset prices, the liquidity of certain
securities and the normal operations of securities exchanges and other
markets.
Recently
Organized Fund Risk. The
Fund is newer with a limited operating history. As a result,
prospective investors do not have a long-term track record or history on
which to base their investment decision. There can be no assurance that the Fund
will grow to or maintain an economically viable size.
Underlying
ETFs Risks.
The Fund will incur higher and duplicative expenses because it invests in
Underlying ETFs. There is also the risk that the Fund may suffer losses due to
the investment practices of the Underlying ETFs. The Fund will be subject to
substantially the same risks as those associated with the direct ownership of
securities held by the Underlying ETFs. Additionally, the market price of the
shares of an Underlying ETF in which the Fund invests will fluctuate based on
changes in the net asset value as well as changes in the supply and demand of
its shares in the secondary market. It is also possible that an active secondary
market for an Underlying ETF’s shares may not develop, and market trading in the
shares of the Underlying ETF may be halted under certain circumstances.
Underlying ETFs are also subject to the “ETF Risks” described
above.
Performance
Performance information for the Fund is not
included because the Fund has not completed a full calendar year of operations
as of the date of this Prospectus. When such information is
included, this section will provide some indication of the risks of investing in
the Fund by showing changes in the Fund’s performance history from year to year
and showing how the Fund’s average annual total returns compare with those of a
broad measure of market performance. Although past performance of the
Fund is no guarantee of how it will perform in the future, historical
performance may give you some indication of the risks of investing in the
Fund. Updated performance information is available on the Fund’s
website at www.atacfunds.com.
Management
Investment
Adviser:
Toroso
Investments, LLC serves
as investment adviser to the Fund.
Portfolio
Managers:
Michael
Venuto, Chief Investment Officer for the Adviser, is responsible for the
day-to-day management of the Fund and has been a portfolio manager of the Fund
since its inception in 2020.
Michael
Gayed, CFA, Portfolio Manager for the Adviser, is responsible for the day-to-day
management of the Fund and has been a portfolio manager of the Fund since its
inception in 2020.
Purchase
and Sale of Shares
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities (the “Deposit Securities”) and/or a designated amount of U.S.
cash.
Shares
are listed on a national securities exchange, such as the Exchange, and
individual Shares may only be bought and sold in the secondary market through
brokers at market prices, rather than NAV. Because Shares trade at market prices
rather than NAV, Shares may trade at a price greater than NAV (premium) or less
than NAV (discount).
An
investor may incur costs attributable to the difference between the highest
price a buyer is willing to pay to purchase Shares (the “bid” price) and the
lowest price a seller is willing to accept for Shares (the “ask” price) when
buying or selling Shares in the secondary market. This difference in bid and ask
prices is often referred to as the “bid-ask spread.”
Recent
information regarding the Fund’s NAV, market price, how often Shares traded on
the Exchange at a premium or discount, and bid-ask spreads can be found on the
Fund’s website at www.atacfunds.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an
individual retirement account (“IRA”) or other tax-advantaged account.
Distributions on investments made through tax-deferred arrangements may be taxed
later upon withdrawal of assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training, or other initiatives
related to the sale or promotion of Shares. These payments may create a conflict
of interest by influencing the Intermediary and your salesperson to recommend
the Fund over another investment. Any such arrangements do not result in
increased Fund expenses. Ask your salesperson or visit the Intermediary’s
website for more information.
ADDITIONAL
INFORMATION ABOUT THE FUND
Investment
Objective
The
ATAC US Rotation ETF (the “Fund”) seeks
total return.
An
investment objective is fundamental if it cannot be changed without the consent
of the holders of a majority of the outstanding Shares. The Fund’s investment
objective has not been adopted as a fundamental investment policy and therefore
may be changed without the consent of the Fund’s shareholders upon Board
approval and written notice to shareholders.
Principal
Investment Strategies
The
following information is in addition to, and should be read along with, the
description of the Fund’s principal investment strategies in the section titled
“Fund Summary—Principal Investment Strategies” above.
To
achieve the Fund’s investment objective, the Adviser invests the Fund’s assets
primarily in shares of Underlying ETFs.
Section
12(d)(1) of the 1940 Act restricts investments by investment companies in the
securities of other investment companies, including Underlying ETFs.
However,
registered investment companies are permitted to invest in other investment
companies beyond the limits set forth in Section 12(d)(1) in recently adopted
rules under the 1940 Act, subject to certain conditions. As of the date of this
Prospectus, included among these conditions is a requirement that such
Underlying ETF enter into an agreement with the Fund that is consistent with
relevant terms of the Section 12(d)(1) exemptive order that the Underlying ETF
has obtained from the SEC or the applicable rule under the 1940 Act permitting
such investments. Since the Fund currently, or anticipates that it will, invest
in Underlying ETFs beyond the limits of Section 12(d)(1) of the 1940 Act, the
Fund has entered into agreements with certain Underlying ETFs that permit the
Fund to invest in such Underlying ETFs beyond the limits of Section 12(d)(1) of
the 1940 Act. Going forward, by January 19, 2022, the Fund intends to rely on
Rule 12d1-4 of the 1940 Act, which provides an exemption from Section 12(d)(1)
that allows the Fund to invest all of its assets in other registered funds,
including ETFs, if the Fund satisfies certain conditions specified in the Rule,
including, among other conditions, that the Fund and its advisory group will not
control (individually or in the aggregate) an acquired fund (e.g., hold more
than 25% of the outstanding voting securities of an acquired fund that is a
registered open-end management investment company).
The
Fund has adopted a policy to comply with Rule 35d-1 under the 1940 Act pursuant
to which, under normal circumstances, at least 80% of the Fund’s net assets,
plus borrowings for investment purposes, will be invested in (i) securities that
are traded principally in the United States, (ii) securities issued or
guaranteed by the U.S. government, its agencies, or instrumentalities, or (iii)
ETFs that invest, under normal circumstances, at least 80% of their net assets,
plus borrowings for investment purposes, in the foregoing securities. Such
policy has been adopted as a non-fundamental investment policy and may be
changed without shareholder approval upon Board approval and 60 days’ written
notice to shareholders.
The
Fund may engage in active and frequent trading and have a high portfolio
turnover rate.
Temporary
Defensive Strategies. For
temporary defensive purposes during adverse market, economic, political or other
conditions, the Fund may invest in cash or cash equivalents or short-term
instruments such as commercial paper, money market mutual funds, short-term U.S.
government securities, and/or repurchase agreements collateralized by U.S.
government securities. Taking a temporary defensive position may result in the
Fund not achieving its investment objective.
Manager
of Managers Structure
Although
the Fund is not currently sub-advised, the Fund and the Adviser have received
exemptive relief from the SEC permitting the Adviser (subject to certain
conditions and the approval of the Board) to change or select unaffiliated
sub-advisers without obtaining shareholder approval. The relief also permits the
Adviser to materially amend the terms of agreements with an unaffiliated
sub-adviser (including an increase in the fee paid by the Adviser to the
unaffiliated sub-adviser (and not paid by the Fund)) or to continue the
employment of an unaffiliated sub-adviser after an event that would otherwise
cause the automatic termination of services with Board approval, but without
shareholder approval. Shareholders will be notified of any unaffiliated
sub-adviser changes. The Adviser has the ultimate responsibility, subject to
oversight by the Board, to oversee a sub-adviser and recommend their hiring,
termination and replacement.
Principal
Risks of Investing in the Fund
The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which they appear. As with any investment, there is a
risk that you could lose all or a portion of your investment in the Fund.
Some
or all of these risks may adversely affect the Fund’s NAV per share, trading
price, yield, total return and/or ability to meet its investment objective. The
following risks could affect the value of your performance in the
Fund:
Associated
Risks of Short-Term Signals. Because
the Fund expects to change its exposure as frequently as each week based on
short-term price performance information, (i) the Fund’s exposure may be
affected by significant market movements at or near the end of such short-term
period that are not predictive of such asset’s performance for subsequent
periods and (ii) changes to the Fund’s exposure may lag a significant change in
an asset’s direction (up or down) if such changes first take effect at or near a
weekend. Such lags between an asset’s performance and changes to the Fund’s
exposure may result in significant underperformance relative to the broader
equity or fixed income market.
Additionally,
because the Adviser determines the exposure for the Fund based on the price
movements of gold and lumber, the Fund is exposed to the risk that such assets
or their relative price movements fail to accurately predict future performance.
Consequently, the Fund may significantly underperform relative to the
broader equity or fixed income market if the RORO Index is unsuccessful at
predicting future performance for the Underlying ETFs.
Derivatives
Risk.
The
Fund is exposed to risks associated with derivatives through its investments in
leveraged Underlying ETFs. Such Underlying ETFs may use derivative instruments,
including swap agreements and futures contracts, which derive their value from
the value of an underlying asset or index.
The performance of derivative instruments (including currency derivatives)
depends largely on the performance of an underlying currency, security, interest
rate or index, and such derivatives often have risks similar to the underlying
instrument, in addition to other risks. Derivatives involve costs and can create
economic leverage in the Underlying ETF’s portfolio which may result in
significant volatility and cause the Underlying ETFs to participate in losses
(as well as gains) in an amount that significantly exceeds the Underlying ETF’s
initial investment. Certain derivatives have the potential for unlimited loss,
regardless of the size of the initial investment. Other risks include
illiquidity, mispricing or improper valuation of the derivative, and imperfect
correlation between the value of the derivative and the underlying instrument so
that the Underlying ETFs may not realize the intended benefits. Their successful
use will usually depend on the investment adviser’s ability to accurately
forecast movements in the market relating to the underlying instrument. Should a
market or markets, or prices of particular classes of investments move in an
unexpected manner, especially in unusual or extreme market conditions, the
Underlying ETFs may not achieve the anticipated benefits of the transaction, and
it may realize losses, which could be significant. If an Underlying ETF is not
successful in using such derivative instruments, the Underlying ETF’s
performance may be worse than if the Underlying ETF did not use such derivatives
at all. When a derivative is used for hedging, the change in value of the
derivative may also not correlate specifically with the currency, security,
interest rate, index or other risk being hedged. Derivatives also may present
the risk that the other party to the transaction will fail to perform. There is
also the risk, especially under extreme market conditions, that a derivative,
which usually would operate as a hedge, provides no hedging benefits at all.
Use
of derivatives could also result in a loss if the counterparty to the
transaction does not perform as promised, including because of such
counterparty’s bankruptcy or insolvency. This risk is heightened with respect to
over-the-counter (“OTC”) instruments, such as certain swap agreements and
currency forwards, and may be greater during volatile market conditions. Other
risks include the inability to close out a position because the trading market
becomes illiquid (particularly in the OTC markets) or the availability of
counterparties becomes limited for a period of time. In addition, the presence
of speculators in a particular market could lead to price distortions. To the
extent that an Underlying ETF is unable to close out a position because of
market illiquidity, the Underlying ETF may not be able to prevent further losses
of value in its derivatives holdings and the Underlying ETF’s liquidity may be
impaired to the extent that it has a substantial portion of its otherwise liquid
assets marked as segregated to cover its obligations under such derivative
instruments. Some derivatives can be particularly sensitive to changes in
interest rates or other market prices. Investors should bear in mind that, while
the Underlying ETFs intend to use derivative strategies on a regular basis, they
are not obligated to actively engage in these transactions, generally or in any
particular kind of derivative, if the Underlying ETFs elects not to do so due to
availability, cost or other factors.
The
use of derivative strategies may also have a tax impact on the Underlying ETFs.
The timing and character of income, gains or losses from these strategies could
impair the ability of the Underlying ETFs to use derivatives when it wishes to
do so.
Equity
Market Risk. These
risks apply to the extent the Fund or the Underlying ETFs in which the Fund
invests, hold equity securities. Common stocks are susceptible to general stock
market fluctuations and to volatile increases and decreases in value as market
confidence in and perceptions of their issuers change. These investor
perceptions are based on various and unpredictable factors including:
expectations regarding government, economic, monetary and fiscal policies;
inflation and interest rates; economic expansion or contraction; and global or
regional political, economic and banking crises. Common stock, or common stock
equivalents are generally exposed to greater risk than other types of
securities, such as preferred stocks and debt obligations, because common
stockholders, or holders of equivalent interests, generally have inferior rights
to
receive
payments from issuers in comparison with the rights of preferred stockholders,
bondholders, and other creditors of such issuers.
ETF
Risk.
◦APs,
Market Makers, and Liquidity Providers Concentration Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares may trade at a material discount to NAV and possibly face
delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services; or (ii) market makers and/or liquidity providers exit the
business or significantly reduce their business activities and no other entities
step forward to perform their functions.
◦Costs
of Buying or Selling Shares. Investors
buying or selling Shares in the secondary market will pay brokerage commissions
or other charges imposed by brokers, as determined by that broker. Brokerage
commissions are often a fixed amount and may be a significant proportional cost
for investors seeking to buy or sell relatively small amounts of Shares. In
addition, secondary market investors will also incur the cost of the bid-ask
spread. The bid-ask spread varies over time for Shares based on trading volume
and market liquidity, and is generally lower if Shares have more trading volume
and market liquidity and higher if Shares have little trading volume and market
liquidity. Further, a relatively small investor base in the Fund, asset swings
in the Fund and/or increased market volatility may cause increased bid-ask
spreads. Due to the costs of buying or selling Shares, including bid-ask
spreads, frequent trading of Shares may significantly reduce investment results
and an investment in Shares may not be advisable for investors who anticipate
regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of the Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of the Shares or during periods of market
volatility. This risk is heightened in times of market volatility or periods of
steep market declines. The market price of Shares during the trading day, like
the price of any exchange-traded security, includes a “bid-ask” spread charged
by the exchange specialist, market makers or other participants that trade the
Shares. In times of severe market disruption, the bid‑ask spread can increase
significantly. At those times, Shares are most likely to be traded at a discount
to NAV, and the discount is likely to be greatest when the price of Shares is
falling fastest, which may be the time that you most want to sell your Shares.
The Adviser believes that, under normal market conditions, large market price
discounts or premiums to NAV will not be sustained because of arbitrage
opportunities.
◦Trading. Although
Shares are listed for trading on the Exchange and may be listed or traded on
U.S. and non-U.S. stock exchanges other than the Exchange, there can be no
assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange “circuit breaker”
rules, which temporarily halt trading on the Exchange when a decline in the
S&P 500 Index during a single day reaches certain thresholds (e.g., 7%, 13%,
and 20%). Additional rules applicable to the Exchange may halt trading in Shares
when extraordinary volatility causes sudden, significant swings in the market
price of Shares. There can be no assurance that Shares will trade with any
volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than
Shares.
Fixed
Income Securities Risk. The
Fund invests directly or in Underlying ETFs that principally invest in
long-duration U.S. Treasury securities. The prices of fixed income securities
may be affected by changes in interest rates, the creditworthiness and financial
strength of the issuer and other factors. An increase in prevailing interest
rates typically causes the value of existing fixed income securities to fall and
often has a greater impact on longer-duration and/or higher quality fixed income
securities. Falling interest rates will cause the Fund or an Underlying ETF to
reinvest the proceeds of fixed income securities that have been repaid by the
issuer at lower interest rates and may also reduce the Fund’s or such Underlying
ETF’s distributable income because interest payments on floating rate fixed
income instruments held by the Fund or the Underlying ETF will decline. The Fund
could lose money on direct or indirect investments in fixed income securities if
the issuer or borrower fails to meet its obligations to make interest payments
and/or to repay principal in a timely manner. If an issuer seeks to restructure
the terms of its borrowings or the Underlying ETF is required to seek recovery
upon a default in the payment of interest or the repayment of principal, the
Fund or the Underlying ETF may incur additional expenses. Changes in an issuer’s
financial strength, the market’s perception of such strength or in the credit
rating of the issuer or the security may
affect
the value of debt securities. The Adviser’s or Underlying ETF’s adviser’s credit
analysis may fail to anticipate such changes, which could result in buying a
fixed income security at an inopportune time or failing to sell a fixed income
security in advance of a price decline or other credit event.
General
Market Risk.
Economies and financial markets throughout the world are becoming increasingly
interconnected, which increases the likelihood that events or conditions in one
country or region will adversely impact markets or issuers in other countries or
regions. Securities in the Fund’s portfolio may underperform in comparison to
securities in the general financial markets, a particular financial market or
other asset classes, due to a number of factors, including inflation (or
expectations for inflation), interest rates, global demand for particular
products or resources, natural disasters or events, pandemic diseases,
terrorism, regulatory events, and government controls.
Government
Obligations Risk.
Some of the Underlying ETFs in which the Fund invests may invest in securities
issued by the U.S. government or its agencies or instrumentalities. The Fund may
also invest directly in these securities. There can be no guarantee that the
United States will be able to meet its payment obligations with respect to such
securities. Additionally, market prices and yields of securities supported by
the full faith and credit of the U.S. government or other countries may decline
or be negative for short or long periods of time.
Growth
Stocks Risk. Growth
stocks, which may be held by some of the Underlying ETFs in which the Fund
invests or in which the Fund may invest directly, tend to rise and fall with the
business cycle. When the economy is doing well, generally the value of these
companies increases; however, when there is a recession or downturn in the
economy, these companies tend to decrease in value because their goods and
services are generally not a necessity. These are typically companies that
provide consumer discretionary goods or services. The success of consumer
product manufacturers and retailers is tied closely to the performance of
domestic and international economies, interest rates, exchange rates,
competition, consumer confidence, changes in demographics, and consumer
preferences. Growth companies may depend heavily on disposable household income
and consumer spending, and may be strongly affected by social trends and
marketing campaigns. These companies may be subject to severe competition, which
may have an adverse impact on their profitability.
High
Portfolio Turnover Risk. The
Fund actively and frequently trades all or a significant portion of the
securities in its portfolio. A high portfolio turnover rate increases
transaction costs, which may increase the Fund’s expenses. Frequent trading may
also cause adverse tax consequences for investors in the Fund due to an increase
in short-term capital gains.
Leveraged
ETF Risk. Leveraged
ETFs seek to provide investment results that match a multiple of the performance
of an underlying index (e.g., three times the performance) for a single day and
rely to some degree, often extensively, on derivatives to achieve their
objectives. Thus, the Fund is indirectly exposed to derivatives risk through its
investments in these leveraged ETFs. Further, investments in leveraged ETFs are
subject to the risk that the performance of such ETF will not correlate with the
underlying index as intended. Leveraged ETFs often “reset” daily, meaning that
they are designed to achieve their stated objectives on a daily basis. Due to
the effect of compounding, their performance over longer periods of time can
differ significantly from the performance of their underlying index or benchmark
during the same period of time. This effect can be magnified in volatile
markets. Consequently, these investment vehicles may be extremely volatile and
can potentially expose the Fund to complete loss of its investment. Leveraged
ETFs are also subject to the risks presented by traditional ETFs (see “ETF
Risks” above).
Management
Risk.
The Fund is actively-managed and may not meet its investment objective based on
the Adviser’s success or failure to implement investment strategies for the
Fund.
Market
Capitalization Risk. These
risks apply to the extent the Underlying ETFs in which the Fund invests or in
which the Fund invests directly, hold securities of large- and
small-capitalization companies.
◦Large-Capitalization
Investing. The
securities of large-capitalization companies may be relatively mature compared
to smaller companies and therefore subject to slower growth during times of
economic expansion. Large-capitalization companies may also be unable to respond
quickly to new competitive challenges, such as changes in technology and
consumer tastes.
◦Small-Capitalization
Investing.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or mid-capitalization stocks or the
stock market as a whole. There is typically less publicly available information
concerning smaller-capitalization companies than for larger, more established
companies. Small-capitalization companies also may be particularly sensitive to
changes in interest rates, government regulation, borrowing costs and
earnings.
Non-Diversification
Risk. Because
the Fund is “non-diversified,” it may invest a greater percentage of its assets
in the securities of a single issuer or a smaller number of issuers than if it
was a diversified fund. As a result, a decline in the value of an investment in
a single issuer or a small number of issuers could cause the Fund’s overall
value to decline to a greater degree than if the Fund held a more diversified
portfolio. This may increase the Fund’s volatility and have a greater impact on
the Fund’s performance.
Recent
Market Events Risk.
U.S. and international markets have experienced significant periods of
volatility in recent years and months due to a number of economic, political and
global macro factors including the impact of COVID-19 and related public health
issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions, and the threat of tariffs imposed by the U.S.
and other countries. In particular, the spread of COVID-19 worldwide has
resulted in disruptions to supply chains and customer activity, stress on the
global healthcare system, temporary and permanent layoffs in the private sector,
and rising unemployment claims, reduced consumer spending, quarantines,
cancellations, market declines, the closing of borders, restrictions on travel,
changed travel and social behaviors, and widespread concern and uncertainty. The
recovery from the lasting effects of COVID-19 is uncertain and may last for an
extended period of time. Health crises and related political, social and
economic disruptions caused by the spread of COVID-19 may also exacerbate other
pre-existing political, social and economic risks in certain countries. These
developments as well as other events could result in further market volatility
and negatively affect financial asset prices, the liquidity of certain
securities and the normal operations of securities exchanges and other markets,
despite government efforts to address market disruptions. As a result, the risk
environment remains elevated. The Adviser will monitor developments and seek to
manage the Fund in a manner consistent with achieving the Fund’s investment
objective, but there can be no assurance that they will be successful in doing
so.
Recently
Organized Fund Risk. The
Fund is newer with limited operating history. As a result, prospective
investors do not have a long-term track record or history on which to base
their investment decision. There can be no assurance that the Fund will grow to
or maintain an economically viable size.
Underlying
ETFs Risks.
The Underlying ETFs in which the Fund invests are subject to additional risks
that do not apply to conventional mutual funds, including the risks that the
market price of an Underlying ETF’s shares may trade at a discount to its NAV
per share, an active secondary trading market may not develop or be maintained,
and trading may be halted by, or the Underlying ETF may be delisted from, the
exchange in which it trades, which may impact the Fund’s ability to sell its
Shares. (See “ETF Risks” described above.) The lack of liquidity in a particular
Underlying ETF could result in it being more volatile than the Underlying ETF’s
underlying portfolio of securities. Underlying ETFs are also subject to the
risks of the underlying securities or sectors the Underlying ETF is designed to
track. In addition, there are brokerage commissions paid in connection with
buying or selling Underlying ETF shares.
PORTFOLIO
HOLDINGS INFORMATION
Information
about the Fund’s daily portfolio holdings is available on the Fund’s website at
www.atacfunds.com. A complete description of the Fund’s policies and procedures
with respect to the disclosure of the Fund’s portfolio holdings is available in
the Fund’s Statement of Additional Information (“SAI”).
MANAGEMENT
Investment
Adviser
Toroso
Investments, LLC, located at 898 N. Broadway, Suite 2, Massapequa, New York
11758, is an SEC-registered investment adviser and a Delaware limited liability
company. Toroso was founded in and has been managing investment companies since
March 2012. Toroso is dedicated to understanding, researching and managing
assets within the expanding ETF universe. As of November 30, 2021, Toroso had
assets under management of approximately $8.2 billion and served as the
investment adviser or sub-adviser for 43 registered funds.
Toroso
serves as investment adviser to the Fund, and has overall responsibility for the
general management and administration of the Fund pursuant to an investment
advisory agreement with the Trust, on behalf of the Fund (the “Advisory
Agreement”). The Adviser is responsible for determining the securities purchased
and sold by the Fund. The Adviser also arranges for sub-advisory, transfer
agency, custody, fund administration, and all other related services necessary
for the Fund to operate.
For
the services provided to the Fund, the Fund pays the Adviser a unified
management fee, which is calculated daily and paid monthly, at an annual rate of
1.25% of the Fund’s average daily net assets. For the fiscal period November 17,
2020 (commencement of operations) to August 31, 2021, the Adviser received an
aggregate fee of 0.98% (net of fee waiver) of average net assets.
Under
the Advisory Agreement, in exchange for a single unitary management fee from the
Fund, the Adviser has agreed to pay all expenses incurred by the Fund except for
Excluded Expenses. The Adviser has agreed to reduce its unitary management fee
to 0.98% of the Fund’s average daily net assets through at least December 31,
2022. To the extent the Fund incurs Excluded Expenses, Total Annual Fund
Operating Expenses After Fee Waiver in the Fees and Expenses table will be
higher than 0.98%. This agreement may be terminated only by, or with the consent
of, the Fund’s Board of Trustees, on behalf of the Fund, upon sixty (60) days’
written notice to the Adviser. This Agreement may not be terminated by the
Adviser without the consent of the Board of Trustees.
The
Adviser has entered into an agreement with Tactical Rotation Management, LLC
(“TRM”), an entity owned by Mr. Gayed, under which the Adviser and TRM jointly
assume the obligation of the Adviser to pay all expenses of the Fund, except
Excluded Expenses (such expenses of the Fund, except Excluded Expenses, the
“Unitary Expenses”), and such expenses are divided equally between the Adviser
and TRM. Although TRM has agreed to be responsible for half of the Unitary
Expenses, the Adviser retains the ultimate obligation to the Fund to pay such
expenses. TRM is entitled to a fee, paid by the Adviser, based on the total
management fee earned by the Adviser under the Advisory Agreement less the
Unitary Expenses and certain start-up costs.
A
discussion regarding the basis for the Board’s approval of the Fund’s Advisory
Agreement is available in the Fund’s semi-annual report to shareholders for the
reporting period ended February 28, 2021.
Portfolio
Managers
The
Fund has been jointly and primarily managed by Michael Venuto, Chief Investment
Officer for the Adviser, and Michael Gayed, CFA, Portfolio Manager for the
Adviser, since its inception in 2020.
Michael
Venuto, Chief Investment Officer for the Adviser
Mr.
Venuto is a co-founder and has been the Chief Investment Officer of the Adviser
since 2012. Mr. Venuto is an ETF industry veteran with over a decade of
experience in the design and implementation of ETF-based investment strategies.
Previously, he was Head of Investments at Global X Funds where he provided
portfolio optimization services to institutional clients. Before that, he was
Senior Vice President at Horizon Kinetics where his responsibilities included
new business development, investment strategy and client and strategic
initiatives.
Michael
Gayed, CFA, Portfolio Manager for the Adviser
Mr.
Gayed joined the Adviser in 2020 as a portfolio manager. In addition to the
Fund, Mr. Gayed has served as a portfolio manager for the ATAC Credit Rotation
ETF, a separate series of the Trust, since 2021, and has served as the portfolio
manager for the ATAC Rotation Fund, an open-end mutual fund and a series of
Managed Portfolio Series, which employs a tactical investment strategy, since
2012. Prior to that, Mr. Gayed was a Member of Pension Partners, LLC and served
as its Chief Investment Strategist and a portfolio manager. As Chief Investment
Strategist, Mr. Gayed helped to structure portfolios to best take advantage of
various strategies designed to maximize the amount of time and capital spent in
potentially outperforming investments. Prior to his role as Chief Investment
Strategist and portfolio manager of Pension Partners, from 2009 to 2010, Mr.
Gayed served as a Portfolio Manager for a large international investment group,
trading long/short investment ideas in an effort to capture excess returns. Mr.
Gayed also served as a portfolio strategist and business development consultant
for Pension Partners during 2009. From 2004 to 2008, Mr. Gayed was a Portfolio
Strategist at AmeriCap Advisers, LLC, a registered investment advisory firm
which managed equity portfolios for large institutional clients. As a member of
the investment committee at AmeriCap Advisers, LLC, Mr. Gayed performed detailed
analysis on various stocks and worked closely with the principals of the firm to
structure client portfolios. In 2007, he launched a long/short hedge fund, using
various trading strategies focused on taking advantage of stock market
anomalies. Mr. Gayed earned his B.S. in Finance and Management from New York
University and holds the CFA designation.
CFA®
is a registered trademark owned by the CFA Institute.
The
Fund’s SAI provides additional information about the Portfolio Managers’
compensation structure, other accounts that the Portfolio Managers manage, and
the Portfolio Managers’ ownership of Shares.
HOW
TO BUY AND SELL SHARES
The
Fund issues and redeems Shares only in Creation Units at the NAV per share next
determined after receipt of an order from an AP. Only APs may acquire Shares
directly from the Fund, and only APs may tender their Shares for redemption
directly to the Fund, at NAV. APs must be a member or participant of a clearing
agency registered with the SEC and must execute a Participant Agreement that has
been agreed to by the Distributor (defined below), and that has been accepted by
the Fund’s transfer agent, with respect to purchases and redemptions of Creation
Units. Once created, Shares trade in the secondary market in quantities less
than a Creation Unit.
Most
investors buy and sell Shares in secondary market transactions through brokers.
Individual Shares are listed for trading on the secondary market on the Exchange
and can be bought and sold throughout the trading day like other publicly traded
securities.
When
buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the spread between the
bid and the offer price in the secondary market on each leg of a round trip
(purchase and sale) transaction. In addition, because secondary market
transactions occur at market prices, you may pay more than NAV when you buy
Shares, and receive less than NAV when you sell those Shares.
Book
Entry
Shares
are held in book-entry form, which means that no stock certificates are issued.
Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding Shares.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares. DTC’s
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other institutions that directly or indirectly
maintain a custodial relationship with DTC. As a beneficial owner of Shares, you
are not entitled to receive physical delivery of stock certificates or to have
Shares registered in your name, and you are not considered a registered owner of
Shares. Therefore, to exercise any right as an owner of Shares, you must rely
upon the procedures of DTC and its participants. These procedures are the same
as those that apply to any other securities that you hold in book-entry or
“street name” through your brokerage account.
Frequent
Purchases and Redemptions of Shares
The
Fund imposes no restrictions on the frequency of purchases and redemptions of
Shares. In determining not to approve a written, established policy, the Board
evaluated the risks of market timing activities by Fund shareholders. Purchases
and redemptions by APs, who are the only parties that may purchase or redeem
Shares directly with the Fund, are an essential part of the ETF process and help
keep Share trading prices in line with the NAV. As such, the Fund accommodates
frequent purchases and redemptions by APs. However, the Board has also
determined that frequent purchases and redemptions for cash may increase
tracking error and portfolio transaction costs and may lead to the realization
of capital gains. To minimize these potential consequences of frequent purchases
and redemptions, the Fund employs fair value pricing and may impose transaction
fees on purchases and redemptions of Creation Units to cover the custodial and
other costs incurred by the Fund in effecting trades. In addition, the Fund and
the Adviser reserve the right to reject any purchase order at any
time.
Determination
of Net Asset Value
The
Fund’s NAV is calculated as of the scheduled close of regular trading on the New
York Stock Exchange (“NYSE”), generally 4:00 p.m. Eastern Time, each day
the NYSE is open for business. The NAV for the Fund is calculated by dividing
the Fund’s net assets by its Shares outstanding.
In
calculating its NAV, the Fund generally values its assets on the basis of market
quotations, last sale prices, or estimates of value furnished by a pricing
service or brokers who make markets in such instruments. If such information is
not available for a security held by the Fund or is determined to be unreliable,
the security will be valued at fair value estimates under guidelines established
by the Board (as described below).
Fair
Value Pricing
The
Board has adopted procedures and methodologies to fair value Fund securities
whose market prices are not “readily available” or are deemed to be unreliable.
For example, such circumstances may arise when: (i) a security has been delisted
or has had its trading halted or suspended; (ii) a security’s primary pricing
source is unable or unwilling to provide a price; (iii) a security’s primary
trading market is closed during regular market hours; or (iv) a security’s value
is materially affected by events occurring after the close of the security’s
primary trading market. Generally, when fair valuing a security, the Fund will
take into account all reasonably available information that may be relevant to a
particular valuation including, but not limited to, fundamental analytical data
regarding the issuer, information relating to the issuer’s business, recent
trades or offers of the security, general and/or specific market conditions, and
the specific facts giving rise to the need to fair value the security. Fair
value determinations are made in good faith and in accordance with the fair
value methodologies included in the Board-adopted valuation procedures. Due to
the subjective and variable nature of fair value pricing, there can be no
assurance that the Adviser will be able to obtain the fair value assigned to the
security upon the sale of such security.
Investments
by Other Registered Investment Companies in the Fund
Section 12(d)(1)
of the 1940 Act restricts investments by registered investment companies in the
securities of other investment companies, including Shares. Registered
investment companies are permitted to invest in the Fund beyond the
limits
set forth in Section 12(d)(1), subject to certain terms and conditions set forth
in an SEC exemptive order issued to the Trust or rule under the 1940 Act,
including that such investment companies enter into an agreement with the
Fund.
Delivery
of Shareholder Documents – Householding
Householding
is an option available to certain investors of the Fund. Householding is a
method of delivery, based on the preference of the individual investor, in which
a single copy of certain shareholder documents can be delivered to investors who
share the same address, even if their accounts are registered under different
names. Householding for the Fund is available through certain broker-dealers. If
you are interested in enrolling in householding and receiving a single copy of
prospectuses and other shareholder documents, please contact your broker-dealer.
If you are currently enrolled in householding and wish to change your
householding status, please contact your broker-dealer.
DIVIDENDS,
DISTRIBUTIONS, AND TAXES
Dividends
and Distributions
The
Fund intends to pay out dividends and interest income, if any, at least
quarterly, and distribute any net realized capital gains to its shareholders at
least annually. The Fund will declare and pay income and capital gain
distributions, if any, in cash. Distributions in cash may be reinvested
automatically in additional whole Shares only if the broker through whom you
purchased Shares makes such option available. Your broker is responsible for
distributing the income and capital gain distributions to you.
Taxes
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in the Fund. Your investment
in the Fund may have other tax implications. Please consult your tax advisor
about the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws.
The
Fund intends to qualify each year for treatment as a regulated investment
company (a “RIC”) under the Internal Revenue Code of 1986, as amended. If it
meets certain minimum distribution requirements, a RIC is not subject to tax at
the fund level on income and gains from investments that are timely distributed
to shareholders. However, the Fund’s failure to qualify as a RIC or to meet
minimum distribution requirements would result (if certain relief provisions
were not available) in fund-level taxation and, consequently, a reduction in
income available for distribution to shareholders.
Unless
your investment in Shares is made through a tax-exempt entity or tax-advantaged
account, such as an IRA plan, you need to be aware of the possible tax
consequences when the Fund makes distributions, when you sell your Shares listed
on the Exchange, and when you purchase or redeem Creation Units (institutional
investors only).
The
tax legislation commonly referred to as the Tax Cuts and Jobs Act (the “Tax
Act”) made significant changes to the U.S. federal income tax rules for taxation
of individuals and corporations, generally effective for taxable years beginning
after December 31, 2017. Many of the changes applicable to individuals are
temporary and would apply only to taxable years before January 1, 2026. There
were only minor changes with respect to the specific rules only applicable to
RICs, such as the Fund. The Tax Act, however, also made numerous other changes
to the tax rules that may affect shareholders and the Fund. Subsequent
legislation has modified certain changes to the U.S. federal income tax rules
made by the Tax Act which may, in addition, affect shareholders and the Fund.
You are urged to consult with your own tax advisor regarding how this
legislation affects your investment in the Fund.
Taxes
on Distributions
For
federal income tax purposes, distributions of net investment income are
generally taxable to shareholders as ordinary income or qualified dividend
income. Taxes on distributions of net capital gains (if any) are determined by
how long the Fund owned the investments that generated them, rather than how
long a shareholder has owned his or her Shares. Sales of assets held by the Fund
for more than one year generally result in long-term capital gains and losses,
and sales of assets held by the Fund for one year or less generally result in
short-term capital gains and losses. Distributions of the Fund’s net capital
gain (the excess of net long-term capital gains over net short-term capital
losses) that are reported by the Fund as capital gain dividends (“Capital Gain
Dividends”) will be taxable to shareholders as long-term capital gains.
Distributions of short-term capital gain will generally be taxable to
shareholders as ordinary income. Dividends and distributions are generally
taxable to you whether you receive them in cash or reinvest them in additional
Shares.
Distributions
reported by the Fund as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided certain holding period and other requirements are met. “Qualified
dividend income” generally is income derived from dividends paid by U.S.
corporations or certain foreign corporations that are either incorporated in a
U.S. possession or eligible for tax benefits under certain U.S. income tax
treaties. In addition, dividends that
the
Fund receives in respect of stock of certain foreign corporations may be
qualified dividend income if that stock is readily tradable on an established
U.S. securities market. Corporate shareholders may be entitled to a
dividends-received deduction for the portion of dividends they receive from the
Fund that are attributable to dividends received by the Fund from U.S.
corporations, subject to certain limitations.
Shortly
after the close of each calendar year, you will be informed of the character of
any distributions received from the Fund.
In
addition to the federal income tax, certain individuals, trusts and estates may
be subject to a Net Investment Income (“NII”) tax of 3.8%. The NII tax is
imposed on the lesser of: (i) a taxpayer’s investment income, net of deductions
properly allocable to such income; or (ii) the amount by which such taxpayer’s
modified adjusted gross income exceeds certain thresholds ($250,000 for married
individuals filing jointly, $200,000 for unmarried individuals and $125,000 for
married individuals filing separately). The Fund’s distributions are includable
in a shareholder’s investment income for purposes of this NII tax. In
addition, any capital gain realized by a shareholder upon a sale or redemption
of Fund shares is includable in such shareholder’s investment income for
purposes of this NII tax.
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are generally
taxable to you even if they are paid from income or gains earned by the Fund
before your investment (and thus were included in the Shares’ NAV when you
purchased your Shares).
You
may wish to avoid investing in the Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable to you even
though it may economically represent a return of a portion of your
investment.
If
you are neither a resident nor a citizen of the United States or if you are a
foreign entity, distributions (other than Capital Gain Dividends) paid to you by
the Fund will generally be subject to a U.S. withholding tax at the rate of 30%,
unless a lower treaty rate applies. The Fund may, under certain circumstances,
report all or a portion of a dividend as an “interest-related dividend” or a
“short-term capital gain dividend,” which would generally be exempt from this
30% U.S. withholding tax, provided certain other requirements are
met.
Under
the Foreign Account Tax Compliance Act (“FATCA”), the Fund may be required to
withhold a generally nonrefundable 30% tax on (i) distributions of investment
company taxable income and (ii) distributions of net capital gain and the gross
proceeds of a sale or redemption of Fund shares paid to (A) certain “foreign
financial institutions” unless such foreign financial institution agrees to
verify, monitor, and report to the Internal Revenue Service (“IRS”) the identity
of certain of its account holders, among other items (or unless such entity is
otherwise deemed compliant under the terms of an intergovernmental agreement
between the United States and the foreign financial institution’s country of
residence), and (B) certain “non-financial foreign entities” unless such entity
certifies to the Fund that it does not have any substantial U.S. owners or
provides the name, address, and taxpayer identification number of each
substantial U.S. owner, among other items. In December 2018, the IRS and
Treasury Department released proposed Treasury Regulations that would eliminate
FATCA withholding on Fund distributions of net capital gain and the gross
proceeds from a sale or redemption of Fund shares. Although taxpayers are
entitled to rely on these proposed Treasury Regulations until final Treasury
Regulations are issued, these proposed Treasury Regulations have not been
finalized, may not be finalized in their proposed form, and are potentially
subject to change. This FATCA withholding tax could also affect the Fund’s
return on its investments in foreign securities or affect a shareholder’s return
if the shareholder holds its Fund shares through a foreign intermediary. You are
urged to consult your tax adviser regarding the application of this FATCA
withholding tax to your investment in the Fund and the potential certification,
compliance, due diligence, reporting, and withholding obligations to which you
may become subject in order to avoid this withholding tax.
The
Fund (or a financial intermediary, such as a broker, through which a shareholder
owns Shares) generally is required to withhold and remit to the U.S. Treasury a
percentage of the taxable distributions and sale or redemption proceeds paid to
any shareholder who fails to properly furnish a correct taxpayer identification
number, who has underreported dividend or interest income, or who fails to
certify that he, she or it is not subject to such withholding.
Taxes
When Shares are Sold on the Exchange
Any
capital gain or loss realized upon a sale of Shares generally is treated as a
long-term capital gain or loss if Shares have been held for more than one year
and as a short-term capital gain or loss if Shares have been held for one year
or less. However, any capital loss on a sale of Shares held for six months or
less is treated as long-term capital loss to the extent of Capital Gain
Dividends paid with respect to such Shares. Any loss realized on a sale will be
disallowed to the extent Shares are acquired, including through reinvestment of
dividends, within a 61-day period beginning 30 days before and ending 30 days
after the sale of Shares.
Taxes
on Purchases and Redemptions of Creation Units
An
AP having the U.S. dollar as its functional currency for U.S. federal income tax
purposes who exchanges securities for Creation Units generally recognizes a gain
or a loss. The gain or loss will be equal to the difference between the value of
the Creation Units at the time of the exchange and the exchanging AP’s aggregate
basis in the securities delivered plus the amount of any cash paid for the
Creation Units. An AP who exchanges Creation Units for securities will generally
recognize a gain or loss equal to the difference between the exchanging AP’s
basis in the Creation Units and the aggregate U.S. dollar market value of the
securities received, plus any cash received for such Creation Units. The IRS may
assert, however, that a loss that is realized upon an exchange of securities for
Creation Units may not be currently deducted under the rules governing “wash
sales” (for an AP who does not mark-to-market their holdings) or on the basis
that there has been no significant change in economic position. Persons
exchanging securities should consult their own tax advisor with respect to
whether wash sale rules apply and when a loss might be deductible.
Any
capital gain or loss realized upon redemption of Creation Units is generally
treated as long-term capital gain or loss if Shares composing the Creation Units
have been held for more than one year and as a short-term capital gain or loss
if such Shares have been held for one year or less.
The
Fund may include a payment of cash in addition to, or in place of, the delivery
of a basket of securities upon the redemption of Creation Units. The Fund may
sell portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause the Fund to recognize investment income and/or capital
gains or losses that it might not have recognized if it had completely satisfied
the redemption in-kind. As a result, the Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in the Fund. It is not a substitute for
personal tax advice. You also may be subject to foreign, state and local tax on
Fund distributions and sales of Shares. Consult your personal tax advisor about
the potential tax consequences of an investment in Shares
under
all applicable tax laws. For more information, please see the section entitled
“Federal Income Taxes” in the SAI.
DISTRIBUTION
Foreside
Fund Services, LLC (the “Distributor”), the Fund’s distributor, is a
broker-dealer registered with the SEC. The Distributor distributes Creation
Units for the Fund on an agency basis and does not maintain a secondary market
in Shares. The Distributor has no role in determining the policies of the Fund
or the securities that are purchased or sold by the Fund. The Distributor’s
principal address is Three Canal Plaza, Suite 100, Portland, Maine
04101.
The
Board has adopted a Distribution (Rule 12b-1) Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, the Fund is authorized to
pay an amount up to 0.25% of its average daily net assets each year to pay
distribution fees for the sale and distribution of its Shares.
No
Rule 12b-1 fees are currently paid by the Fund, and there are no plans to impose
these fees. However, in the event Rule 12b-1 fees are charged in the future,
because the fees are paid out of Fund assets on an ongoing basis, over time
these fees will increase the cost of your investment and may cost you more than
certain other types of sales charges.
PREMIUM/DISCOUNT
INFORMATION
Information
regarding how often Shares traded on the Exchange at a price above (i.e., at a
premium) or below (i.e., at a discount) the NAV of the Fund can be found on the
Fund’s website at www.atacfunds.com.
ADDITIONAL
NOTICES
Shares
are not sponsored, endorsed, or promoted by the Exchange. The Exchange is not
responsible for, nor has it participated in the determination of, the timing,
prices, or quantities of Shares to be issued, nor in the determination or
calculation of the equation by which Shares are redeemable. The Exchange has no
obligation or liability to owners of Shares in connection with the
administration, marketing, or trading of Shares.
Without
limiting any of the foregoing, in no event shall the Exchange have any liability
for any lost profits or indirect, punitive, special, or consequential damages
even if notified of the possibility thereof.
The
Adviser and the Fund make no representation or warranty, express or implied, to
the owners of Shares or any member of the public regarding the advisability of
investing in securities generally or in the Fund particularly.
FINANCIAL
HIGHLIGHTS
The
Financial Highlights table is intended to help you understand the Fund’s
financial performance for the fiscal period from November 17, 2020 (commencement
of operations) to August 31, 2021. Certain information reflects financial
results for a single Fund share. The total return in the table represents the
rate that an investor would have earned or lost on an investment in the Fund
(assuming reinvestment of all dividends and distributions). This information has
been audited by Tait, Weller & Baker LLP, the Fund’s independent registered
public accounting firm, whose report, along with the Fund’s financial
statements, is included in the Fund’s annual report, which is available upon
request.
|
|
|
|
|
|
|
|
|
|
|
|
|
For
a capital share outstanding through the period |
|
|
Period
Ended
August
31, 2021 (1) |
|
PER
SHARE DATA: |
|
|
|
Net
asset value, beginning of period |
|
$ |
20.00 |
|
|
|
|
|
|
INVESTMENT
OPERATIONS: |
|
|
|
Net
investment income
(loss)
(2) |
|
0.06 |
|
|
Net
realized and unrealized gain (loss) on investments |
|
4.45 |
|
|
Total
from investment operations |
|
4.51 |
|
|
|
|
|
|
LESS
DISTRIBUTIONS |
|
|
|
From
net investment income |
|
— |
|
|
Total
distributions |
|
— |
|
|
|
|
|
|
Net
asset value, end of period |
|
$ |
24.51 |
|
|
|
|
|
|
TOTAL
RETURN (3)
(4) |
|
22.55 |
% |
|
|
|
|
|
SUPPLEMENTAL
DATA AND RATIOS: |
|
|
|
Net
assets, end of period (millions) |
|
$ |
41.1 |
|
|
|
|
|
|
Ratio
of expenses to average net assets |
|
|
|
Before
management fees waived (5) |
|
1.25 |
% |
|
After
management fees waived (5) |
|
0.98 |
% |
|
|
|
|
|
Ratio
of net investment income (loss) to average net assets |
|
|
|
Before
management fees waived (5) |
|
0.06 |
% |
|
After
management fees waived (5) |
|
0.33 |
% |
|
|
|
|
|
Portfolio
turnover rate (3) |
|
678 |
% |
|
|
|
|
|
(1)
The Fund commenced operations on November 17, 2020. The information
presented is from November 17, 2020 to August 31, 2021.
|
(2)
Calculated using average shares outstanding method. |
|
(3)
Not annualized. |
|
(4)
The total return is based on the Fund’s net asset value.
|
(5)
Annualized. |
|
|
|
ATAC
US ROTATION ETF
|
|
|
|
|
|
|
|
|
|
|
|
Adviser |
Toroso
Investments, LLC
898
N. Broadway, Suite 2
Massapequa,
New York 11758 |
Administrator |
Tidal
ETF Services LLC
898
N. Broadway, Suite 2
Massapequa,
New York 11758 |
Custodian |
U.S.
Bank National Association
1555
N. Rivercenter Dr.
Milwaukee,
Wisconsin 53212 |
Distributor |
Foreside
Fund Services, LLC
Three
Canal Plaza, Suite 100
Portland,
Maine 04101 |
Sub-Administrator,
Fund Accountant, and Transfer Agent |
U.S.
Bancorp Fund Services, LLC
615
East Michigan Street
Milwaukee,
Wisconsin 53202
|
Independent
Registered Public Accounting Firm |
Tait,
Weller & Baker LLP
Two
Liberty Place
50
S. 16th Street, 29th Floor
Philadelphia,
Pennsylvania 19102 |
Legal
Counsel
|
Godfrey
& Kahn, S.C.
833
East Michigan Street, Suite 1800
Milwaukee,
Wisconsin 53202 |
|
Investors
may find more information about the Fund in the following documents:
Statement
of Additional Information: The
Fund’s SAI provides additional details about the investments of the Fund and
certain other additional information. A current SAI dated December 29, 2021, as
supplemented from time to time, is on file with the SEC and is herein
incorporated by reference into this Prospectus. It is legally considered a part
of this Prospectus.
Annual/Semi-Annual
Reports: Additional
information about the Fund’s investments is available in the Fund’s annual and
semi-annual reports to shareholders. In the annual report you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund’s performance during the Fund’s prior fiscal
period.
You
can obtain free copies of these documents, request other information or make
general inquiries about the Fund by contacting the Fund at ATAC US Rotation ETF,
c/o U.S. Bank Global Fund Services, P.O. Box 701, Milwaukee, Wisconsin
53201-0701 or calling 855-ATACFUND.
These
documents and other information about the Fund are also be
available:
•Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov; or
•Free
of charge from the Fund’s Internet website at www.atacfunds.com; or
(SEC
Investment Company Act File No. 811-23377)