ck0001742912-20211130
National
Investment Services
Ultra-Short
Duration Enhanced Income ETF
(AWTM)
Listed
on NYSE Arca, Inc.
PROSPECTUS
March 30,
2022
The
U.S. Securities and Exchange Commission (the “SEC”) has not approved or
disapproved of these securities or passed upon the accuracy or adequacy of this
Prospectus. Any representation to the contrary is a criminal
offense.
The
Fund offered through this Prospectus is not a money market fund and does not
seek to maintain a fixed or stable net asset value (“NAV”) per share of
$1.00.
TABLE
OF CONTENTS
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National
Investment Services Ultra-Short Duration Enhanced Income ETF - Fund
Summary |
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National
Investment Services Ultra-Short Duration Enhanced Income ETF - Fund
Summary
Investment Objective
The National Investment
Services Ultra-Short Duration Enhanced Income ETF (the “Fund”) seeks to maximize
current income over the most recently issued three-month U.S. Treasury bill
while maintaining low volatility and preservation of capital.
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) |
Management
Fees |
0.23% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Acquired
Fund Fees and Expenses1 |
0.01% |
Other
Expenses |
0.00% |
Total
Annual Fund Operating Expenses |
0.24% |
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 ratio in the Fund’s Financial
Highlights because the Financial Highlights include only the direct operating
expenses incurred by the Fund and exclude
AFFEs.
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. 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 |
$25 |
$77 |
$135 |
$306 |
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 year
ended November 30, 2021, the Fund’s portfolio turnover rate was 66% 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, under normal circumstances, by investing at least 80%
of its net assets in U.S.-dollar denominated investment-grade fixed- and
floating-rate bonds, and debt securities with ultra-short maturities and an
overall effective duration of less than one year. Effective duration is a
measure of the Fund’s price sensitivity to changes in yields or interest rates
and a fund with a higher effective duration will, under normal circumstances,
have a greater sensitivity to interest rates. For example, if a portfolio has a
duration of one year, and interest rates increase (or, conversely, decrease) by
2%, the portfolio would decline (or increase, respectively) in value by
approximately 2%. However, duration may not accurately reflect the true interest
rate sensitivity of instruments held by the Fund and, therefore, the Fund’s
exposure to changes in interest rates.
The
Fund’s investments may include instruments issued by both U.S. and non-U.S.
government and private sector issuers, including asset-backed securities
(“ABS”). Instruments issued by the U.S. government include U.S. Treasury and
U.S. agency securities, which may include mortgage-backed securities (“MBS”)
issued or guaranteed by the U.S. government, federal agencies, or U.S.
government sponsored instrumentalities. The Fund may purchase or sell securities
on a when-issued, delayed delivery, or forward commitment basis, including the
use of the “To Be Announced” (“TBA”) market for MBS
investments.
The Fund may also invest in private placements and “Rule 144A” securities, which
are subject to resale restrictions, as well as ETFs that primarily invest in
debt instruments.
The
Fund is not a money market fund and does not seek to maintain a stable NAV of
$1.00 per Share.
As
part of the Fund’s principal investment strategy or for temporary defensive
purposes, the Fund may invest, without limitation, in short-term instruments
such as commercial paper and/or repurchase agreements collateralized by U.S.
government securities, corporate obligations, municipal debt securities, MBS,
cash or cash equivalents.
The
Fund’s investment sub-adviser, National Investment Services of America, LLC,
doing business as National Investment Services (“NIS” or the “Sub-Adviser”), has
broad discretion to determine the most favorable strategies and investment
opportunities for the Fund, as well as the instruments and investment techniques
used by the Fund to achieve its investment objective. The Sub-Adviser determines
which instruments to purchase, hold, or sell based on a variety of factors,
including expectations regarding an instrument or group of instruments’ risk and
correlation, as well as market conditions and economic metrics, such as interest
rates and inflation. The Sub-Adviser seeks to buy instruments that it believes
will best help the Fund achieve its objective and seeks to sell instruments
whose outlook has changed or to redeploy assets in more attractive investment
opportunities. If a credit rating agency changes the rating of a portfolio
security held by the Fund, the Fund may retain the security if the Sub-Adviser
deems it is in the best interest of shareholders.
The
Fund is actively-managed and does not seek to replicate the performance of a
specified index. The Fund may actively and frequently trade all or a significant
portion of its portfolio.
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 it appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund.
An investment in the Fund is not a
bank deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any government agency. An investment in this Fund
or any other fund may not provide a complete investment program. The suitability
of an investment in the Fund should be considered based on the investment
objective, strategies, and risks described in this Prospectus, considered in
light of all of the other investments in your portfolio, as well as your risk
tolerance, financial goals, and time horizons. You may want to consult with a
financial advisor to determine if this Fund is suitable for you. The following
risks could affect the value of your investment in the Fund:
Agency
Debt Risk. The
Fund invests in unsecured bonds or debentures issued by U.S. government
agencies, including the Federal National Mortgage Association (“Fannie Mae”) and
the Federal Home Loan Mortgage Corporation (“Freddie Mac”), and
government-sponsored entities, including, the Government National Mortgage
Administration (“Ginnie Mae”). Bonds or debentures issued by U.S. government
agencies, government-sponsored entities, or government corporations, including,
among others, Fannie Mae and Freddie Mac, are generally backed only by the
general creditworthiness and reputation of the U.S. government agency,
government-sponsored entity, or government corporation issuing the bond or
debenture and are not guaranteed by the U.S. Department of the Treasury (“U.S.
Treasury”) or backed by the full faith and credit of the U.S. government. As a
result, there is uncertainty as to the current status of many obligations of
Fannie Mae, Freddie Mac and other agencies that are placed under conservatorship
of the federal government. By contrast, Ginnie Mae securities are generally
backed by the full faith and credit of the U.S. government.
ABS
Risk. The
price paid by the Fund for ABS, the yield the Fund expects to receive from such
securities, and the average life of such securities are based on a number of
factors, including the anticipated rate of prepayment of the underlying assets.
The value of these securities may be significantly affected by changes in
interest rates, the market’s perception of issuers, and the creditworthiness of
the parties involved. The ability of the Fund to successfully utilize these
instruments may depend on the ability of the Sub-Adviser to forecast interest
rates and other economic factors correctly. These securities may have a
structure that makes their reaction to interest rate changes and other factors
difficult to predict, making their value highly volatile. As of November 30,
2021, 21.0% of the Fund’s net assets were invested in ABS.
Collateralized
Loan Obligation (“CLO”) Risk.
In addition to the normal interest rate, default and other risks of fixed-income
securities, CLOs carry additional risks, including the possibility that
distributions from collateral securities will not be adequate to make interest
or other payments, the quality of the collateral may decline in value or
default, the Fund may invest in CLOs that are subordinate to other classes,
values may be volatile, and disputes with the issuer may produce unexpected
investment results.
Commercial
Paper Risk. The
value of the Fund’s investments in commercial paper, which is an unsecured
promissory note that generally has a maturity date between one and 270 days and
is issued by a U.S. or foreign entity, is susceptible to changes in the issuer’s
financial condition or credit quality. Investments in commercial paper are
usually discounted from their value at maturity. Commercial paper can be
fixed-rate or variable rate and can be adversely affected by changes in interest
rates.
Credit
Risk. The
Fund’s investments are subject to the risk that issuers and/or counterparties
will fail to make payments when due or default completely. If an issuer’s or
counterparty’s financial condition worsens, the credit quality of the issuer or
counterparty may deteriorate, making it difficult for the Fund to sell such
investments. Changes in an issuer’s credit rating or the market’s perception of
an issuer’s creditworthiness may also affect the value of an investment in that
issuer.
Debt
Securities Risk. The
Fund invests in debt securities, such as bonds and certain asset-backed
securities, that involve certain risks, including:
◦Call
Risk. During
periods of falling interest rates, an issuer of a callable bond held by the Fund
may “call” or repay the security prior to its stated maturity, and the Fund may
have to reinvest the proceeds at lower interest rates, resulting in a decline in
the Fund’s income.
◦Event
Risk. Event
risk is the risk that corporate issuers may undergo restructurings, such as
mergers, leveraged buyouts, takeovers, or similar events financed by increased
debt. As a result of the added debt, the credit quality and market value of a
company’s bonds and/or other debt securities may decline
significantly.
◦Extension
Risk. When
interest rates rise, certain obligations will be repaid by the obligor more
slowly than anticipated, causing the value of these securities to
fall.
ETF
Risks.
◦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.
◦Cash
Redemption Risk.
The
Fund’s investment strategy may require it to redeem Shares for cash or to
otherwise include cash as part of its redemption proceeds. For example, the Fund
may not be able to redeem in-kind certain securities held by the Fund (e.g., TBA
transactions, short positions, derivative instruments, and bonds that cannot be
broken up beyond certain minimum sizes needed for transfer and settlement). In
such a case, the Fund may be required to sell or unwind portfolio investments to
obtain the cash needed to distribute redemption proceeds. This may cause the
Fund to recognize a capital gain that it might not have recognized if it had
made a redemption in-kind. As a result, the Fund may pay out higher annual
capital gain distributions than if the in-kind redemption process was
used.
◦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.
Floating
or Variable Rate Securities Risk. Floating
or variable rate securities pay interest at rates that adjust in response to
changes in a specified interest rate or reset at predetermined dates (such as
the end of a calendar quarter). Securities with floating or variable interest
rates are generally less sensitive to interest rate changes than securities with
fixed interest rates, but may decline in value if their interest rates do not
rise as much, or as quickly, as comparable market interest rates. Although
floating or variable rate securities are generally less sensitive to interest
rate risk than fixed rate securities, they are subject to credit, liquidity and
default risk and may be subject to legal or contractual restrictions on resale,
which could impair their value.
Foreign
Securities Risk. Investments
in securities or other instruments of non-U.S. issuers involve certain risks not
involved in domestic investments and may experience more rapid and extreme
changes in value than investments in securities of U.S. companies. Financial
markets in foreign countries often are not as developed, efficient, or liquid as
financial markets in the United States, and therefore, the prices of non-U.S.
securities and instruments can be more volatile. In addition, the Fund will be
subject to risks associated with adverse political and economic developments in
foreign countries, which may include the imposition of economic sanctions.
Generally, there is less readily available and reliable information about
non-U.S. issuers due to less rigorous disclosure or accounting standards and
regulatory practices.
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.
High
Portfolio Turnover Risk.
The Fund may actively and frequently trade 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.
Illiquid
Securities Risk.
The Fund may, at times, hold illiquid securities, by virtue of the absence of a
readily available market for certain of its investments, or because of legal or
contractual restrictions on sales. The Fund could lose money if it is unable to
dispose of an investment at a time or price that is most beneficial to the
Fund.
Industry
and Sector Focus Risk.
At times the Fund may increase the relative emphasis of its investments in a
particular industry or sector. The prices of securities of issuers in a
particular industry or sector may be more susceptible to fluctuations due to
changes in economic or business conditions, government regulations, availability
of basic resources or supplies, or other events that affect that industry or
sector more than securities of issuers in other industries and sectors. To the
extent that the Fund increases the relative emphasis of its investments in a
particular industry or sector, the Fund’s Share values may fluctuate in response
to events affecting that industry or sector.
◦Financial
Services Sector Risk.
The Fund may invest in companies in the financial services sector, and therefore
the performance of the Fund could be negatively impacted by events affecting
this sector. This sector can be significantly affected by changes in interest
rates, government regulation, the rate of defaults on corporate, consumer and
government debt and the availability and cost of capital, among other factors.
Insurance companies, in particular, may be significantly affected by changes in
interest rates, catastrophic events, price and market competition, the
imposition of premium rate caps, or other changes in government regulation or
tax law and/or rate regulation, which may have an adverse impact on their
profitability. This sector has experienced significant losses in the recent
past, and the impact of more stringent capital requirements and of recent or
future regulation on any individual financial company or on the sector as a
whole cannot be predicted. In recent years, cyber attacks and technology
malfunctions and failures have become increasingly frequent in this sector and
have caused significant losses. As of November 30, 2021, 17.8% of the Fund’s net
assets were invested in the financial services sector.
Interest
Rate Risk. The
Fund’s investments in bonds and other debt securities will change in value based
on changes in interest rates. If rates rise, the value of these investments
generally declines. Securities with greater interest rate sensitivity and longer
maturities generally are subject to greater fluctuations in value.
Management
Risk. The
Fund is actively-managed and may not meet its investment objective based on the
Sub-Adviser’s success or failure to implement investment strategies for the
Fund.
Market
Trading Risk. The
trading prices of debt securities and other instruments fluctuate in response to
a variety of factors. The Fund’s NAV and market price may fluctuate
significantly in response to these and other factors. As a result, an investor
could lose money over short or long periods of
time.
MBS
Risk. The
Fund invests in MBS issued or guaranteed by the U.S. government. Such securities
are subject to credit, interest rate, prepayment, and extension risks. These
securities also are subject to risk of default on the underlying mortgage or
asset, particularly during periods of economic downturn. Small movements in
interest rates may quickly and significantly reduce the value of certain
MBS.
NAV
Risk. The
Fund is not a money market fund, does not attempt to maintain a stable NAV, and
is not subject to the rules that govern the quality, maturity, liquidity and
other features of securities that money market funds may purchase. Under normal
conditions, the Fund’s investments may be more susceptible than a money market
fund to interest rate risk, valuation risk, credit risk, and other risks
relevant to the Fund’s investments. The Fund’s NAV per share will
fluctuate.
Non-Investment
Grade Security Risk. Securities
which are rated by credit ratings agencies may be subject to downgrade, which
may have an indirect impact on the market price of securities. Securities may be
downgraded by credit ratings agencies due to, for example, the weakening
financial condition of the issuer or declining revenues. If an issuer fails to
pay interest or otherwise fails to meet its obligations to the Fund, the Fund’s
income might be reduced and the value of the investment might fall, and if an
issuer fails to pay principal, the value of the investment might fall and the
Fund could lose the amount of its investment.
Other
Investment Companies Risk. The
Fund will incur higher and duplicative expenses when it invests in ETFs and
other investment companies. By investing in another investment company, the Fund
becomes a shareholder of that investment company and bears its proportionate
share of the fees and expenses of the other investment company. There is also
the risk that the Fund may suffer losses due to the investment practices of the
underlying funds as the Fund will be subject to substantially the same risks as
those associated with the direct ownership of securities held by such investment
companies. ETFs may be less liquid than other investments, and thus their share
values more volatile than the values of the investments they hold. Investments
in ETFs are also subject to the “ETF Risks” described above.
Prepayment
Risk. The
issuer of certain securities may repay principal in advance, especially when
yields fall. Changes in the rate at which prepayments occur can affect the
return on investment of these securities. When debt obligations are prepaid or
when securities are called, the Fund may have to reinvest in securities with a
lower yield. The Fund also may fail to recover additional amounts (i.e.,
premiums) paid for securities with higher coupons, resulting in an unexpected
capital loss.
Privately
Placed Securities Risk.
Privately placed securities generally are less liquid than publicly traded
securities and the Fund may not always be able to sell such securities without
experiencing delays in finding buyers or reducing the sale price for such
securities. The disposition of some of the securities held by the Fund may be
restricted under federal securities laws. As a result, the Fund may not be able
to dispose of such investments at a time when, or at a price at which, it
desires to do so and may have to bear expenses of registering these securities,
if necessary. These securities may also be difficult to value.
Rating
Agencies Risk. Ratings
are not an absolute standard of quality. Ratings are general indicators that
reflect only the view of the originating rating agencies from which an
explanation of the significance of such ratings may be obtained. There is no
assurance that a particular rating will continue for any given period of time or
that any such rating will not be revised downward or withdrawn entirely. Such
changes may negatively affect the liquidity or market price of the securities in
which the Fund invests. The ratings of securitized assets may not adequately
reflect the credit risk of those assets due to their structure.
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 as a global pandemic,
which has resulted in a public health crisis, disruptions to business operations
and supply chains, stress on the global healthcare system, growth concerns in
the U.S. and overseas, staffing shortages and the inability to meet consumer
demand, and widespread concern and uncertainty. The global recovery from
COVID-19 is proceeding at slower than expected rates due to the emergence of
variant strains and may last for an extended period of time. Continuing
uncertainties regarding interest rates, rising inflation, political events,
rising government debt in the U.S. and trade tensions also contribute to market
volatility. As a result of continuing political tensions and armed conflicts,
including the war between Ukraine and Russia, the U.S. and the European Union
imposed sanctions on certain Russian individuals and companies, including
certain financial institutions, and have limited certain exports and imports to
and from Russia. The war has contributed to recent market volatility and may
continue to do so.
Repurchase
Agreement Risk. Repurchase
agreements may be construed to be collateralized loans by the Fund, and if so,
the underlying securities relating to the repurchase agreement will only
constitute collateral for the seller’s obligation to pay the repurchase price.
If the seller defaults on its obligation under the agreement, the Fund may
suffer delays and incur costs or lose money in exercising its rights under the
agreement. A seller failing to repurchase the security coupled with a decline in
the market value of the security may result in the Fund losing
money.
Sovereign
Debt Risk.
The Fund may invest in securities issued or guaranteed by foreign governmental
entities (known as sovereign debt securities). These investments are subject to
the risk of payment delays or defaults, due, for example, to cash flow problems,
insufficient foreign currency reserves, political considerations, large debt
positions relative to the country’s economy, or failure to implement economic
reforms. There is no legal or bankruptcy process for collecting sovereign
debt.
TBA
Securities and Rolls Risk. TBA
transactions are subject to increased credit risk and increased overall
investment exposure. TBA rolls involve the risk that the Fund’s counterparty
will be unable to deliver the MBS underlying the TBA roll at the fixed time. If
the buyer files for bankruptcy or becomes insolvent, the buyer or its
representative may ask for and receive an extension of time to decide whether to
enforce the Fund’s repurchase obligation. In addition, the Fund earns interest
by investing the transaction proceeds during the roll period. TBA roll
transactions may have the effect of creating leverage in the Fund’s
portfolio.
Unrated
Securities Risks. Unrated
securities may be less liquid than comparable rated securities and involve the
risk that the Sub-Adviser may not accurately evaluate the security’s comparative
credit rating.
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 or other countries may decline or be negative for short or long
periods of time.
Valuation
Risk. The
prices provided by the Fund’s pricing services or independent dealers or the
fair value determinations made by the Fund’s valuation committee may be
different from the prices used by other investment companies or from the prices
at which debt obligations are actually bought and sold. The prices of certain
debt obligations provided by pricing services may be subject to frequent and
significant change, and will vary depending on the information that is
available.
When-Issued,
Delayed Delivery, and Forward Commitment Risks. When-issued
and delayed delivery transactions arise when securities are purchased by the
Fund with payment and delivery taking place in the future to secure a price and
yield to the Fund at the time of entering into the transaction. In a forward
commitment transaction, the Fund contracts to purchase securities for a fixed
price at a future date beyond customary settlement time. The Fund is required to
hold and maintain until the settlement date, cash or other liquid assets
sufficient to meet the purchase price or enter into offsetting contracts for the
forward sale of other securities that it owns. The purchase of securities on a
when-issued, delayed delivery, or forward commitment basis involves a risk of
loss if the value of the security to be purchased declines prior to the
settlement date.
Performance
The following performance
information provides some indication of the risks of investing in the Fund by
showing changes in the Fund’s performance from year to year. The bar chart
shows the Fund’s performance for the calendar years ended December 31, 2020 and
2021. The table illustrates how the Fund’s average annual
returns for the 1-year and since inception periods compare with those of a broad
measure of market performance. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Prior to November 6, 2021, the Fund had a different
investment objective and principal investment strategies. Updated performance
information is available on the Fund’s website at www.awtmetf.com.
Calendar Year Ended December 31,
During the period of time shown
in the bar chart, the Fund’s highest quarterly return
was 4.20% for the quarter ended June 30, 2020 and the
lowest quarterly return was
-5.44% for the quarter ended March 31,
2020.
Average
Annual Total Returns
For
the Periods Ended December 31, 2021
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1
Year |
|
Since
Inception
(1/28/2019) |
Return Before
Taxes |
0.46% |
|
1.49% |
Return After Taxes on
Distributions |
-0.04% |
|
0.73% |
Return After Taxes on Distributions and
Sale of Fund Shares |
0.27% |
|
0.82% |
ICE
BofA Merrill Lynch 3-Month U.S. Treasury Bill Index (reflects no deduction for
fees, expenses, or taxes) |
0.05% |
|
0.96% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns
depend on an investor’s tax situation and may differ from those shown. After-tax
returns shown are not relevant to investors who hold their Shares through
tax-deferred arrangements such as an individual retirement account (“IRA”) or
other tax-advantaged accounts”). In certain cases, the
figures representing “Return after Taxes on Distributions and Sale of Fund
Shares” may be higher than other return figures for the same period. A higher
after-tax return results when a capital loss occurs upon redemption and provides
an assumed tax deduction that benefits the
investor.
Management
Investment
Adviser:
Toroso Investments, LLC (“Toroso” or the “Adviser”).
Investment
Sub-Adviser:
National Investment Services of America, LLC.
Adviser
Portfolio Managers: Michael
Venuto, Chief Investment Officer for the Adviser, and Charles A. Ragauss, CFA,
Portfolio Manager for the Adviser, have each been a portfolio manager of the
Fund since December 2020.
Sub-Adviser
Portfolio Managers:
The following individuals at the Sub-Adviser are jointly and primarily
responsible for the day-to-day management of the Fund and have acted in this
capacity since January 2021:
Jason
C. Berrie, CFA, Chief Investment Officer at the Sub-Adviser
Kent
J. White, CFA, Senior Adviser at the Sub-Adviser
Mark
R. Anderson, CFA, Chief Strategy Officer at the Sub-Adviser
Jeffrey
F. Parker, Lead Portfolio Manager, Preferred Stock at the
Sub-Adviser
James
S. Kaplan, CFA, Lead Portfolio Manager, Structured Products at the
Sub-Adviser
Barbara
A. Schalla, CFA, Portfolio Manager, Corporate Bonds at the
Sub-Adviser
Lesly
M. Barnes, Portfolio Manager, Structured Products and Treasury at the
Sub-Adviser
Vincent
S. Russo, CFA, Portfolio Manager, Corporate Bonds at the
Sub-Adviser
Stefan
T. Martin, Portfolio Manager, Structured Products at the
Sub-Adviser
Michael
D. Fohr, CFA, CPA, JD, MBA, Co-Portfolio Manager, High Yield at the
Sub-Adviser
Thomas
M Price, Co-Portfolio Manager, High Yield at the Sub-Adviser
Stephen
J. Smitley, Portfolio Manager, Municipal Bonds and Structured Products at the
Sub-Adviser
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.awtmetf.com.
Tax
Information
Fund
distributions are generally taxable to shareholders as ordinary income,
qualified dividend income, or capital gains (or a combination), unless an
investment is in an IRA or other tax-advantaged account. Distributions on
investments made through tax-deferred arrangements may be taxed later upon
withdrawal of assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser, the Sub-Adviser, or their
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
Fund seeks to maximize current income over the most recently issued three-month
U.S. Treasury bill while maintaining low volatility and preservation of
capital.
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 approval by
the Board of Trustees (the “Board”) of Tidal ETF Trust (the “Trust”) and 60
days’ 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.
144A
Securities. The
Fund may invest in Rule 144A securities (known as “restricted securities”),
which are not registered under the federal securities laws and cannot be sold to
the U.S. public because of SEC regulations. The Fund generally considers Rule
144A securities to be liquid unless the Sub-Adviser determines
otherwise.
MBS.
The Fund’s investments may include instruments issued by both U.S. and non-U.S.
government and private sector issuers, including asset-backed securities.
Instruments issued by the U.S. government include U.S. Treasuries and U.S.
agency securities, which may include MBS issued or guaranteed by the U.S.
government, federal agencies, or U.S. government sponsored instrumentalities,
such as Ginnie Mae and the Federal Housing Administration (“FHA”).
Repurchase
Agreements.
As part of the Fund’s principal investment strategy or for temporary defensive
purposes, the Fund may invest, without limitation, in short-term instruments
such as commercial paper and/or repurchase agreements. A repurchase agreement is
an agreement under which the Fund acquires a financial instrument (e.g.,
a security issued by the U.S. government or an agency thereof) from a seller. At
the time of purchase, the seller (usually a commercial bank, broker, or dealer)
agrees to repurchase the underlying security at a mutually agreed-upon price on
a designated future date (normally, the next business day). The securities
acquired by the Fund pursuant to repurchase agreement transactions will
generally have a total value (including accrued interest earned thereon) in
excess of the repurchase agreement’s value and will be held by the Fund’s
custodian until the securities are repurchased. As a result, repurchase
agreements may be considered a loan collateralized by securities. Such
securities may include U.S. government securities, corporate obligations,
municipal debt securities, and MBS.
TBA
Securities. The
TBA market allows investors to gain exposure to MBS with certain broad
characteristics (e.g.,
maturity, coupon, age) without taking delivery of the actual securities until
the settlement day, which is once every month. In addition, the Fund may utilize
the TBA roll market, in which one sells, in the TBA market, the security for
current month settlement, while simultaneously committing to buy the same TBA
security for next month settlement. The Fund may utilize the TBA roll market for
extended periods of time without taking delivery of the physical securities. The
Fund may, without limitation, seek to obtain market exposure to the securities
in which it primarily invests by entering into a series of purchase and sale
contracts or by using other investment techniques (such as buy backs or dollar
rolls).
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, or short-term
U.S. government securities. Taking a temporary defensive position may result in
the Fund not achieving its investment objective.
The
Fund’s strategy may result in the active and frequent trading of the Fund’s
investments, which may result in high portfolio turnover.
Principal
Risks of Investing in the Fund
There
can be no assurance that the Fund will achieve its investment objective. An
investment in the Fund is not a bank deposit and is not insured or guaranteed by
the Federal Deposit Insurance Corporation or any government agency. An
investment in this Fund or any other fund may not provide a complete investment
program. The suitability of an investment in the Fund should be considered based
on the investment objective, strategies and risks described in this Prospectus,
considered in light of all of the other investments in your portfolio, as well
as your risk tolerance, financial goals, and time horizons. You may want to
consult with a financial advisor to determine if this Fund is suitable for you.
The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with those of other funds. Each risk
summarized below is considered a “principal risk” of investing in the Fund,
regardless of the order in which it appears. As with any investment, there is a
risk that you could lose all or a portion of your investment in the Fund. Some
or all of these risks may adversely affect the Fund’s 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:
Agency
Debt Risk. The
Fund invests in unsecured bonds or debentures issued by U.S. government agencies
and government sponsored entities. Bonds or debentures issued by U.S. government
agencies, government-sponsored entities, or government corporations, including,
among others, Fannie Mae and Freddie Mac, are generally backed only by the
general creditworthiness and reputation of the U.S. government agency,
government-sponsored entity, or government corporation issuing the bond or
debenture and are not guaranteed by the U.S. Treasury or backed by the full
faith and credit of the U.S. government. Ginnie Mae securities are generally
backed by the full faith and credit of the U.S. government.
Some
U.S. government agencies, including Fannie Mae and Freddie Mac, purchase and
guarantee residential mortgages and form MBS that they issue to the market.
These agencies also hold their own MBS as well as those of other institutions
with funding from the agency debentures they issue. The market for MBS has been
adversely affected by the value of those MBS held and/or issued by these
agencies. These securities are subject to more credit risk than U.S. government
securities that are supported by the full faith and credit of the U.S.
(e.g.,
U.S. Treasury bonds). If a U.S. government agency that is the issuer of
securities in which the Fund invests is unable to meet its obligations or ceases
to exist and no plan is made for repayment of securities, the performance of the
Fund will be adversely impacted.
ABS
Risk. The
price paid by the Fund for ABS, the yield the Fund expects to receive from such
securities, and the average life of such securities are based on a number of
factors, including the anticipated rate of prepayment of the underlying assets.
The value of these securities may be significantly affected by changes in
interest rates, the market’s perception of issuers, and the creditworthiness of
the parties involved. The ability of the Fund to successfully utilize these
instruments may depend on the ability of the Sub-Adviser to forecast interest
rates and other economic factors correctly. These securities may have a
structure that makes their reaction to interest rate changes and other factors
difficult to predict, making their value highly volatile. As of November 30,
2021, 21.0% of the Fund’s net assets were invested in ABS.
Collateralized
Loan Obligation Risk.
CLOs are subject to credit, interest rate, valuation, prepayment and extension
risks. These securities also are subject to risk of default on the underlying
assets, particularly during periods of economic downturn. CLOs issue securities
in tranches with different payment characteristics and different credit ratings.
Below investment grade tranches of CLO securities typically experience a lower
recovery, greater risk of loss or deferral or non- payment of interest than more
senior tranches of the CLO. CLOs can experience substantial losses due to actual
defaults, increased sensitivity to defaults due to collateral default and
disappearance of protecting tranches, market anticipation of defaults and
aversion to CLOs in general. The market value of CLO securities may be affected
by, among other things, changes in the market value of the underlying assets
held by the CLO, changes in the distributions on the underlying assets, defaults
and recoveries on the underlying assets, capital gains and losses on the
underlying assets, prepayments on underlying assets and the availability, prices
and interest rate of underlying assets.
Commercial
Paper Risk. The
value of the Fund’s investments in commercial paper, which is an unsecured
promissory note that generally has a maturity date between one and 270 days and
is issued by a U.S. or foreign entity, is susceptible to changes in the issuer’s
financial condition or credit quality. Commercial paper is typically repaid with
the proceeds from the issuance of new commercial paper. Thus, investments in
commercial paper are subject to the risk (commonly referred to as
rollover
risk) that the issuer will be unable to issue sufficient new commercial paper to
meet the repayment obligations under its outstanding commercial paper.
Investments in commercial paper are usually discounted from their value at
maturity. Commercial paper can be fixed-rate or variable rate and can be
adversely affected by changes in interest rates. As with other debt securities,
there is a risk that the issuer of commercial paper will default completely on
its obligations. Commercial paper is generally unsecured and, thus, is subject
to increased credit risk. The Fund may have limited or no recourse against the
issuer of commercial paper in the event of default.
Credit
Risk. The
Fund’s investments are subject to the risk that issuers and/or counterparties
will fail to make payments when due or default completely. If an issuer’s or
counterparty’s financial condition worsens, the credit quality of the issuer or
counterparty may deteriorate, making it difficult for the Fund to sell such
investments. Changes in an issuer’s credit rating or the market’s perception of
an issuer’s creditworthiness may also affect the value of an investment in that
issuer.
Debt
Securities Risk. The
Fund invests in debt securities, such as bonds and certain asset-backed
securities, that involve certain risks, including:
Call
Risk. During
periods of falling interest rates, an issuer of a callable bond held by the Fund
may “call” or repay the security before its stated maturity, and the Fund may
have to reinvest the proceeds in securities with lower yields, which would
result in a decline in the Fund’s income, or in securities with greater risks or
with other less favorable features.
Event
Risk. Event
risk is the risk that corporate issuers may undergo restructurings, such as
mergers, leveraged buyouts, takeovers, or similar events financed by increased
debt. As a result of the added debt, the credit quality and market value of a
company’s bonds and/or other debt securities may decline
significantly.
Extension
Risk. When
interest rates rise, certain obligations will be repaid by the obligor more
slowly than anticipated, causing the value of these securities to fall. Rising
interest rates tend to extend the duration of securities, making them more
sensitive to future changes in interest rates. The value of longer-term
securities generally changes more in response to changes in interest rates than
the value of shorter-term securities. As a result, in a period of rising
interest rates, securities may exhibit additional volatility and may lose
value.
ETF
Risks.
APs,
Market Makers, and Liquidity Providers Concentration Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares may trade at a material discount to NAV and possibly face
delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services; or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
Cash
Redemption Risk.
The
Fund’s investment strategy may require it to redeem Shares for cash or to
otherwise include cash as part of its redemption proceeds. For example, the Fund
may not be able to redeem in-kind certain securities held by the Fund (e.g., TBA
transactions, short positions, derivative instruments, and bonds that cannot be
broken up beyond certain minimum sizes needed for transfer and settlement). In
such a case, the Fund may be required to sell or unwind portfolio investments to
obtain the cash needed to distribute redemption proceeds. This may cause the
Fund to recognize a capital gain that it might not have recognized if it had
made a redemption in-kind (i.e.,
distribute securities as payment of redemption proceeds). As a result, the Fund
may pay out higher annual capital gain distributions than if the in-kind
redemption process was used.
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.
Floating
or Variable Rate Securities Risk. Floating
or variable rate securities pay interest at rates that adjust in response to
changes in a specified interest rate or reset at predetermined dates (such as
the end of a calendar quarter). Securities with floating or variable interest
rates are generally less sensitive to interest rate changes than securities with
fixed interest rates, but may decline in value if their interest rates do not
rise as much, or as quickly, as comparable market interest rates. Conversely,
floating or variable rate securities will not generally increase in value if
interest rates decline. The impact of interest rate changes on floating or
variable rate securities is typically mitigated by the periodic interest rate
reset of the investments. Floating or variable rate securities can be rated
below investment grade or unrated; therefore, the Fund relies heavily on the
analytical ability of the Sub-Adviser. Floating or variable rate securities are
often subject to restrictions on resale, which can result in reduced
liquidity.
Foreign
Securities Risks. Certain
foreign countries may impose exchange control regulations, restrictions on
repatriation of profit on investments or of capital invested, local taxes on
investments, and restrictions on the ability of issuers of non-U.S. securities
to make payments of principal and interest to investors located outside the
country, whether from currency blockage or otherwise. In addition, the Fund will
be subject to risks associated with adverse political and economic developments
in foreign countries, including seizure or nationalization of foreign deposits,
the imposition of economic sanctions, different legal systems and laws relating
to bankruptcy and creditors’ rights and the potential inability to enforce legal
judgments, all of which could cause the Fund to lose money on its investments in
non-U.S. securities. The cost of servicing external debt will also generally be
adversely affected by rising international interest rates, as many external debt
obligations bear interest at rates which are adjusted based upon international
interest rates. Because non-U.S. securities may trade on days when the Fund’s
shares are not priced, NAV may change at times when the Fund’s shares cannot be
sold.
Foreign
banks and securities depositories at which the Fund holds its foreign securities
and cash may be recently organized or new to the foreign custody business and
may be subject to only limited or no regulatory oversight. Additionally, many
foreign governments do not supervise and regulate stock exchanges, brokers and
the sale of securities to the same extent as does the United States and may not
have laws to protect investors that are comparable to U.S. securities laws.
Settlement and clearance procedures in certain foreign markets may result in
delays in payment for or delivery of securities not typically associated with
settlement and clearance of U.S. investments.
In
recent years, the European financial markets have experienced volatility and
adverse trends due to concerns about economic downturns in, or rising government
debt levels of, several European countries. These events may spread to other
countries in Europe, including countries that do not use the Euro. These events
may affect the value and liquidity of certain of the Fund’s
investments.
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.
High
Portfolio Turnover Risk. The
Fund may actively and frequently trade 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.
Illiquid
Securities Risks. The
Fund may invest up to 15% of its net assets in illiquid securities. The Fund may
also invest in restricted securities. Investments in restricted securities could
have the effect of increasing the amount of the Fund’s assets invested in
illiquid securities if qualified institutional buyers are unwilling to purchase
these securities.
Illiquid
and restricted securities may be difficult to dispose of at a fair price at the
times when the Fund believes it is desirable to do so. The market price of
illiquid and restricted securities generally is more volatile than that of more
liquid securities, which may adversely affect the price that the Fund pays for
or recovers upon the sale of such securities. Illiquid and restricted securities
are also more difficult to value, especially in challenging markets. The
Sub-Adviser’s judgment may play a greater role in the valuation process.
Investment of the Fund’s assets in illiquid and restricted securities may
restrict the Fund’s ability to take advantage of market opportunities. To
dispose of an unregistered security, the Fund, where it has contractual rights
to do so, may have to cause such security to be registered. A considerable
period may elapse between the time the decision is made to sell the security and
the time the security is registered, thereby enabling the Fund to sell it.
Contractual restrictions on the resale of securities vary in length and scope
and are generally the result of a negotiation between the issuer and acquiror of
the securities. In either case, the Fund would bear market risks during that
period. Liquidity risk may impact the Fund’s ability to meet shareholder
redemptions and as a result, the Fund may be forced to sell securities at
inopportune prices.
Certain
fixed-income instruments are not readily marketable and may be subject to
restrictions on resale. Fixed-income instruments may not be listed on any
national securities exchange and no active trading market may exist for certain
of the fixed-income instruments in which the Fund will invest. Where a secondary
market exists, the market for some fixed- income instruments may be subject to
irregular trading activity, wide bid/ask spreads and extended trade settlement
periods. In addition, dealer inventories of certain securities are at historic
lows in relation to market size, which indicates a potential for reduced
liquidity as dealers may be less able to “make markets” for certain fixed-income
securities.
Industry
and Sector Focus Risk.
At times the Fund may increase the relative emphasis of its investments in a
particular industry or sector. The prices of securities of issuers in a
particular industry or sector may be more susceptible to fluctuations due to
changes in economic or business conditions, government regulations, availability
of basic resources or supplies, or other events that affect that industry or
sector more than securities of issuers in other industries and sectors. To the
extent that the Fund increases the relative emphasis of its investments in a
particular industry or sector, the Fund’s Share values may fluctuate in response
to events affecting that industry or sector.
Financial
Services Sector Risk.
The Fund may invest in companies in the financial services sector, and therefore
the performance of the Fund could be negatively impacted by events affecting
this sector. This sector can be significantly affected by changes in interest
rates, government regulation, the rate of defaults on corporate, consumer and
government debt and the availability and cost of capital, among other factors.
Insurance companies, in particular, may be significantly affected by changes in
interest rates, catastrophic events, price and market competition, the
imposition of premium rate caps, or other changes in government regulation or
tax law and/or rate regulation, which may have an adverse impact on their
profitability. This sector has experienced significant losses in the recent
past, and the impact of more stringent capital requirements and of recent or
future regulation on any individual financial company or on the sector as a
whole cannot be predicted. In recent years, cyber attacks and technology
malfunctions and failures have become increasingly frequent in this sector and
have caused significant losses. As of November 30, 2021, 17.8% of the Fund’s net
assets were invested in the financial services sector.
Interest
Rate Risk. The
Fund’s investments in bonds and other debt securities will change in value based
on changes in interest rates. If rates rise, the value of these investments
generally declines. Securities with greater interest rate sensitivity and longer
maturities generally are subject to greater fluctuations in value.
Management
Risk. The
Fund is actively-managed and may not meet its investment objective based on the
Sub-Adviser’s success or failure to implement investment strategies for the
Fund.
Market
Trading Risk. The
trading prices of debt securities and other instruments fluctuate in response to
a variety of factors. These factors include events impacting the entire market
or specific market segments, such as political, market and economic
developments, as well as events that impact specific issuers. The Fund’s NAV and
market price, like security and commodity prices generally, may fluctuate
significantly in response to these and other factors. As a result, an investor
could lose money over short or long periods of time.
MBS
Risk. Mortgage-related
securities represent ownership in pools of mortgage loans assembled for sale to
investors by various government agencies such as Ginnie Mae and
government-related organizations such as Fannie Mae and Freddie Mac. Although
these mortgage-related securities are guaranteed by a third party or otherwise
similarly secured, the market value of the security, which may fluctuate, is not
so secured. MBS, like traditional fixed-income securities, are subject to
credit, interest rate, prepayment, and extension risks (see “Credit Risk,”
“Interest Rate Risk,” “Prepayment Risk,” and “Extension Risk” for more
information on these risks).
These
securities differ from conventional bonds in that the principal is paid back to
the investor as payments are made on the underlying mortgages in the pool.
Accordingly, the Fund will receive scheduled payments of principal and interest
along with any unscheduled principal prepayments on the underlying mortgages.
Because these scheduled and unscheduled principal payments must be reinvested at
prevailing interest rates, MBS do not provide an effective means of locking in
long-term interest rates for the investor. Small movements in interest rates
(both increases and decreases) may quickly and significantly reduce the value of
certain MBS.
The
mortgage market in the United States has experienced and may in the future
experience difficulties that may adversely affect the performance and market
value of certain of the Fund’s mortgage-related investments. Delinquencies and
losses on mortgage loans (including subprime and second-lien mortgage loans) may
increase and real-estate values may decline due to such difficulties, which may
exacerbate such delinquencies and losses. Reduced investor demand for mortgage
loans and mortgage-related securities and increased investor yield requirements
may cause limited liquidity in the secondary market for mortgage-related
securities, which can adversely affect the market value of mortgage-related
securities and the Fund.
NAV
Risk. The
Fund is not a money market fund, does not attempt to maintain a stable NAV, and
is not subject to the rules that govern the quality, maturity, liquidity and
other features of securities that money market funds may purchase. Under normal
conditions, the Fund’s investments may be more susceptible than a money market
fund to interest rate risk, valuation risk, credit risk, and other risks
relevant to the Fund’s investments. The Fund’s NAV per share will
fluctuate.
Non-Investment
Grade Security Risk. Securities
which are rated by credit ratings agencies may be subject to downgrade, which
may have an indirect impact on the market price of securities. Securities may be
downgraded by credit ratings agencies due to, for example, the weakening
financial condition of the issuer or declining revenues. If an issuer fails to
pay interest or otherwise fails to meet its obligations to the Fund, the Fund’s
income might be reduced and the value of the investment might fall, and if an
issuer fails to pay principal, the value of the investment might fall and the
Fund could lose the amount of its investment.
Other
Investment Company Risk. The
Fund may invest in shares of investment companies, such as ETFs, that invest in
a wide range of instruments designed to track the performance of a particular
securities market index (or sector of an index) or that are actively-managed.
The risks of investment in these securities typically reflect the risks of the
types of instruments in which the investment company invests. When the Fund
invests in investment company securities, shareholders of the Fund bear
indirectly their proportionate share of their fees and expenses, as well as
their share of the Fund’s fees and expenses. As a result, an investment by the
Fund in an investment company will cause the Fund’s operating expenses (taking
into account indirect expenses such as the fees and expenses of the investment
company) to be higher and, in turn, performance to be lower than if it were to
invest directly in the instruments underlying the investment company.
Additionally, there may not be an active trading market available for shares of
some ETFs. Shares of an ETF may also trade in the market at a premium or
discount to their NAV. The Fund’s investments in other investment companies may
include investments in listed closed-end funds (“CEFs”). Shares of CEFs
frequently trade at a price per share that is less than the fund’s NAV. There
can be no assurance that the market discount on shares of any CEF purchased by
the Fund will ever decrease or that when the Fund seeks to sell shares of a CEF
it can receive the NAV of those shares. CEFs have lower levels of daily volume
when compared to open-end companies. There are greater risks involved in
investing in securities with limited market liquidity.
Prepayment
Risk. The
issuer of certain securities may repay principal in advance, especially when
yields fall. Changes in the rate at which prepayments occur can affect the
return on investment of these securities. When debt obligations are prepaid or
when securities are called, the Fund may have to reinvest in securities with a
lower yield. The Fund also may fail to recover additional amounts (i.e.,
premiums) paid for securities with higher coupons, resulting in an unexpected
capital loss. In periods of falling interest rates, the rate of prepayments
tends to increase (as does price fluctuation) as borrowers are motivated to
repay debt and refinance at new lower rates. During such periods, reinvestment
of the prepayment proceeds by the management team will generally be at lower
rates of return than the return on the assets that were prepaid. Prepayment
reduces the yield to maturity and the average life of the security.
Privately
Placed Securities Risk.
Privately placed securities generally are less liquid than publicly traded
securities and the Fund may not always be able to sell such securities without
experiencing delays in finding buyers or reducing the sale price for such
securities. The disposition of some of the securities held by the Fund may be
restricted under federal securities laws.
As
a result, the Fund may not be able to dispose of such investments at a time
when, or at a price at which, it desires to do so and may have to bear expenses
of registering these securities, if necessary. These securities may also be
difficult to value.
Rating
Agencies Risk. Rating
agencies may fail to make timely changes in credit ratings and an issuer’s
current financial condition may be better or worse than a rating indicates. In
addition, rating agencies are subject to an inherent conflict of interest
because they are often compensated by the same issuers whose securities they
grade.
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 as a global pandemic and
related public health crisis, growth concerns in the U.S. and overseas,
uncertainties regarding interest rates, rising inflation, trade tensions, and
the threat of tariffs imposed by the U.S. and other countries. In particular,
the global spread of COVID-19 has resulted in disruptions to business operations
and supply chains, stress on the global healthcare system, growth concerns in
the U.S. and overseas, staffing shortages and the inability to meet consumer
demand, and widespread concern and uncertainty. The global recovery from
COVID-19 is proceeding at slower than expected rates due to the emergence of
variant strains 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. As a result of continuing political tensions and
armed conflicts, including the war between Ukraine and Russia, the U.S. and the
European Union imposed sanctions on certain Russian individuals and companies,
including certain financial institutions, and have limited certain exports and
imports to and from Russia. The war has contrbuted to recent market volatility
and may continue to do so. 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 and the Sub-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.
Repurchase
Agreement Risk. Repurchase
agreements may be construed to be collateralized loans by the purchaser to the
seller secured by the securities transferred to the purchaser. If a repurchase
agreement is construed to be a collateralized loan, the underlying securities
will not be considered to be owned by the Fund but only to constitute collateral
for the seller’s obligation to pay the repurchase price. Repurchase agreements
that do not provide for payment within seven days will be treated as illiquid
securities. In the event of a bankruptcy or other default by the seller of a
repurchase agreement, the Fund could experience both delays in liquidating the
underlying security and losses. These losses could result from: (a) possible
decline in the value of the underlying security while the Fund is seeking to
enforce its rights under the repurchase agreement; (b) possible reduced levels
of income or lack of access to income during this period; and (c) expenses of
enforcing its rights.
Sovereign
Debt Risk.
The Fund may invest in securities issued or guaranteed by foreign governmental
entities (known as sovereign debt securities). These investments are subject to
the risk of payment delays or defaults, due, for example, to cash flow problems,
insufficient foreign currency reserves, political considerations, large debt
positions relative to the country’s economy, or failure to implement economic
reforms. There is no legal or bankruptcy process for collecting sovereign
debt.
TBA
Securities and Rolls Risk.
The Fund may invest in TBA securities. In a TBA transaction, a seller agrees to
deliver a security at a future date, but does not specify the particular
security to be delivered. Instead, the seller agrees to accept any security that
meets specified terms. The principal risks of TBA transactions are increased
credit risk and increased overall investment exposure. The Fund may enter into
TBA roll transactions, in which the Fund sells MBS for delivery in the current
month and simultaneously contracts to purchase substantially similar securities
on a specified future date from the same party. The investor may assume some
risk because the characteristics of the MBS delivered to the investor may be
less favorable than the MBS the investor delivered to the dealer. Because the
dealer is not obligated to return the identical MBS collateral that the investor
has delivered, both parties usually transact the dollar roll with generic MBS
pools that have the same or less value than the average TBA-eligible
security.
Unrated
Securities Risks. The
Fund may purchase unrated securities which are not rated by a rating agency if
the Sub- Adviser determines that the security is of comparable quality to a
rated security that the Fund may purchase. Unrated securities may be less liquid
than comparable rated securities and involve the risk that the Sub-Adviser may
not accurately evaluate the security’s comparative credit rating. To the extent
that the Fund purchases unrated securities, the Fund’s success in achieving its
investment objective may depend more heavily on the Sub-Adviser’s
creditworthiness analysis than if the Fund invested exclusively in rated
securities.
U.S.
Government Obligations Risk. The
Fund invests in securities issued by the U.S. government. The total public debt
of the United States as a percentage of gross domestic product has grown rapidly
since the beginning of the 2008–2009 financial downturn. Although high debt
levels do not necessarily indicate or cause economic problems, they may create
certain
systemic
risks if sound debt management practices are not implemented. A high national
debt can raise concerns that the U.S. government will not be able to make
principal or interest payments when they are due. This increase has also
necessitated the need for the U.S. Congress to negotiate adjustments to the
statutory debt limit to increase the cap on the amount the U.S. government is
permitted to borrow to meet its existing obligations and finance current budget
deficits. In August 2011, S&P lowered its long term sovereign credit rating
on the U.S. In explaining the downgrade at that time, S&P cited, among other
reasons, controversy over raising the statutory debt limit and growth in public
spending. Any controversy or ongoing uncertainty regarding the statutory debt
ceiling negotiations may impact the U.S. long-term sovereign credit rating and
may cause market uncertainty. As a result, market prices and yields of
securities supported by the full faith and credit of the U.S. government may be
adversely affected.
Valuation
Risk. It
may be difficult for the Fund to purchase and sell particular investments within
a reasonable time at a fair price, or the price at which it has been valued for
purposes of the Fund’s net asset value, causing the Fund to be less liquid and
unable to sell securities for what the Adviser believes is the appropriate price
of the investment. Valuation of portfolio investments may be difficult, such as
during periods of market turmoil or reduced liquidity and for investments that
trade infrequently or irregularly. In these and other circumstances, an
investment may be valued using fair value methodologies, which are inherently
subjective, reflect good faith judgments based on available information and may
not accurately estimate the price at which the Fund could sell the investment at
that time. Based on its investment strategies, a significant portion of the
Fund’s investments can be difficult to value and potentially less liquid and
therefore particularly prone to these risks.
When-Issued,
Delayed Delivery, and Forward Commitment Risks. To
ensure the availability of suitable securities for its portfolio, the Fund may
purchase when-issued or delayed delivery securities. When-issued and delayed
delivery transactions arise when securities are purchased by the Fund with
payment and delivery taking place in the future to secure a price and yield to
the Fund at the time of entering into the transaction. In a forward commitment
transaction, the Fund contracts to purchase securities for a fixed price at a
future date beyond customary settlement time. The Fund is required to hold and
maintain until the settlement date, cash or other liquid assets sufficient to
meet the purchase price or enter into offsetting contracts for the forward sale
of other securities that it owns. The purchase of securities on a when-issued,
delayed delivery, or forward commitment basis involves a risk of loss if the
value of the security to be purchased declines prior to the settlement date.
Although the Fund would generally purchase securities on a when-issued, delayed
delivery, or forward commitment basis with the intention of actually acquiring
securities for its portfolio, it may dispose of a when-issued or delayed
delivery security or forward commitment prior to settlement if the Sub-Adviser
deems it appropriate to do so.
Additional
Risks of Investing in the Fund
Foreign
Issuer Risk.
The Fund may invest in U.S. dollar-denominated securities of foreign issuers or
U.S. affiliates of foreign issuers. Although these securities are not subject to
all of the risks summarized in “Foreign Securities Risk”, they may be subject to
additional risks not faced by domestic issuers. These risks include political
and economic risks, civil conflicts and war, greater volatility, expropriation
and nationalization risks, and regulatory issues facing issuers in such foreign
countries.
Inflation-Linked
and Inflation-Protected Security Risk.
Inflation-linked debt securities are subject to the effects of changes in market
interest rates caused by factors other than inflation (real interest rates). In
general, the price of an inflation-linked security tends to decrease when real
interest rates increase and can increase when real interest rates decrease.
Interest payments on inflation-linked securities are unpredictable and will
fluctuate as the principal and interest are adjusted for inflation. Any increase
in the principal amount of an inflation-linked debt security will be considered
taxable ordinary income, even though the Fund will not receive the principal
until maturity. There can also be no assurance that the inflation index used
will accurately measure the real rate of inflation in the prices of goods and
services. The Fund’s investments in inflation-linked securities may lose value
in the event that the actual rate of inflation is different than the rate of the
inflation index. In addition, inflation-linked securities are subject to the
risk that the CPI-U or other relevant pricing index may be discontinued,
fundamentally altered in a manner materially adverse to the interests of an
investor in the securities, altered by legislation or Executive Order in a
materially adverse manner to the interests of an investor in the securities or
substituted with an alternative index.
Municipal
Securities Risk.
Changes in a municipality’s financial health may make it difficult for the
municipality to make interest and principal payments when due. A number of
municipalities have had significant financial problems recently, and these and
other municipalities could, potentially, continue to experience significant
financial problems resulting from lower tax revenues and/or decreased aid from
state and local governments in the event of an economic downturn. This could
decrease the Fund’s income or hurt the ability to preserve capital and
liquidity.
Under
some circumstances, municipal securities might not pay interest unless the state
legislature or municipality authorizes money for that purpose. Some securities,
including municipal lease obligations, carry additional risks. For example, they
may be difficult to trade or interest payments may be tied only to a specific
stream of revenue.
Since
some municipal securities may be secured or guaranteed by banks and other
institutions, the risk to the Fund could increase if the banking or financial
sector suffers an economic downturn and/or if the credit ratings of the
institutions issuing the guarantee are downgraded or at risk of being downgraded
by a national rating organization. If such events were to occur, the value of
the security could decrease or the value could be lost entirely, and it may be
difficult or impossible for the Fund to sell the security at the time and the
price that normally prevails in the market. Interest on municipal obligations,
while generally exempt from federal income tax, may not be exempt from federal
alternative minimum tax.
PORTFOLIO
HOLDINGS INFORMATION
Information
about the Fund’s daily portfolio holdings is available on the Fund’s website at
www.awtmetf.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 and is dedicated to understanding, researching and managing assets
within the expanding ETF universe. As of February 28, 2022, Toroso had assets
under management of approximately $7.7 billion and served as the investment
adviser or sub-adviser for 50 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 provides oversight of the Sub-Adviser and review of the
Sub-Adviser’s performance. 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 it provides to the Fund, the Fund pays the Adviser a unified
management fee, which is calculated daily and paid monthly, at an annual rate of
0.23% of the Fund’s average daily net assets. For the fiscal year ended November
30, 2021, the Adviser received an aggregate fee of 0.23% 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
interest charges on any borrowings, dividends and other expenses on securities
sold short, taxes, brokerage commissions, and other expenses incurred in placing
orders for the purchase and sale of securities and other investment instruments,
acquired fund fees and expenses, accrued deferred tax liability, extraordinary
expenses, 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”).
Investment
Sub-Adviser
National
Investment Services of America, LLC, doing business as National Investment
Services, 777 East Wisconsin Avenue, Suite 2350, Milwaukee, Wisconsin 53202,
serves as investment sub-adviser to the Fund pursuant to a sub-advisory
agreement between NIS and the Adviser (the “Sub-Advisory
Agreement”).
NIS
is responsible for the day-to-day management of the Fund’s portfolio, including
determining the securities purchased and sold by the Fund, subject to the
supervision of the Adviser and the Board. NIS is also responsible for trading
portfolio securities for the Fund, including selecting broker-dealers to execute
purchase and sale transactions. For its services, NIS is paid a fee by the
Adviser, which is calculated daily and paid monthly, at an annual rate of 0.21%
of the Fund’s average daily net assets.
NIS
has agreed to assume the Adviser’s obligation to pay all expenses incurred by
the Fund, except for Excluded Expenses. For assuming the payment obligations,
the Adviser has agreed to pay to NIS the profits, if any, generated by the
Fund’s unified management fee. Expenses incurred by the Fund and paid by NIS
include fees charged by Tidal ETF Services, LLC, the Fund’s administrator and an
affiliate of the Adviser. See the section of the SAI titled “Administrator” for
additional information about the Fund’s administrator. As of February 28, 2022,
NIS had assets under management of approximately $9.8 billion.
A
discussion regarding the basis for the Board’s approval of the Fund’s Advisory
Agreement and Sub-Advisory Agreement is available in the Fund’s semi-annual
report to shareholders for the reporting period ended May 31, 2021.
Portfolio
Managers
The
following individuals at the Adviser are portfolio managers of the Fund and have
acted in this capacity since December 2020. Messrs. Venuto and Ragauss provide
oversight of the Sub-Adviser.
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.
Charles
A. Ragauss, CFA, Portfolio Manager for the Adviser
Mr.
Ragauss serves as Portfolio Manager of the Adviser, having joined the Adviser in
September 2020. Mr. Ragauss previously served as Chief Operating Officer and in
other roles at CSat Investment Advisory, L.P. from April 2016 to September 2020.
Previously, Mr. Ragauss was Assistant Vice President at Huntington National Bank
(“Huntington”), where he was Product Manager for the Huntington Funds and
Huntington Strategy Shares ETFs, a combined fund complex of almost $4 billion in
assets under management. At Huntington, he led ETF development bringing to
market some of the first actively managed ETFs. Mr. Ragauss joined Huntington in
2010. Mr. Ragauss attended Grand Valley State University where he received his
Bachelor of Business Administration in Finance and International Business, as
well as a minor in French. He is a member of both the National and West Michigan
CFA societies and holds the CFA designation.
CFA®
is a registered trademark owned by the CFA Institute.
The
following individuals at the Sub-Adviser are jointly and primarily responsible
for the day-to-day management of the Fund and have acted in this capacity since
January 2021.
Jason
C. Berrie, CFA, Chief Investment Officer at the Sub-Adviser
Mr.
Berrie, an owner of the Sub-Adviser, has been with the Sub-Adviser since 2003
and is Chief Investment Officer. Mr. Berrie has over 25 years of investment
experience and is responsible, in conjunction with Mr. Kent White, for
developing investment strategies and overseeing final portfolio decisions at the
Sub-Adviser. Mr. Berrie holds a B.B.A in business administration from the
University of Iowa and is a CFA charterholder.
Kent
J. White, CFA, Senior Adviser at the Sub-Adviser
Mr.
White, an owner of the Sub-Adviser, has been with the Sub-Adviser since 1994 and
is Senior Adviser. Mr. White has over 30 years of investment experience and is
responsible, in conjunction with Mr. Jason Berrie, for developing investment
strategies and overseeing final portfolio decisions at the Sub-Adviser. Mr.
White holds a B.S. in pharmacy from the University of Kansas and an M.B.A. in
finance from Duke University and is a CFA charterholder.
Mark
R. Anderson, CFA, Chief Strategy Officer at the Sub-Adviser
Mr.
Anderson, an owner of the Sub-Adviser, has been with the Sub-Adviser since 2000.
Mr. Anderson has over 25 years of investment experience and is responsible for
the Sub-Adviser’s economic and market outlooks. Mr. Anderson holds a B.S. in
business administration from the University of Wisconsin - Stevens Point and is
a CFA charterholder.
Jeffrey
F. Parker, Lead Portfolio Manager, Preferred Stock at the
Sub-Adviser
Mr.
Parker, an owner of the Sub-Adviser, has been with the Sub-Adviser since 2000.
Mr. Parker has over 25 years of investment experience and is responsible for
preferred stock management at the Sub-Adviser. Mr. Parker holds a B.B.A. in
finance from the University of Wisconsin - Milwaukee.
James
S. Kaplan, CFA, Lead Portfolio Manager, Structured Products at the
Sub-Adviser
Mr.
Kaplan, an owner of the Sub-Adviser, has been with the Sub-Adviser since 2009.
Mr. Kaplan has over 35 years of investment experience and is responsible for
management for all mortgage products at the Sub-Adviser. Mr. Kaplan holds a B.A.
in economics and political science from Washington and Lee University and is a
CFA charterholder.
Barbara
A. Schalla, CFA, Portfolio Manager, Corporate Bonds at the
Sub-Adviser
Ms.
Schalla, an owner of the Sub-Adviser, has been with the Sub-Adviser since 1993
and has over 30 years of investment experience. Ms. Schalla is responsible for
co-managing the corporate bond portfolio and oversees investment policy
guidelines at the Sub-Adviser. Ms. Schalla holds a B.B.A. in finance from the
University of Wisconsin - Milwaukee and is a CFA charterholder.
Lesly
M. Barnes, Portfolio Manager, Structured Products and Treasury at the
Sub-Adviser
Ms.
Barnes has been with the Sub-Adviser since 2007 and has over 15 years of
investment experience. Ms. Barnes is responsible for credit research and
structure and collateral analysis at the Sub-Adviser. Ms. Barnes holds a degree
in Mathematics from Miami University-Oxford.
Vincent
S. Russo, CFA, Portfolio Manager, Corporate Bonds at the
Sub-Adviser
Mr.
Russo has been with the Sub-Adviser since 2014 and has over 20 years of
investment experience. Mr. Russo is responsible for sector allocations and
credit research in the industrial sector. at the Sub-Adviser. Mr. Russo holds a
B.B.A. in finance and an M.B.A. from the University of Wisconsin - Whitewater
and is a CFA charterholder.
Stefan
T. Martin, Portfolio Manager, Structured Products at the
Sub-Adviser
Mr.
Martin has been with the Sub-Adviser since 2017 and has over 20 years of
investment experience. Prior to joining the Sub-Adviser, Mr. Martin was at
Aberdeen Asset Management. Mr. Martin is responsible for credit research,
structure and collateral analysis in the CMBS sector at the Sub-Adviser. Mr.
Martin holds a B.A. in biology from Goshen College and an M.B.A. in finance from
Villanova University.
Michael
D. Fohr, CFA, CPA, JD, MBA, Co-Portfolio Manager, High Yield at the
Sub-Adviser
Mr.
Fohr has been with the Sub-Adviser since 2016 where he is responsible for
research coverage in the services, capital goods, consumer goods, and retail
sectors. Mr. Fohr holds a B.B.A. in accounting, an M.S. in taxation from the
University of Wisconsin - Milwaukee. He also holds an M.B.A. in applied security
analysis and J.D. from the University of Wisconsin - Madison. Mr. Fohr is a CFA
charterholder and certified public accountant.
Thomas
M. Price, Co-Portfolio Manager, High Yield at the Sub-Adviser
Mr.
Price has been with the Sub-Adviser since 2020 and has over 25 years of
investment experience. Prior to joining the Sub-Adviser, Mr. Price held multiple
roles at Wells Fargo Asset Management from 2005 to 2020. Mr. Price holds a B.A.
in business administration from the University of Michigan and an M.B.A. in
finance from the Kellogg Graduate School of Management at Northwestern
University.
Stephen
J. Smitley, Portfolio Manager, Municipal Bonds and Structured Product at the
Sub-Adviser
Mr.
Smitley joined the Sub-Adviser in 2021 and has over 20 years of investment
experience. Prior to joining the Sub-Adviser, Mr. Smitley was lead Portfolio
Manager Structured Products at Aware Asset Management and held various roles in
the Structured Products sector at Carval Investors, Black River Asset Management
and GMAC-RFC. Mr. Smitley has a B.S. Finance from California State University -
Northridge and an M.S.B.A. from the University of Notre Dame Mendoza College of
Business.
The
Fund’s SAI provides additional information about each Portfolio Manager’s
compensation structure, other accounts that each Portfolio Manager manages, and
each Portfolio Manager’s 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 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 or the Sub-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, monthly, 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
following general discussion of certain U.S. federal income tax consequences is
based on provisions of the Code and the regulations issued thereunder as in
effect on the date of this SAI. New legislation, as well as administrative
changes or court decisions, may significantly change the conclusions expressed
herein, and may have a retroactive effect with respect to the transactions
contemplated herein.
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 their 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 they are 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 substantially identical 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 comprising 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.
Foreign
Investments by the Fund
Interest
and other income received by the Fund with respect to foreign securities may
give rise to withholding and other taxes imposed by foreign countries. Tax
treaties or conventions between certain countries and the United States may
reduce or eliminate such taxes. If, as of the close of a taxable year, more than
50% of the value of the Fund’s assets consists of certain foreign stock or
securities, the Fund will be eligible to elect to “pass through” to investors
the amount of certain qualifying foreign income and similar taxes paid by the
Fund during that taxable year. This means that investors would be considered to
have received as additional income their respective shares of such foreign
taxes, but may be entitled to either a corresponding tax deduction in
calculating taxable income, or, subject to certain limitations, a credit in
calculating federal income tax. If the Fund does not so elect, the Fund will be
entitled to claim a deduction for certain foreign taxes incurred by the Fund.
The Fund (or its administrative agent) will notify you if it makes such an
election and provide you with the information necessary to reflect foreign taxes
paid on your income tax return.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in 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.awtmetf.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, the Sub-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 periods shown. 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 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.
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FINANCIAL
HIGHLIGHTS For a capital share outstanding throughout the
period/year |
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|
Year
Ended November 30, 2021 |
|
Year
Ended November 30, 2020 |
|
Period
Ended November 30,
2019
(1) |
|
Net
asset value, beginning of period/year |
$ |
49.80 |
|
|
$ |
50.49 |
|
|
$ |
50.00 |
|
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INCOME
(LOSS) FROM INVESTMENT OPERATIONS: |
|
|
|
|
|
|
Net
investment income (loss)
(2) |
0.52 |
|
|
0.93 |
|
|
1.16 |
|
|
Net
realized and unrealized gain (loss) on investments |
(0.17) |
|
|
(0.70) |
|
|
0.43 |
|
|
Total
from investment operations |
0.35 |
|
|
0.23 |
|
|
1.59 |
|
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LESS
DISTRIBUTIONS: |
|
|
|
|
|
|
From
net investment income |
(0.54) |
|
|
(0.92) |
|
|
(1.10) |
|
|
Total
distributions |
(0.54) |
|
|
(0.92) |
|
|
(1.10) |
|
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|
|
|
|
|
|
Net
asset value, end of period/year |
$ |
49.61 |
|
|
$ |
49.80 |
|
|
$ |
50.49 |
|
|
Total
return (4) |
0.70 |
% |
|
0.49 |
% |
|
3.22 |
% |
(3) |
|
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|
RATIOS
/ SUPPLEMENTAL DATA: |
|
|
|
|
|
|
Net
assets, end of period/year (millions) |
$ |
45.9 |
|
|
$ |
226.6 |
|
|
$ |
300.4 |
|
|
Portfolio
turnover rate |
66 |
% |
|
194 |
% |
|
49 |
% |
(3) |
Ratio
of expenses to average net assets |
0.23 |
% |
|
0.23 |
% |
|
0.23 |
% |
(5) |
Ratio
of net investment income (loss) to average net assets |
1.05 |
% |
|
1.89 |
% |
|
2.74 |
% |
(5)
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(1)
The
Fund commenced operations on January 28, 2019. The information presented
is from January 28, 2019 to November 30, 2019. |
(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. |
NATIONAL
INVESTMENT SERVICES ULTRA-SHORT DURATION ENHANCED INCOME ETF
|
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Adviser |
Toroso
Investments, LLC
898
N. Broadway, Suite 2
Massapequa,
New York 11758 |
Sub-Adviser |
National
Investment Services of America, LLC, doing business as National Investment
Services
777
East Wisconsin Avenue, Suite 2350
Milwaukee,
Wisconsin 53202 |
Custodian |
U.S.
Bank National Association
1555
N. Rivercenter Dr.
Milwaukee,
Wisconsin 53212 |
Administrator |
Tidal
ETF Services LLC
898
N. Broadway, Suite 2
Massapequa,
New York 11758 |
Sub-Administrator,
Fund Accountant, and Transfer Agent |
U.S.
Bancorp Fund Services, LLC
615
East Michigan Street
Milwaukee,
Wisconsin 53202 |
Distributor |
Foreside
Fund Services, LLC
Three
Canal Plaza, Suite 100
Portland,
Maine 04101 |
Legal
Counsel |
Godfrey
& Kahn, S.C.
833
East Michigan Street, Suite 1800
Milwaukee,
Wisconsin 53202 |
Independent
Registered Public Accounting Firm |
Tait,
Weller & Baker LLP
Two
Liberty Place
50
S 16th Street
Philadelphia,
Pennsylvania 19102 |
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 March 30, 2022,
as supplemented from time to time, is on file with the SEC and is herein
incorporated by reference into this Prospectus. It is legally considered a part
of this Prospectus.
Annual/Semi-Annual
Reports: Additional
information about the Fund’s investments is available in the Fund’s annual and
semi-annual reports to shareholders. In the annual report you will find a
discussion of the market conditions and investment strategies that significantly
affected the Fund’s performance during the Fund’s prior fiscal
year.
You
can obtain free copies of these documents, request other information or make
general inquiries about the Fund by contacting the Fund at National Investment
Services Ultra-Short Duration Enhanced Income ETF, c/o U.S. Bank Global Fund
Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or calling (866)
539-9530.
Shareholder
reports, the Fund’s current Prospectus and SAI and other information about the
Fund are also available:
•Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov; or
•Free
of charge from the Fund’s Internet website at www.awtmetf.com.; or
(SEC
Investment Company Act File No. 811-23377)