Horizon
Kinetics Medical ETF (MEDX
)
Horizon
Kinetics SPAC Active ETF (SPAQ
)
Listed
on The Nasdaq Stock Market, LLC
PROSPECTUS
January
25, 2023,
as
supplemented March 2, 2023
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.
TABLE
OF CONTENTS
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HORIZON
KINETICS MEDICAL ETF – FUND SUMMARY |
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HORIZON
KINETICS SPAC ACTIVE ETF - FUND SUMMARY |
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SUB-ADVISER
TO THE SPAC ETF |
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OTHER
SERVICE PROVIDERS |
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INVESTMENTS
BY REGISTERED INVESTMENT COMPANIES |
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DELIVERY
OF SHAREHOLDER DOCUMENTS – HOUSEHOLDING |
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NET
INVESTMENT INCOME TAX |
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INVESTMENTS
IN COMPLEX SECURITIES |
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DISTRIBUTION
PLAN |
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HORIZON
KINETICS MEDICAL ETF – FUND SUMMARY
Investment
Objective
Horizon
Kinetics Medical ETF (“Medical ETF” or the “Fund”) seeks to provide long-term
growth 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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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
Management
Fee |
0.85% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses |
0.00% |
Total
Annual Fund Operating Expenses* |
0.85% |
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*
Restated to reflect the Fund’s current unified management fee as if it had been
in effect during the previous fiscal year.
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: |
$87 |
3
Years: |
$271 |
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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 the Total
Annual Fund Operating Expenses or in the Example, affect the Fund’s performance.
For the fiscal year ended December 31, 2022, the Predecessor Fund’s (defined
below) portfolio turnover rate was 1% of the average value of its portfolio.
Principal
Investment Strategies
The
Fund is an actively-managed exchange-traded fund (“ETF”) that pursues its
investment objective by investing, under normal circumstances, at least 80% of
its net assets plus any borrowings for investment purposes in common stocks,
convertible securities, warrants and other equity securities having the
characteristics of common stocks (such as American Depositary Receipts (“ADRs”),
Global Depositary Receipts (“GDRs”) and International Depositary Receipts
(“IDRs”)) of U.S. and foreign companies engaged in medical research,
pharmaceutical and medical technology industries and related technology
industries, generally, with an emphasis toward companies engaged in cancer
research and drug development, such as pharmaceutical development companies,
surgical and medical instrument manufacturers and developers, pharmaceutical
manufacturers, and biotech and medical research companies. These types of
companies derive at least 50% of their revenue from such activities. The Fund
also may invest in other ETFs and purchase and write options for hedging
purposes and/or direct investment.
The
Fund may invest up to 20% of its total assets in convertible and non-convertible
debt securities rated below investment grade, also known as junk bonds, or
unrated securities that Horizon Kinetics Asset Management LLC, the Fund’s
investment adviser (the “Adviser”), has determined to be of comparable quality.
The
Adviser selects portfolio securities by evaluating a company’s positioning and
the resources that it currently expends on research and development, looking for
a significant percentage, or large amount, of capital invested into research and
treatment of cancer and other diseases. The Adviser also considers a company’s
fundamentals by reviewing its balance sheets, corporate revenues, earnings and
dividends. The Adviser also considers at the amount of capital a company spends
on research and development because the Adviser believes that such expenditures
frequently have significant bearing on future growth. The Fund may invest in
companies of any size, including small and medium-size companies. Additionally,
the Fund may participate in securities lending arrangements up to 33 1/3% of the
securities in its portfolio with brokers, dealers, and financial institutions
(but not individuals) to seek to increase the return on its
portfolio.
Decisions
to sell the Fund’s portfolio holdings are generally triggered by either adequate
value being achieved, as determined by the Adviser, or an adverse change in a
company’s operating performance or a deterioration of the company’s business
model. A sell
trigger
also may occur if the Adviser discovers a new investment opportunity that it
believes is more compelling and represents a greater risk reward profile than
other investment(s) held by the Fund.
The
Fund may maintain during a temporary period, which could be for a short period
or a longer period lasting several years or more, of abnormal conditions, a
significant portion of its total assets in cash and securities, generally
considered to be cash and cash equivalents, including, but not limited to: high
quality, U.S. short-term debt securities and money market instruments. The
Adviser will invest in such short-term cash positions to the extent the Adviser
is unable to find sufficient investments meeting its criteria and when the
Adviser believes the purchase of additional equity securities would not further
the investment objective of the Fund during such periods of time. Additionally,
to respond to adverse market, economic, political or other conditions, which may
persist for short or long periods of time, the Fund may invest up to 100% of its
assets in the types of high quality, U.S. short-term debt securities and money
market instruments described above.
If
the market advances during periods when the Fund is holding a large cash
position, the Fund may not participate in the positive performance as much as it
would have if it had been more fully invested in securities. In the
aforementioned temporary defensive periods, the Adviser believes that an
additional amount of liquidity in the Fund is desirable both to meet operating
requirements and to take advantage of new investment opportunities. When the
Fund holds a significant portion of assets in cash and cash equivalents, it may
not meet its investment objective.
The
Fund will concentrate its investments (i.e.,
hold more than 25% of its total assets) in companies engaged in the medical
research, pharmaceutical and technology industries and related medical
technology industries, generally, with an emphasis toward companies engaged in
cancer research and drug development.
The
Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940, as amended (the “1940 Act”).
Principal
Investment Risks
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with 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 net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Associated
Risks of Investing in the Medical Industry.
Medical and pharmaceutical-related companies in general are subject to the rate
of change in technology, which is generally higher than that of other
industries. Similarly, cancer research-related industries use many products and
services of companies engaged in medical and pharmaceutical-related activities
and are also subject to relatively high risks of rapid obsolescence caused by
progressive scientific and technological advances. Additionally, it is possible
that a medical device or product may fail after its research period; such
research period may involve substantial research, testing and development time
and the development company may incur significant costs. Further, the medical
research and development industry is subject to strict regulatory scrutiny and
ongoing legislative action.
•Below
Investment Grade Bonds Risk. The
Fund’s investments in below investment grade bonds are subject to a greater risk
of loss of income and principal than higher grade debt securities. The Fund’s
investments in below investment grade bonds also subject the Fund to greater
levels of interest rate, credit and liquidity risk than funds that do not invest
in such securities. Issuers of below investment grade bonds are often highly
leveraged and are more vulnerable to changes in the economy. These securities
are considered predominately speculative with respect to the issuer’s continuing
ability to make principal and interest payments.
•Concentration
Risk.
The Fund expects to concentrate (i.e.,
invest more than 25% of its net assets) its investments in a limited number of
issuers conducting business in the same industry or group of related industries.
To the extent the Fund does so, the Fund is more vulnerable to adverse market,
economic, regulatory, political or other developments affecting that industry or
group of related industries than a fund that invests its assets more broadly. As
a result of the Fund’s concentration in companies in the medical research,
pharmaceutical and technology industries and related medical technology
industries, the Fund is subject to the following industry risks:
◦Medical
Research, Pharmaceutical and Technology Industries Risk.
Companies in the medical research, pharmaceutical and technology industries, as
traditionally defined, spend heavily on research and development, and their
products or services may not prove commercially successful or may become
obsolete quickly. These industries are subject to a significant amount of
governmental regulation, and changes in governmental policies and the need for
regulatory approvals may have a material adverse effect on these industries.
This regulation requires significant investments in time and funds to maintain
compliance. The process of obtaining government approvals can be long and
costly, and the process is accompanied by significant uncertainty. Companies in
which the Fund may invest in may not currently have any marketed or approved
products and may never have marketed or approved products; companies may not be
able to maintain legal and regulatory compliance, resulting in regulatory and/or
legal enforcement actions; companies may not be able to maintain any regulatory
approvals that they obtain for their products or their products may not be
accepted by patients or providers. In addition, unanticipated problems
often
arise in connection with the development and marketing of new products, and many
such efforts are ultimately unsuccessful. Companies in these sectors may not be
able to obtain adequate pricing and reimbursement levels for any marketed
products, impeding their ability to generate a profit. Companies may also have
difficulty manufacturing, marketing, and distributing their products, or may
have regulatory authority-imposed restrictions on their ability to do so.
Companies may further face product liability and other actions should their
products be less safe or efficacious than believed, should they be deemed to
have engaged in misleading practices, or should a person that received their
product otherwise experience harm or injury. Moreover, companies in the
pharmaceutical industries are subject to competitive forces that may make it
difficult to raise prices and, in fact, may result in price discounting and
rebating. The profitability of some companies in these industries may be
dependent on a relatively limited number of products. In addition, their
products can become obsolete due to industry innovation, changes in
technologies, or other market developments. Pharmaceutical products are subject
to government approvals, regulation, and reimbursement rates. Companies in the
medical research, pharmaceutical and technology industries are subject to risks
of new technologies and competitive pressures and are heavily dependent on
patents and intellectual property rights. The loss or impairment of these rights
may adversely affect the profitability of these companies.
•Convertible
Securities Risk.
Convertible securities are subject to the risks affecting both equity and fixed
income securities, including market, credit, liquidity and interest rate
risk.
•Currency
Exchange Rate Risk. The
Fund may invest in investments denominated in non-U.S. currencies or in
securities that provide exposure to such currencies. Changes in currency
exchange rates and the relative value of non-U.S. currencies will affect the
value of the Fund’s investment and the value of your Shares. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the value of an investment in the Fund may change quickly and without
warning and you may lose money.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, and/or other
service providers (including custodians and financial intermediaries) to suffer
data breaches or data corruption. Additionally, cybersecurity failures or
breaches of the electronic systems of the Fund, the Adviser, or the Fund’s other
service providers, market makers, Authorized Participants (“APs”), the Fund’s
primary listing exchange, or the issuers of securities in which the Fund invests
have the ability to disrupt and negatively affect the Fund’s business
operations, including the ability to purchase and sell Fund Shares, potentially
resulting in financial losses to the Fund and its shareholders.
•Depositary
Receipt Risk.
Depositary receipts, including ADRs, GDRs, and IDRs, involve risks similar to
those associated with investments in foreign securities, such as changes in
political or economic conditions of other countries and changes in the exchange
rates of foreign currencies. Depositary receipts listed on U.S. exchanges are
issued by banks or trust companies, and entitle the holder to all dividends and
capital gains that are paid out on the underlying foreign shares (“Underlying
Shares”). When the Fund invests in depositary receipts as a substitute for an
investment directly in the Underlying Shares, the Fund is exposed to the risk
that the depositary receipts may not provide a return that corresponds precisely
with that of the Underlying Shares. Because the Underlying Shares trade on
foreign exchanges that may be closed when the Fund’s primary listing exchange is
open, the Fund may experience premiums and discounts greater than those of funds
without exposure to such Underlying Shares.
•Derivatives
Risk. Put
and call options are referred to as “derivative” instruments since their values
are based on, or derived from, an underlying reference asset, such as an index.
Derivatives can be volatile, and a small investment in a derivative can have a
large impact on the performance of the Fund as derivatives can result in losses
in excess of the amount invested. The return on a derivative instrument may not
correlate with the return of its underlying reference asset. Derivative
instruments may be difficult to value and may be subject to wide swings in
valuations caused by changes in the value of the underlying instrument. Other
risks of investments in derivatives include risks that the transactions may
result in losses that partially or completely offset gains in portfolio
positions, risks associated with leverage, and risks that the derivative
transaction may not be liquid.
•Equity
Market Risk. The
equity securities held in the Fund’s portfolio may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors that affect securities markets generally or factors affecting
specific issuers, industries, sectors or companies in which the Fund invests.
Common stocks are generally exposed to greater risk than other types of
securities, such as preferred stocks and debt obligations, because common
stockholders generally have inferior rights to receive payment from issuers.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
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 Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant. Because
securities held by the Fund may trade on foreign exchanges that are closed when
the Fund’s primary listing exchange is open, the Fund is likely to experience
premiums or discounts greater than those of domestic ETFs.
◦Trading
Risk. Although
Shares are listed for trading on The Nasdaq Stock Market, LLC (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 the Shares.
•Fixed
Income Risk.
Current market conditions and the actions of governmental authorities and
regulators in response to COVID-19 and its far-reaching effects present
heightened risks to the fixed income market generally. Such risks could be
further heightened if such market conditions become more volatile or the
governmental and regulatory actions are unexpectedly or suddenly reversed or are
ineffective in achieving their desired outcomes. In addition, the current
environment is exposing fixed-income and debt markets to significant volatility
and reduced liquidity for Fund investments.
◦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 at lower interest rates, resulting in a
decline in the Fund’s income.
◦Credit
Risk.
Debt issuers and other counterparties may not honor their obligations or may
have their debt downgraded by ratings agencies.
◦Extension
Risk.
During periods of rising interest rates, certain debt obligations will be paid
off substantially more slowly than originally anticipated and the value of those
securities may fall sharply, resulting in a decline in the Fund’s income and
potentially in the value of the Fund’s investments.
◦Interest
Rate Risk.
An increase in interest rates may cause the value of fixed-income securities
held by the Fund to decline. The Fund may be subject to a greater risk of rising
interest rates due to the recent historically low rates and the effect of
potential government fiscal policy initiatives and resulting market reaction to
those initiatives.
◦Income
Risk. The
Fund’s income may decline if interest rates fall. This decline in income can
occur because most of the debt instruments held by the Fund will have floating
or variable interest rates.
•Foreign
Securities Risk. Investments
in non-U.S. securities involve certain risks that may not be present with
investments in U.S. securities. For example, investments in non-U.S. securities
may be subject to risk of loss due to foreign currency fluctuations or to
political or economic instability. There may be less information publicly
available about a non-U.S. issuer than a U.S. issuer. Non-U.S. issuers may be
subject to different accounting, auditing, financial reporting and investor
protection standards than U.S. issuers. Investments in non-U.S. securities also
may be subject to withholding or other taxes and may be subject to additional
trading, settlement, custodial, and operational risks. With respect to certain
countries, there is the possibility of government intervention and expropriation
or nationalization of assets. Because legal systems differ, there also is the
possibility that it will be difficult to obtain or enforce legal judgments in
certain countries. Since foreign exchanges may be open on days when the Fund
does not price its shares, the value of the securities in the Fund’s portfolio
may change on days when shareholders will not be able to purchase or sell the
Fund’s shares. Conversely, Shares may trade on days when foreign exchanges are
closed. Each of these factors can make investments in the Fund more volatile and
potentially less liquid than other types of investments.
•Liquidity
Risk. Liquidity
risk refers to the possibility that the Fund may not be able to sell or buy a
security or close out an investment contract at a favorable price or time.
Consequently, the Fund may have to accept a lower price to sell a security, sell
other securities to raise cash, or give up an investment opportunity, any of
which could have a negative effect on the Fund’s performance. Infrequent trading
of securities also may lead to an increase in their price volatility.
•Management
Risk. The
Fund is actively managed and its ability to achieve its investment objective is
dependent on the Adviser’s successful implementation of the Fund’s investment
strategies.
•Market
Risk. The
trading prices of 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. U.S. and international markets have experienced significant periods of
volatility in recent years due to a number of these factors, including the
impact of the COVID-19 pandemic and related public health issues, growth
concerns in the U.S. and overseas, uncertainties regarding interest rates, trade
tensions and the threat of tariffs imposed by the U.S. and other countries. In
addition, local, regional or global events such as war, including Russia’s
invasion of Ukraine, acts of terrorism, spread of infectious diseases or other
public health issues, recessions, rising inflation, or other events could have a
significant negative impact on the Fund and its investments. 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. It is unknown how
long circumstances related to the COVID-19 pandemic will persist, whether they
will reoccur in the future, whether efforts to support the economy and financial
markets will be successful, and what additional implications may follow from the
pandemic. The impact of these events and other epidemics or pandemics in the
future could adversely affect Fund performance.
•Market
Capitalization Risk.
◦Mid-Capitalization
Investing Risk.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large-capitalization stocks or the stock market
as a whole.
◦Small-Capitalization
Investing Risk.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or mid-capitalization stocks or the
stock market as a whole. There is typically less publicly available information
concerning smaller-capitalization companies than for larger, more established
companies.
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may invest a greater percentage of its
assets in the securities of a single issuer or a lesser number of issuers than
if it was a diversified fund. As a result, the Fund may be more exposed to the
risks associated with and developments affecting an individual issuer or a
lesser number of issuers than a fund that invests more widely. This may increase
the Fund’s volatility and cause the performance of a relatively small number of
issuers to have a greater impact on the Fund’s performance.
•Options
Risk. The
prices of options may change rapidly over time and do not necessarily move in
tandem with the price of the underlying securities. Selling call options reduces
the Fund’s ability to profit from increases in the value of the Fund’s equity
portfolio, and purchasing put options may result in the Fund’s loss of premiums
paid in the event that the put options expire unexercised. To the extent that
the Fund reduces its put option holdings relative to the number of call options
sold by the Fund, the Fund’s ability to mitigate losses in the event of a market
decline will be reduced. When the Fund sells an option, it gains the amount of
the premium it receives, but also incurs a liability representing the value of
the option it has sold until the option is either exercised and finishes “in the
money,” meaning it has value and can be sold, or the option expires worthless,
or the expiration of the option is “rolled,” or extended forward. The value of
the options in which the Fund invests is based partly on the volatility used by
market participants to price such options (i.e.,
implied volatility). Accordingly, increases in the implied volatility of such
options will cause the value of such options to increase (even if the prices of
the options’ underlying stocks do not change), which will result in a
corresponding increase in the liabilities of the Fund under such options and
thus decrease the Fund’s NAV.
•Other
Investment Company Risk.
The risks of investment in other investment companies, including ETFs, typically
reflect the risks of the types of instruments in which the investment companies
invest. By investing in another investment company, the Fund becomes a
shareholder of that investment company and bears its proportionate share of the
fees and expenses of the other investment company. Investments in ETFs are also
subject to the “ETF Risks” described above.
•Sector
Risk.
To the extent the Fund invests more heavily in particular sectors of the
economy, its performance will be especially sensitive to developments that
significantly affect those sectors. The Fund may invest a significant portion of
its assets in the following sectors and, therefore, the performance of the Fund
could be negatively impacted by events affecting each of these sectors.
◦Manufacturing
Sector. Companies
in the Manufacturing Sector can be significantly affected by supply and demand
both for their specific product or service and for Manufacturing Sector products
in general; a decline in demand for products due to rapid technological
developments and frequent new product introduction; government regulation, world
events and economic conditions; and the risks associated with potential
environmental damage and product liability claims.
•Tax
Risk.
The
use of derivatives strategies, such as writing (selling) and purchasing options,
involves complex rules that will determine for income tax purposes the amount,
character and timing of recognition of the gains and losses the Fund realizes in
connection therewith. The Fund expects to generate premiums from its sale of
options. These premiums typically will result in short-term capital gains for
federal income tax purposes. In addition, equity securities that are hedged with
put options may not be eligible for long-term capital gains tax treatment.
•Temporary
Defensive Position Risk.
If the Fund takes a temporary defensive position, it may invest all or a large
portion of its assets in cash and/or cash equivalents. If the Fund takes a
temporary defensive position, it may not achieve its investment
objective.
Performance
The
following performance information indicates some of the risks of investing in
the Fund. The Fund commenced operations after the assets of another investment
company advised by the Adviser, the Kinetics Medical Fund (the “Predecessor
Fund”), were transferred to the Fund in a tax-free reorganization as of the
close of business on January 27, 2023. The Fund has the same investment
objective and substantially similar investment strategies as those of the
Predecessor Fund. The bar chart shows the Predecessor Fund’s performance
(represented by the performance of the Predecessor Fund’s No Load Class of
Shares) for calendar years ended December 31. The table shows the Predecessor
Fund’s average annual total returns (represented by the average annual total
returns of the Predecessor Fund’s No Load Class of Shares) for the 1-year,
5-year, 10-year and since inception periods compared with those of a broad
measure of market performance. Performance for the Fund has not been adjusted to
reflect the Fund’s lower expense ratios. Had the Predecessor Fund been
structured as an ETF, its performance may have differed. Performance for the
Predecessor Fund is based on the NAV per share of the Predecessor Fund shares
rather than on market-determined prices. The Predecessor Fund’s past
performance, before and after taxes, does not necessarily indicate how it will
perform in the future. Updated performance information is available on the
Fund’s website at www.horizonkinetics.com.
Calendar
Years Total Returns
During
the period of time shown in the bar chart, the highest quarterly return was
20.54% for the quarter ended March 31, 2013, and the lowest quarterly return was
-12.31% for the quarter ended March 31, 2016.
Average
Annual Total Returns
(for
periods ended December 31, 2022)
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Horizon
Kinetics Medical ETF |
1-Year |
5-Years |
10-Years |
Since
Inception* |
Return
Before Taxes |
4.21% |
8.19% |
10.83% |
8.96% |
Return
After Taxes on Distributions |
3.80% |
7.32% |
9.63% |
8.18% |
Return
After Taxes on Distributions and Sale of Shares |
2.78% |
6.30% |
8.67% |
7.61% |
S&P
500 Index
(reflects
no deduction for fees, expenses, or taxes) |
-18.11% |
9.42% |
12.56% |
6.83% |
NASDAQ
Composite Index
(reflects
no deduction for fees, expenses, or taxes) |
-33.10% |
8.68% |
13.24% |
5.92% |
*
The Predecessor Fund commenced operations on September 30, 1999.
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.
Portfolio
Management
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Adviser |
Horizon
Kinetics Asset Management LLC |
Portfolio
Managers |
B.
Paul Abel, Portfolio Manager of the Adviser, and Peter B. Doyle, Managing
Director of the Adviser, have been portfolio managers of the Fund since
its inception in January 2023 |
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 and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer 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. The difference in the bid and
ask prices is 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.horizonkinetics.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
in an individual retirement account (“IRA”) or other tax-advantaged account.
Distributions on investments made through tax-deferred arrangements may be taxed
later upon withdrawal of assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
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HORIZON
KINETICS SPAC ACTIVE ETF – FUND
SUMMARY |
Investment
Objective
Horizon
Kinetics SPAC Active ETF (“SPAC ETF” or the “Fund”) seeks to generate realized
capital gains in excess of short-term interest rates on a risk adjusted
basis.
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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Shareholder
Fees
(fees
paid directly from your investment) |
None |
Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
Management
Fee |
0.85% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses |
0.00% |
Total
Annual Fund Operating Expenses* |
0.85% |
|
*
Restated to reflect the Fund’s current unified management fee as if it had been
in effect during the previous fiscal year.
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: |
$87 |
3
Years: |
$271 |
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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 the Total
Annual Fund Operating Expenses or in the Example, affect the Fund’s performance.
Because the Fund is newly reorganized, portfolio turnover information is not yet
available.
Principal
Investment Strategies
The
Fund is an actively-managed exchange-traded fund (“ETF”) that pursues its
investment objective primarily by investing, under normal circumstances, in
special purpose acquisition companies (“SPACs”) that Ryan Heritage, LLP, the
Fund’s investment sub-adviser (the “Sub-Adviser”), believes will generate net
realized capital gains in excess of the income derived from bank certificates of
deposit with similar maturities.
A
SPAC (also known as a “blank check” company) is an investment vehicle with no
commercial operations that is designed to raise capital via an initial public
offering (“IPO”) for the purpose of engaging in a merger, acquisition,
reorganization, or similar business combination (a “Combination”) with one or
more operating companies to be identified subsequent to the SPAC’s IPO. SPACs
are often used as a vehicle to transition a company from private to publicly
traded as an alternative to a more traditional direct IPO by a private company.
Unless and until Combination is completed, a SPAC generally places a minimum of
the total amount of cash raised in the IPO in a trust account that invests such
cash in U.S. government securities or money market funds. A SPAC sponsor
generally has 24 months (or less) to find an acquisition target, secure
shareholder approval, and complete the Combination. Prior to consummation of a
Combination, the SPAC’s shares trade in the market at prices that may be below
or above the per share value of the trust account. If a Combination is not
consummated within the allowed time span, the SPAC is automatically liquidated
and the cash value, after any applicable taxes, fees, and administrative
expenses, of the SPAC trust is distributed to shareholders. If a Combination is
proposed, shareholders can (1) continue to hold onto their shares (which then
bear the risks associated with all equity securities) or (2) redeem their shares
for the pro rata value of the cash value of the trust. The Sub-Adviser believes
SPACs offer upside potential when sold after an attractive Combination
announcement, coupled with one or more redemption options, such as when the Fund
is permitted to exit a SPAC prior to the completion of a Combination without
loss of the principal it invested in the SPAC, thus providing a true asymmetric
risk/reward profile for investors. Under normal circumstances, at least 80% of
the Fund’s net assets, plus borrowings for investment purposes, will be invested
in Pre-Combination SPACs, together with the warrants or rights issued in
connection with the IPO of Pre-Combination SPACs. A warrant or right is a
security that allows its holder to purchase a specified amount of common stock
at a specified price for a specified time.
The
Fund may maintain during a temporary period, which could be for a short period
or a longer period lasting several years or more, of abnormal conditions, a
significant portion of its total assets in cash and securities, generally
considered to be cash and cash equivalents, including, but not limited to, high
quality, U.S. short-term debt securities and money market instruments. The
Sub-Adviser will invest in such short-term cash positions to the extent the
Sub-Adviser is unable to find sufficient investments meeting its criteria and
when the Sub-Adviser believes the purchase of additional equity securities would
not further the investment objective of the Fund during such periods of time.
The criteria for temporarily investing in cash equivalents is a lack of current
investments that the Sub-Adviser believes will generate net realized capital
gains in excess of the income derived from bank certificates of deposit with
similar maturities. Additionally, to respond to adverse market, economic,
political or other conditions, which may persist for short or long periods of
time, the Fund may invest up to 100% of its assets in the types of high quality,
U.S. short-term debt securities and money market instruments described above.
If
the market advances during periods when the Fund is holding a large cash
position, the Fund may not participate in the positive performance as much as it
would have if it had been more fully invested in securities. In the
aforementioned temporary defensive periods, the Sub-Adviser believes that an
additional amount of liquidity in the Fund is desirable both to meet operating
requirements and to take advantage of new investment opportunities. When the
Fund holds a significant portion of assets in cash and cash equivalents, it may
not meet its investment objective.
The
Fund is classified as a “non-diversified” investment company under the
Investment Company Act of 1940, as amended (the “1940 Act”).
Principal
Investment Risks
The
principal risks of investing in the Fund are summarized below. The
principal risks are presented in alphabetical order to facilitate finding
particular risks and comparing them with 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 net asset value (“NAV”),
trading price, yield, total return and/or ability to meet its investment
objective. The following risks could affect the value of your investment in
the Fund:
•Associated
Risks of Pre-Combination SPACs.
“Pre-Combination” SPACs are SPACs that are either seeking a target for a
Combination or have not yet completed a Combination with an identified target.
Pre-Combination SPACs often have predetermined time frames to consummate a
Combination (typically, two years) or the SPAC will liquidate. A Pre-Combination
SPAC may extend the time to consummate a Combination. The Fund invests in equity
securities including common stock, rights and warrants of SPACs, which raise
cash to seek potential Combination opportunities. Unless and until a Combination
is completed, substantially all of the cash raised by a SPAC is deposited in a
trust account that generally invests its assets in U.S. government securities,
money market securities, and cash. Because SPACs have no operating history or
ongoing business other than seeking Combinations, the value of their securities
is particularly dependent on the ability of the entity’s management to identify
and complete a Combination that investors find attractive. There is no guarantee
that the SPACs in which the Fund invests will complete a Combination or that any
Combination that is completed will be attractive to investors. Some SPACs may
pursue Combinations only within certain industries or regions, which may affect
the volatility of their prices. A SPAC may restrict holders from redeeming more
than a certain percentage of the outstanding public shares to discourage holders
from accumulating large blocks of shares. While the terms of warrants issued by
SPACs will vary, to the extent warrants are exercisable prior to a business
combination, the holders of a SPAC’s common stock may be subject to dilution
which could reduce the holder’s proportional ownership in the SPAC.
•Cybersecurity
Risk.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause the Fund, the Adviser, the
Sub-Adviser and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of the Fund, the
Adviser, the Sub-Adviser or the Fund’s other service providers, market makers,
Authorized Participants (“APs”), the Fund’s primary listing exchange, or the
issuers of securities in which the Fund invests have the ability to disrupt and
negatively affect the Fund’s business operations, including the ability to
purchase and sell Fund Shares, potentially resulting in financial losses to the
Fund and its shareholders.
•Equity
Market Risk. The
trading prices of equity 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.
•ETF
Risks.
The Fund is an ETF and, as a result of its structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise
become unable to process creation and/or redemption orders and no other APs step
forward to
perform
these services, or (ii) market makers and/or liquidity providers exit the
business or significantly reduce their business activities and no other entities
step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
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 Risk. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant. Because
securities held by the Fund may trade on foreign exchanges that are closed when
the Fund’s primary listing exchange is open, the Fund is likely to experience
premiums or discounts greater than those of domestic ETFs.
◦Trading
Risk. Although
Shares are listed for trading on The Nasdaq Stock Market, LLC (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 the Shares.
•Liquidity
Risk. Liquidity
risk refers to the possibility that a Fund may not be able to sell or buy a
security or close out an investment contract at a favorable price or time.
Consequently, a Fund may have to accept a lesser price to sell a security, sell
other securities to raise cash, or give up an investment opportunity, any of
which could have a negative effect on a Fund’s performance. Infrequent trading
of securities also may lead to an increase in their price
volatility.
•Management
Risk. The
Fund is actively managed and its ability to achieve its investment objective is
dependent on the Sub-Adviser’s successful implementation of the Fund’s
investment strategies.
•Market
Capitalization Risk.
◦Mid-Capitalization
Investing Risk.
The securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large-capitalization stocks or the stock market
as a whole.
◦Small-Capitalization
Investing Risk.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
large- or mid-capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large- or mid-capitalization stocks or the
stock market as a whole. There is typically less publicly available information
concerning smaller-capitalization companies than for larger, more established
companies.
•Market
Risk. The
trading prices of 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. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
these factors, including the impact of the COVID-19 pandemic and related public
health issues, growth concerns in the U.S. and overseas, uncertainties regarding
interest rates, trade tensions and the threat of tariffs imposed by the U.S. and
other countries. In addition, local, regional or global events such as war,
including Russia’s invasion of Ukraine, acts of terrorism, spread of infectious
diseases or other public health issues, recessions, rising inflation, or other
events could have a significant negative impact on the Fund and its investments.
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. It is unknown how long circumstances related to the COVID-19 pandemic
will persist, whether they will reoccur in the future, whether efforts to
support the economy and financial markets will be successful, and what
additional implications may follow from the pandemic. The impact of these events
and other epidemics or pandemics in the future could adversely affect Fund
performance.
•New
Strategy Risk. The
Fund may not be successful in implementing its new investment strategy, and its
investment strategy may not be successful under all future market conditions,
either of which could result in the Fund being liquidated at some future time
without shareholder approval and/or at a time that may not be favorable for
certain shareholders. New strategies may not attract sufficient assets to
achieve investment, trading or other efficiencies.
•Non-Diversification
Risk.
Because the Fund is “non-diversified,” it may invest a greater percentage of its
assets in the securities of a single issuer or a lesser number of issuers than
if it was a diversified fund. As a result, the Fund may be more exposed to the
risks associated with and developments affecting an individual issuer or a
lesser number of issuers than a fund that invests more widely. This may increase
the Fund’s volatility and cause the performance of a relatively small number of
issuers to have a greater impact on the Fund’s performance.
•Portfolio
Turnover Risk. Because
the Fund may “turn over” some or all of its portfolio frequently, the Fund may
incur high levels of transaction costs from commissions or mark-ups in the
bid/offer spread. Higher portfolio turnover (e.g.,
in excess of 100% per year) may result in the Fund paying higher levels of
transaction costs and generating greater tax liabilities for shareholders.
•Temporary
Defensive Position Risk.
If the Fund takes a temporary defensive position, it may invest all or a large
portion of its assets in cash and/or cash equivalents. If the Fund takes a
temporary defensive position, it may not achieve its investment
objective.
•Warrants
and Rights Risk.
The Fund may receive warrants or rights in connection with purchasing equity
securities, specifically SPAC Units. Investments in warrants or rights are pure
speculation in that they have no voting rights, pay no dividends and have no
rights with respect to the assets of the corporation issuing them. They do not
represent ownership of the securities, but only the right to buy them. Warrants
and rights also are complex financial instruments. Their prices do not
necessarily move parallel to the prices of underlying securities and their
accounting treatment and valuation is subject to special considerations making
them more prone to errors than less complex financial instruments. For example,
determining whether warrants should be treated as equity or an asset or
liability of the SPAC entity depends not only on the specific terms of the
warrant contract, but also on the SPAC entity’s specific facts and
circumstances. Warrants and rights are also subject to the risk that the Fund
could lose the purchase value of the warrant if the warrant is not exercised or
sold prior to its expiration. They also involve the risk that the effective
price paid for the warrant or right added to the subscription price of the
related security may be greater than the value of the subscribed security’s
market price. If the Fund holds warrants or rights associated with a SPAC that
does not complete a business combination within the designated time period, the
warrants or rights held by the Fund will expire and lose all value.
Performance
The
Fund is new and therefore does not have a performance history for a full
calendar year. In the future, performance information for the Fund will be
presented in this section. Updated performance information is available on the
Fund’s website at www.horizonkinetics.com.
Portfolio
Management
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Adviser |
Horizon
Kinetics Asset Management LLC (the “Adviser”) |
Sub-Adviser |
Ryan
Heritage, LLP |
Portfolio
Managers |
Philip
Goldstein, Partner of the Sub-Adviser, Andrew Dakos, Partner of the
Sub-Adviser, and Rajeev Das, Principal of the Sub-Adviser, have been the
portfolio managers of the Fund since its inception in January,
2023 |
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 and/or a designated amount of U.S. cash.
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through a broker or dealer 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. The difference in the bid and
ask prices is 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.horizonkinetics.com.
Tax
Information
The
Fund’s distributions are generally taxable as ordinary income, qualified
dividend income, or capital gains (or a combination), unless your investment is
in an individual retirement account (“IRA”) or other tax-advantaged account.
Distributions on investments made through tax-deferred arrangements may be taxed
later upon withdrawal of assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
ADDITIONAL
INFORMATION ABOUT THE FUNDS
Investment
Objective
Each
Fund’s investment objective has been adopted as a non-fundamental investment
policy and may be changed by the Board of Trustees (the “Board”) of Listed Funds
Trust (the “Trust”) without shareholder approval upon written notice to
shareholders.
The
Medical ETF will concentrate its investments (i.e.,
hold more than 25% of its total assets) companies engaged in the medical
research, pharmaceutical and technology industries and related medical
technology industries, generally, with an emphasis toward companies engaged in
cancer research and drug development.
Principal
Investment Strategies
The
following information is in addition to, and should be read along with, the
description of each Fund’s principal investment strategies in each section
titled “Fund Summary—Principal Investment Strategies” above.
Each
Fund has adopted a policy to comply with Rule 35d-1 under the1940 Act. Each such
policy has been adopted as a non-fundamental investment policy and may be
changed without shareholder approval upon 60 days’ written notice to
shareholders.
The
Medical ETF
The
Medical ETF invests, under normal circumstances, at least 80% of its net assets
plus any borrowings for investment purposes in common stocks, convertible
securities, warrants, and other equity securities having the characteristics of
common stocks (such as ADRs, GDRs, and IDRs) of U.S. and foreign companies
engaged in medical research, pharmaceutical and medical technology industries,
and related technology industries, generally, with an emphasis toward companies
engaged in cancer research and drug development, such as pharmaceutical
development companies, surgical and medical instrument manufacturers and
developers, pharmaceutical manufacturers, and biotech and medical research
companies. These types of companies derive at least 50% of their revenue from
such activities. The Fund also may invest in other ETFs and purchase and write
options for hedging purposes and/or direct investment.
The
Adviser believes that favorable investment opportunities are available through
companies that are developing technology, products, and/or services for cancer
research and treatment and related medical activities. Accordingly, the Medical
ETF seeks to invest in the equity securities of companies whose research and
development efforts may result in higher stock values. Securities will be
selected by the Adviser from companies that are engaged in the medical industry
generally, including, among others, companies engaged in cancer research and
treatment, biopharmaceutical research and the development of medical instruments
for therapeutic purposes. These companies may be large, medium or small in size
if, in the Adviser’s opinion, the companies meet the Medical ETF’s investment
criteria. Such companies include, but are not limited to, the following:
•Pharmaceutical
Development:
Companies that develop drugs and medications for the treatment and prevention of
cancer and other disease.
•Surgical
and Medical Instrument Manufacturers and Developers:
Companies that produce, manufacture and develop the tools used by health care
providers in the delivery of medical care and procedures for the treatment of
cancer and other diseases.
•Pharmaceutical
Manufacturers:
Companies that primarily engage in the mass production of existing drugs and
medicines including drugs and medicines for the treatment of cancer and other
diseases.
•Biotech
& Medical Research: Companies
that primarily research and develop new methods and procedures in the provision
of health care related services for the treatment of cancer and other
diseases.
The
Medical ETF may invest up to 20% of its assets in high quality, U.S. short-term
debt securities and money market instruments to maintain liquidity. Some of
these short-term instruments include commercial paper, certificates of deposit,
demand and time deposits and banker’s acceptances, U.S. government securities
(i.e.,
U.S. Treasury obligations) and repurchase agreements.
The
SPAC ETF
The
SPAC ETF invests, under normal circumstances, at least 80% of the Fund’s net
assets, plus borrowings for investment purposes, in Pre-Combination SPACs,
together with the warrants or rights issued in connection with the IPO of
Pre-Combination SPACs.
The
SPAC ETF invests in units, stock, warrants, and other securities of special
purpose acquisition companies or similar special purpose entities that pool
funds to seek potential acquisition opportunities (“SPACs”). Unless and until a
Combination meeting the SPAC’s requirements is completed, a SPAC generally
deposits substantially all of the cash raised in its IPO (less a specified
amount to cover operating expenses) in a bank trust account which is generally
invested in U.S. Government securities, money market securities and cash. If an
acquisition that meets the requirements for the SPAC is not completed within a
pre-established period of time, the invested funds are returned to the entity’s
shareholders. In addition, just prior to completion of an acquisition,
shareholders of the SPAC can redeem their shares for a pro rata share of the
value of the trust account. Because SPACs have no operating history or ongoing
business other than seeking a Combination, the value of their securities can
vary on the perceived likelihood of management to identify and complete an
attractive acquisition. However, until a SPAC is liquidated or completes a
Combination, its common stock
is
unlikely to fall substantially below the per share value of the trust account.
Nonetheless, SPAC shares are subject to secondary market risk and may decline in
value if sold prior to deal completion or trust liquidation. If a Combination is
completed, the former SPAC’s shares and other securities will take on the same
risks as an equivalent investment in the acquired company. Some SPACs may pursue
acquisitions only within certain industries or regions, which may affect the
volatility of their prices.
Temporary
Defensive Positions
To
respond to adverse market, economic, political, or other conditions, a Fund may
invest up to 100% of its assets in a temporary defensive manner by holding all
or a substantial portion of its assets in cash, cash equivalents, or other high
quality short-term investments. Temporary defensive investments generally may
include short-term U.S. government securities, commercial paper, bank
obligations, repurchase agreements, money market fund shares, and other money
market instruments. The Adviser or Sub-Adviser also may invest in these types of
securities or hold cash while looking for suitable investment opportunities or
to maintain liquidity. In these circumstances, a Fund may be unable to achieve
its investment objective.
Principal
Investment Risks
An
investment in a Fund entails risks. A Fund could lose money, or its performance
could trail that of other investment alternatives. The following provides
additional information about each Fund’s principal risks. It is important that
investors closely review and understand these risks before making an investment
in a Fund. Each risk applies to each Fund unless otherwise specified. Just as in
each Fund’s summary section, the principal risks below 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 a Fund, regardless of the order in which it
appears.
•Associated
Risks of Investing in the Medical Industry (Medical
ETF only).
Medical
and pharmaceutical-related companies in general are subject to the rate of
change in technology, which is generally higher than that of other industries.
Similarly, cancer research-related industries use many products and services of
companies engaged in medical and pharmaceutical-related activities and are also
subject to relatively high risks of rapid obsolescence caused by progressive
scientific and technological advances. Medical research and development also is
subject to strict regulatory scrutiny and ongoing legislative action.
•Associated
Risks of Pre-Combination SPACs (SPAC
ETF only).
The
Fund invests in equity securities and rights and warrants of SPACs, which raise
assets to seek potential Combination opportunities. Unless and until a
Combination is completed, a SPAC generally invests its assets in U.S. government
securities, money market securities, and cash. If a Combination that meets the
requirements for the SPAC is not completed within a pre-established period of
time (e.g.,
18-24 months), the invested funds are returned to the entity’s shareholders. A
Pre-Combination SPAC may extend the time to consummate a Combination. Because
SPACs have no operating history or ongoing business other than seeking
Combinations, the value of their securities is particularly dependent on the
ability of the entity’s management to identify and complete a profitable
Combination. Public stockholders of SPACs may not be afforded a meaningful
opportunity to vote on a proposed initial Combination because certain
stockholders, including stockholders affiliated with the management of the SPAC,
may have sufficient voting power, and a financial incentive, to approve such a
transaction without support from public stockholders. As a result, a
Pre-Combination SPAC may complete a Combination even though a majority of its
public stockholders do not support such a Combination. There is no guarantee
that the SPACs in which the Fund invests will complete a Combination or that any
Combinations that are completed will be profitable. A SPAC may enter into a
Combination with affiliates of its sponsor which could create a stronger
incentive for the sponsor to approve the Combination. Some SPACs may pursue
Combinations only within certain industries or regions, which may increase the
volatility of their prices. A SPAC may restrict holders from redeeming more than
a certain percentage of the outstanding public shares in order to discourage
holders from accumulating large blocks of shares. Some SPACs may seek
shareholder approval for a Combination and might have different redemption terms
depending on whether the shareholder votes for, against, or abstains for the
approval of the proposed Combination. In addition, these securities, which are
typically traded in the over-the-counter market, may be considered illiquid
and/or be subject to restrictions on resale. SPACs may also encounter intense
competition from other entities having a similar business objective, such as
private investors or investment vehicles and other SPACs, competing for the same
Combination opportunities, which could make completing an attractive Combination
more difficult. While the terms of warrants issued by SPACs will vary, to the
extent warrants are exercisable prior to a business combination, the holders of
a SPAC’s common stock may be subject to dilution which could reduce the holder’s
proportional ownership in the SPAC.
•Below
Investment Grade Bonds Risk
(Medical
ETF only).
Securities
rated “BB+” or below by S&P or “Ba1” or below by Moody’s are known as high
yield securities and are commonly referred to as “junk bonds.” Such securities
entail greater price volatility and credit and interest rate risk than
investment-grade securities. Analysis of the creditworthiness of high yield
issuers is more complex than for higher-rated securities, making it more
difficult for the Adviser to accurately predict risk. There is a greater risk
with high yield fixed income securities that an issuer will not be able to make
principal and interest payments when due. If the Fund pursues missed payments,
there is a risk that Fund expenses could increase. In addition, lower-rated
securities may not trade as often and may be less liquid than higher-rated
securities, especially during periods of economic uncertainty or change. As a
result of all of these factors, these securities are generally considered to be
speculative.
•Concentration
Risk (Medical
ETF only).
Because the Fund’s assets will be concentrated in an industry or group of
industries, the Fund is subject to loss due to adverse occurrences that may
affect that industry or group of industries. To the extent the Fund concentrates
in the securities of issuers in a particular industry, the Fund may face more
risks than if it were diversified more broadly over numerous industries. Such
industry-based risks, any of which may adversely affect the Fund may include,
but are not limited to, the following: general economic conditions or cyclical
market patterns that could negatively affect supply and demand in a particular
industry; competition for resources, adverse labor relations, political or world
events; obsolescence of technologies; and increased competition or new product
introductions that may affect the profitability or viability of companies in an
industry. In addition, at times, an industry may be out of favor and
underperform other industries or the market as a whole. As a result of the
Fund’s concentration in companies in the medical research, pharmaceutical and
technology industries and related medical technology industries, the Fund is
subject to the following industry risks:
◦Medical
Research, Pharmaceutical and Technology Industries Risk.
Companies in the medical research, pharmaceutical and technology industries, as
traditionally defined, spend heavily on research and development, and their
products or services may not prove commercially successful or may become
obsolete quickly. These industries are subject to a significant amount of
governmental regulation, and changes in governmental policies and the need for
regulatory approvals may have a material adverse effect on these industries.
This regulation requires significant investments in time and funds to maintain
compliance. The process of obtaining government approvals can be long and
costly, and the process is accompanied by significant uncertainty. Companies in
which the Fund may invest in may not currently have any marketed or approved
products and may never have marketed or approved products; companies may not be
able to maintain legal and regulatory compliance, resulting in regulatory and/or
legal enforcement actions; companies may not be able to maintain any regulatory
approvals that they obtain for their products or their products may not be
accepted by patients or providers. In addition, unanticipated problems often
arise in connection with the development and marketing of new products, and many
such efforts are ultimately unsuccessful. Companies in these sectors may not be
able to obtain adequate pricing and reimbursement levels for any marketed
products, impeding their ability to generate a profit. Companies may also have
difficulty manufacturing, marketing, and distributing their products, or may
have regulatory authority-imposed restrictions on their ability to do so.
Companies may further face product liability and other actions should their
products be less safe or efficacious than believed, should they be deemed to
have engaged in misleading practices, or should a person that received their
product otherwise experience harm or injury. Moreover, companies in the
pharmaceutical industries are subject to competitive forces that may make it
difficult to raise prices and, in fact, may result in price discounting and
rebating. The profitability of some companies in these industries may be
dependent on a relatively limited number of products. In addition, their
products can become obsolete due to industry innovation, changes in
technologies, or other market developments. Pharmaceutical products are subject
to government approvals, regulation, and reimbursement rates. Companies in the
medical research, pharmaceutical and technology industries are subject to risks
of new technologies and competitive pressures and are heavily dependent on
patents and intellectual property rights. The loss or impairment of these rights
may adversely affect the profitability of these companies.
•Convertible
Securities Risk (Medical
ETF only).
Convertible securities are subject to the risks affecting both equity and fixed
income securities, including market, credit, liquidity and interest rate
risk.
•Currency
Exchange Rate Risk
(Medical
ETF only).
Changes in currency exchange rates and the relative value of non-U.S. currencies
will affect the value of the Fund’s investments and the value of your Shares.
Because the Fund’s NAV is determined on the basis of U.S. dollars, the U.S.
dollar value of your investment in the Fund may go down if the value of the
local currency of the non-U.S. markets in which the Fund invests depreciates
against the U.S. dollar. This is true even if the local currency value of
securities in the Fund’s holdings goes up. Conversely, the dollar value of your
investment in the Fund may go up if the value of the local currency appreciates
against the U.S. dollar. The value of the U.S. dollar measured against other
currencies is influenced by a variety of factors. These factors include:
national debt levels and trade deficits, changes in balances of payments and
trade, domestic and foreign interest and inflation rates, global or regional
political, economic or financial events, monetary policies of governments,
actual or potential government intervention, and global energy prices. Political
instability, the possibility of government intervention and restrictive or
opaque business and investment policies also may reduce the value of a country’s
currency. Government monetary policies and the buying or selling of currency by
a country’s government also may influence exchange rates. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the value of an investment in the Fund may change quickly and without
warning, and you may lose money.
•Cybersecurity
Risk.
With the increased use of technologies such as the Internet and the dependence
on computer systems to perform business and operational functions, funds (such
as a Fund) and their service providers may be prone to operational and
information security risks resulting from cyber-attacks and/or technological
malfunctions. In general, cyber-attacks are deliberate, but unintentional events
may have similar effects. Cyber-attacks include, among others, stealing or
corrupting data maintained online or digitally, preventing legitimate users from
accessing information or services on a website, releasing confidential
information without authorization, and causing operational disruption.
Cybersecurity incidents may allow an unauthorized party to gain access to Fund
assets or proprietary information, or cause a Fund, the Adviser, the Sub-Adviser
and/or other service providers (including custodians and financial
intermediaries) to suffer data breaches or data corruption. Additionally,
cybersecurity failures or breaches of the electronic systems of a Fund, the
Adviser, the Sub-Adviser or a Fund’s other service providers, market makers,
APs, a Fund’s primary listing or the issuers of securities in which such Fund
invests have the ability to
disrupt
and negatively affect the Fund’s business operations, including the ability to
purchase and sell Fund Shares, potentially resulting in financial losses to the
Fund and its shareholders. For instance, cyber-attacks or technical malfunctions
may interfere with the processing of shareholder or other transactions, affect a
Fund’s ability to calculate its NAV, cause the release of private shareholder
information or confidential Fund information, impede trading, cause reputational
damage, and subject a Fund to regulatory fines, penalties or financial losses,
reimbursement or other compensation costs, and additional compliance costs.
Cyber-attacks or technical malfunctions may render records of Fund assets and
transactions, shareholder ownership of Fund Shares, and other data integral to
the functioning of a Fund inaccessible or inaccurate or incomplete. A Fund also
may incur substantial costs for cybersecurity risk management to prevent cyber
incidents in the future. A Fund and its respective shareholders could be
negatively impacted as a result.
•Depositary
Receipt Risk (Medical
ETF only).
The Fund may hold the securities of non-U.S. companies in the form of depository
receipts, including ADRs, GDRs, and IDRs. ADRs are negotiable certificates
issued by a U.S. financial institution that represent a specified number of
shares in a foreign stock and trade on a U.S. national securities exchange, such
as the New York Stock Exchange (“NYSE”). Sponsored ADRs are issued with the
support of the issuer of the foreign stock underlying the ADRs and carry all of
the rights of common shares, including voting rights. GDRs are similar to ADRs,
but may be issued in bearer form and are typically offered for sale globally and
held by a foreign branch of an international bank. IDRs are a negotiable
certificate issued by a bank. It represents ownership of a number of shares of
stock in a foreign company that the bank holds in trust. The underlying issuers
of certain depositary receipts, particularly unsponsored or unregistered
depositary receipts, are under no obligation to distribute shareholder
communications to the holders of such receipts, or to pass through to them any
voting rights with respect to the deposited securities. Issuers of unsponsored
depositary receipts are not contractually obligated to disclose material
information in the U.S. and, therefore, such information may not correlate to
the market value of the unsponsored depositary receipt. The Underlying Shares in
the Fund’s portfolio are usually denominated or quoted in currencies other than
the U.S. Dollar. As a result, changes in foreign currency exchange rates may
affect the value of the Fund’s portfolio. In addition, because the Underlying
Shares trade on foreign exchanges at times when the U.S. markets are not open
for trading, the value of the Underlying Shares may change materially at times
when the U.S. markets are not open for trading, regardless of whether there is
an active U.S. market for Shares.
•Derivatives
Risk (Medical
ETF only).
The Fund may invest in derivatives, including in particular options contracts,
to pursue its investment objective. The use of derivatives may expose the Fund
to risks in addition to and greater than those associated with investing
directly in the instruments underlying those derivatives, including risks
relating to leverage, correlation (imperfect correlations with underlying
instruments or the Fund’s other portfolio holdings), high price volatility, lack
of availability, counterparty credit, liquidity, valuation and legal
restrictions. The use of derivatives also may expose the Fund to the performance
of securities that the Fund does not own. To the extent the Fund engages in
derivatives in an attempt to hedge certain exposures or risks, there can be no
assurance that the Fund’s hedging investments or transactions will be effective.
In addition, hedging investments or transactions involve costs and may reduce
gains or result in losses, which may adversely affect the Fund. The skills
necessary to successfully execute derivatives strategies may be different from
those for more traditional portfolio management techniques, and if the Adviser
is incorrect about its expectations of market conditions, the use of derivatives
also could result in a loss, which in some cases may be unlimited. Use of
derivatives also may cause the Fund to be subject to additional regulations,
which may generate additional Fund expenses. These practices also entail
transactional expenses and may cause the Fund to realize higher amounts of
short-term capital gains than if the Fund had not engaged in such transactions.
Certain of the derivatives in which the Fund invests may trade (and privately
negotiated) in the OTC market. OTC derivatives are complex and often valued
subjectively, which exposes the Fund to heightened liquidity, mispricing and
valuation risks. Improper valuations can result in increased cash payment
requirements to counterparties or a loss of value to the Fund. In addition, OTC
derivative instruments are often highly customized and tailored to meet the
needs of the Fund and its trading counterparties. If a derivative transaction is
particularly large or if the relevant market is illiquid, it may not be possible
to initiate a transaction or liquidate a position at an advantageous time or
price. As a result and similar to other privately negotiated contracts, the Fund
is subject to counterparty credit risk with respect to such derivative
contracts. Certain derivatives are subject to mandatory exchange trading and/or
clearing, which exposes the Fund to the credit risk of the clearing broker or
clearinghouse. While exchange trading and central clearing are intended to
reduce counterparty credit risk and to increase liquidity, they do not make
derivatives transactions risk-free.
◦Options
Risk.
Selling (writing) and buying options are speculative activities and entail
greater than ordinary investment risks. A Fund’s use of put options can lead to
losses because of adverse movements in the price or value of the underlying
asset, which may be magnified by certain features of the options. When selling a
put option, a Fund will receive a premium; however, this premium may not be
enough to offset a loss incurred by such Fund if the price of the underlying
asset is below the strike price by an amount equal to or greater than the
premium. Purchasing of put options involves the payment of premiums, which may
adversely affect a Fund’s performance. Purchasing a put option gives the
purchaser of the option the right to sell a specified quantity of an underlying
asset at a fixed exercise price over a defined period of time. Purchased put
options may expire worthless resulting in a Fund’s loss of the premium it paid
for the option.
The
value of an option may be adversely affected if the market for the option
becomes less liquid or smaller, and will be affected by changes in the value or
yield of the option’s underlying asset, an increase in interest rates, a change
in the actual
or
perceived volatility of the stock market or the underlying asset and the
remaining time to expiration. Additionally, the value of an option does not
increase or decrease at the same rate as the underlying asset. A Fund’s use of
options may reduce such Fund’s ability to profit from increases in the value of
the underlying asset. If the price of the underlying asset of an option is above
the strike price of a written put option, the value of the option, and
consequently of a Fund, may decline significantly more than if such Fund
invested directly in the underlying asset instead of using options. When the
Fund sells an option, it gains the amount of the premium it receives, but also
incurs a liability representing the value of the option it has sold until the
option is either exercised and finishes “in the money,” meaning it has value and
can be sold, or the option expires worthless, or the expiration of the option is
“rolled,” or extended forward. The value of the options in which the Fund
invests is based partly on the volatility used by market participants to price
such options (i.e.,
implied volatility). Accordingly, increases in the implied volatility of such
options will cause the value of such options to increase (even if the prices of
the options’ underlying stocks do not change), which will result in a
corresponding increase in the liabilities of the Fund under such options and
thus decrease the Fund’s NAV.
The
Fund is subject to the risk that a change in U.S. law and related regulations
will affect the way the Fund operates, increase the particular costs of the
Fund’s operation and/or change the competitive landscape. The SEC recently
adopted and implemented a new rule governing a fund’s use of derivatives. The
new rule, among other things, generally requires a fund to adopt a derivatives
risk management program, appoint a derivatives risk manager to oversee the
program and comply with an outer limit on fund leverage risk based on value at
risk, or “VaR.” The new rule has significantly changed the regulatory framework
applicable to the Fund’s use of derivatives, including by replacing the prior
asset segregation regulatory framework in its entirety. Complying with the new
rule may adversely affect the Fund’s performance and may increase costs related
to the Fund’s use of derivatives.
•Equity
Market Risk.
Common stocks are susceptible to general stock market fluctuations and to
volatile increases and decreases in value as market confidence in and
perceptions of their issuers change. These investor perceptions are based on
various and unpredictable factors including: expectations regarding government,
economic, monetary and fiscal policies; inflation and interest rates; economic
expansion or contraction; and global or regional political, economic and banking
crises. If you held common stock, or common stock equivalents, of any given
issuer, you would generally be exposed to greater risk than if you held
preferred stocks and debt obligations of the issuer because common stockholders,
or holders of equivalent interests, generally have inferior rights to receive
payments from issuers in comparison with the rights of preferred stockholders,
bondholders, and other creditors of such issuers.
The
respiratory illness COVID-19 has spread globally for over two years, resulting
in a global pandemic and major disruption to economies and markets around the
world, including the United States. During this time, financial markets have
experienced extreme volatility and severe losses, and trading in many
instruments has been disrupted or suspended. Liquidity for many instruments has
been greatly reduced for periods of time. Some sectors of the economy and
individual issuers have experienced particularly large losses. Governments and
central banks, including the Federal Reserve in the U.S., have taken
extraordinary and unprecedented actions to support local and global economies
and the financial markets. The impact of these measures, and whether they will
be effective to mitigate the economic and market disruption, will not be known
for some time. However, the rapid COVID-19 vaccination rollout in the United
States and certain other developed countries, coupled with the passage of
stimulus programs in the U.S. and abroad, have resulted in the re-opening of
businesses, a reduction in quarantine and masking requirements, increased
consumer demand, and the resumption of in-person schooling, travel and events.
As a result, many global economies, including the U.S. economy, have either
re-opened fully or decreased significantly the number of public safety measures
in place that are designed to mitigate virus transmission. Despite these
positive trends, the prevalence of new COVID-19 variants, a failure to achieve
herd immunity, or other unforeseen circumstances may result in the continued
spread of the virus throughout unvaccinated populations or a resurgence in
infections among vaccinated individuals. As a result, it remains unclear if
recent positive trends will continue in developed markets and whether such
trends will spread world-wide to countries with limited access to effective
vaccines that are still experiencing rising COVID-19 hospitalizations and
deaths.
•ETF
Risks.
Each Fund is an ETF, and, as a result of the structure, is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk.
A 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. Shares may trade at a material discount to NAV and
possibly face delisting if either: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares Risk.
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 also will incur the cost of
the difference between the price at which an investor is willing to buy Shares
(the “bid” price) and the price at which an investor is willing to sell Shares
(the “ask” price). This difference in bid and ask prices is often referred to as
the “spread” or “bid/ask spread.” The bid/ask spread varies over time for Shares
based on trading volume and market liquidity, and 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 a Fund, asset swings in a 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 Risk.
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 a 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 or 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.
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 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.
Because securities held by a Fund may trade on foreign exchanges that are closed
when such Fund’s primary listing exchange is open, such Fund is likely to
experience premiums or discounts greater than those of domestic ETFs.
◦Trading
Risk.
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 a Fund’s underlying
portfolio holdings, which can be significantly less liquid than Shares.
•Fixed
Income Risk
(Medical
ETF only).
Current
market conditions and the actions of governmental authorities and regulators in
response to COVID-19 and its far-reaching effects present heightened risks to
the fixed income market generally. Such risks could be further heightened if
such market conditions become more volatile or the governmental and regulatory
actions are unexpectedly or suddenly reversed or are ineffective in achieving
their desired outcomes. In addition, the current environment is exposing
fixed-income and debt markets to significant volatility and reduced liquidity
for Fund investments.
◦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 at lower interest rates, resulting in a
decline in the Fund’s income.
◦Credit
Risk.
Debt issuers and other counterparties may not honor their obligations or may
have their debt downgraded by ratings agencies. This risk may be especially
acute with respect to high yield securities, whose issuers are particularly
susceptible to failure to meet repayment obligations principal under current
conditions. An issuer may suffer adverse changes in its financial condition or
be adversely affected by economic, political or social conditions that could
lower the credit quality (or the market’s perception of the credit quality) of a
security, leading to greater volatility in the price of the security and the
value of the Fund. A change in the credit quality rating of a security can
affect its liquidity and make it more difficult for the Fund to sell. Although
credit quality may not accurately reflect the true credit risk of a security, a
change in the credit quality rating of a security or an issuer can have a rapid,
adverse effect on the instrument’s liquidity and make it more difficult for the
Fund to sell at an advantageous price or time. The risk of the occurrence of
these types of events is especially heightened under current conditions. Any
applicable limitation on the credit quality of a security in which the Fund may
invest is applied at the time such Fund purchases the security.
Credit
quality is a measure of the issuer’s expected ability to make all required
interest and principal payments in a timely manner. An issuer with the highest
credit rating has a very strong capacity with respect to making all payments. An
issuer with the second highest credit rating has a strong capacity to make all
payments, but the degree of safety is somewhat less. An issuer with the lowest
credit quality rating may be in default or have extremely poor prospects of
making timely payment of interest and principal. Investment grade securities are
fixed-income securities that have been determined by a nationally recognized
statistical rating organization to have a medium to high probability of being
paid (although there is always a risk of default), or which, if unrated, have
been determined by the Adviser or Sub-Adviser to be of comparable quality. If
nationally recognized statistical rating organizations assign different ratings
to the same security, the Fund will use the higher rating for purposes of
determining the security’s credit quality.
◦Extension
Risk.
During periods of rising interest rates, certain debt obligations will be paid
off substantially more slowly than originally anticipated and the value of those
securities may fall sharply, resulting in a decline in the Fund’s income and
potentially in the value of the Fund’s investments. During periods when credit
spreads are increasing, certain CLO debt tranches may be paid off substantially
more slowly than originally anticipated and the value of those securities may
fall sharply, resulting in a decline in the Fund’s income and potentially in the
value of the Fund’s investments.
◦Interest
Rate Risk.
An increase in interest rates may cause the value of fixed-income securities
held by the Fund to decline. The Fund may be subject to a greater risk of rising
interest rates due to the recent historically low rates and the effect of
potential government fiscal policy initiatives and resulting market reaction to
those initiatives. Longer term fixed income instruments and zero coupon bonds
are generally more sensitive to interest rate changes than shorter-term fixed
income instruments. Generally, the longer the average maturity of the fixed
income investments in the Fund, the more such Fund’s share price will fluctuate
in response to interest rate changes. If an issuer calls or redeems an
investment during a time of declining interest rates, the Fund might have to
reinvest the proceeds in an investment offering a lower yield, and therefore
might not benefit from any increase in value as a result of declining interest
rates. Securities with floating interest rates, such as syndicated bank loans,
generally are less sensitive to interest rate changes, but may decline in value
if their interest rates do not rise as much or as fast as interest rates in
general. Changes in government or central bank policy, including changes in tax
policy or changes in a central bank’s implementation of specific policy goals,
may have a substantial impact on interest rates, and could have an adverse
effect on prices for fixed income securities and on the performance of the Fund.
In particular, interest rates in the U.S. are at or near historically low levels
and as a result, fixed income securities markets may experience heightened
levels of interest rate risk. Any unexpected or sudden reversal of the fiscal
policy underlying current interest rate levels could adversely affect the value
of the Fund. There can be no guarantee that any particular government or central
bank policy will be continued, discontinued or changed, nor that any such policy
will have the desired effect on interest rates.
There
is a risk that interest rates across the financial system may change, sometimes
unpredictably, in response to a variety of factors, such as central bank
monetary policies, inflation rates and general economic conditions. Very low or
negative interest rates may magnify the Fund’s susceptibility to interest rate
risk and diminish yield and performance (e.g.,
during periods of very low or negative interest rates, the Fund may be unable to
maintain positive returns). Changes in fixed-income or related market
conditions, including the potential for changes to interest rates and negative
interest rates, may expose fixed-income or related markets to heightened
volatility and reduced liquidity for Fund investments, which may be difficult to
sell at favorable times or prices, causing the value of the Fund’s investments
and NAV per share to decline. A rise in general interest rates also may result
in increased redemptions from the Fund. Very low, negative or changing interest
rates also may have unpredictable effects on securities markets in general,
directly or indirectly affecting the Fund’s investments, yield and
performance.
◦Income
Risk.
The Fund’s income may decline if interest rates fall. This decline in income can
occur because most of the debt instruments held by the Fund will have floating
or variable interest rates.
•Foreign
Securities Risk (Medical
ETF only).
Investments in non-U.S. securities involve certain risks that may not be present
with investments in U.S. securities. For example, investments in non-U.S.
securities may be subject to risk of loss due to foreign currency fluctuations
or to political or economic instability. There may be less information publicly
available about a non-U.S. issuer than a U.S. issuer. Non-U.S. issuers may be
subject to different accounting, auditing, financial reporting and investor
protection standards than U.S. issuers. Investments in non-U.S. securities may
be subject to withholding or other taxes and may be subject to additional
trading, settlement, custodial, and operational risks. With respect to certain
countries, there is the possibility of government intervention and expropriation
or nationalization of assets. Because legal systems differ, there is also the
possibility that it will be difficult to obtain or enforce legal judgments in
certain countries. Since foreign exchanges may be open on days when the Fund
does not price its shares, the value of the securities in the Fund’s portfolio
may change on days when shareholders will not be able to purchase or sell the
Fund’s shares. Conversely, Shares may trade on days when foreign exchanges are
close. Each of these factors can make investments in the Fund more volatile and
potentially less liquid than other types of investments.
•Liquidity
Risk. Liquidity
risk refers to the possibility that a Fund may not be able to sell or buy a
security or close out an investment contract at a favorable price or time.
Consequently, a Fund may have to accept a lesser price to sell a security, sell
other securities to raise cash, or give up an investment opportunity, any of
which could have a negative effect on a Fund’s performance. Infrequent trading
of securities also may lead to an increase in their price volatility.
In
addition, during periods of reduced market liquidity or in the absence of
readily available market quotations for particular investments in a Fund’s
portfolio, the ability of a Fund to assign an accurate daily value to these
investments may be difficult and the Adviser or Sub-Adviser may be required to
fair value the investments. Fair value determinations are inherently subjective
and reflect good faith judgments based on available information. Accordingly,
there can be no assurance that the determination of a security’s fair value in
accordance with a Fund’s valuation procedures will in fact approximate the price
at which such Fund could sell that security at that time (i.e.,
the sale price could differ, sometimes significantly, from the Fund’s last
valuation for the security). Investors who purchase or redeem shares of a Fund
on days when such Fund is holding fair valued securities may receive fewer or
more shares or lower or higher redemption proceeds than they would have received
if the Fund had not fair
valued
the securities or had used a different valuation methodology. These risks may be
magnified in a rising interest rate environment and if a Fund holds a
significant percentage of fair valued or otherwise difficult to value
securities, such Fund may be particularly susceptible to the risks associated
with valuation.
Liquidity
risk also refers to the risk of unusually high redemption requests, redemption
requests by certain large shareholders such as institutional investors or asset
allocators, or other unusual market conditions that may make it difficult for a
Fund to sell investments within the allowable time period to meet redemptions.
Meeting such redemption requests could require a Fund to sell securities at
reduced prices or under unfavorable conditions or access additional means of
liquidity, which would reduce the value of such Fund. This risk is especially
acute under current market conditions.
•Management
Risk. Each
Fund is actively managed and may not meet its investment objective based on the
Adviser’s or Sub-Adviser’s success or failure to implement investment strategies
for the Fund. The Adviser’s or Sub-Adviser’s evaluations and assumptions
regarding issuers, securities, and other factors may not successfully achieve a
Fund’s investment objective given actual market conditions.
•Market
Capitalization Risk.
◦Mid-Capitalization
Investing Risk.
The
securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies. The securities of mid-capitalization companies
generally trade in lower volumes and are subject to greater and more
unpredictable price changes than large-capitalization stocks or the stock market
as a whole. Some mid-capitalization companies have limited product lines,
markets, financial resources, and management personnel and tend to concentrate
on fewer geographical markets relative to large-capitalization companies.
◦Small-Capitalization
Investing Risk.
The securities of small-capitalization companies may be more vulnerable to
adverse issuer, market, political, or economic developments than securities of
larger capitalization companies. The securities of small-capitalization
companies generally trade in lower volumes and are subject to greater and more
unpredictable price changes than larger capitalization stocks or the stock
market as a whole. Some small-capitalization companies have limited product
lines, markets, and financial and managerial resources and tend to concentrate
on fewer geographical markets relative to larger capitalization companies. There
is typically less publicly available information concerning
smaller-capitalization companies than for larger, more established companies.
Small-capitalization companies also may be particularly sensitive to changes in
interest rates, government regulation, borrowing costs and earnings.
•Market
Risk. The
trading prices of 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. A 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. U.S. and international markets have
experienced significant periods of volatility in recent years due to a number of
economic, political and global macro factors, including public health issues,
growth concerns in the U.S. and overseas, uncertainties regarding interest
rates, trade tensions and the threat of tariffs imposed by the U.S. and other
countries. In addition, local, regional or global events such as war, including
Russia’s invasion of Ukraine, acts of terrorism, spread of infectious diseases
or other public health issues, recessions, rising inflation, or other events
could have a significant negative impact on the performance of the Fund and its
investments. 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, which could have an adverse effect on a Fund.
The
COVID-19 pandemic has significantly impacted economies and markets around the
world, including the United States. The pandemic has resulted in a wide range of
social and economic disruptions, including closed borders, voluntary or
compelled quarantines of large populations, stressed healthcare systems, reduced
or prohibited domestic or international travel, supply chain disruptions, and
so-called “stay-at-home” orders throughout much of the United States and many
other countries. Financial markets have experienced extreme volatility and
severe losses, and trading in many instruments has been disrupted. Some sectors
of the economy and individual issuers have experienced particularly large
losses. Such disruptions may continue for an extended period of time or reoccur
in the future to a similar or greater extent. Liquidity for many instruments has
been greatly reduced for periods of time. In response to these disruptions, the
U.S. government and the Federal Reserve have taken extraordinary actions to
support the domestic economy and financial markets. It is unknown how long
circumstances related to the COVID-19 pandemic will persist, whether they will
reoccur in the future, whether efforts to support the economy and financial
markets will be successful, and what additional implications may follow from the
pandemic. The impact of these events and other epidemics or pandemics in the
future could adversely affect Fund performance.
•New
Strategy Risk (SPAC
ETF only).
The
Fund may not be successful in implementing its new investment strategy, and its
investment strategy may not be successful under all future market conditions,
either of which could result in the Fund being liquidated at some future time
without shareholder approval and/or at a time that may not be favorable for
certain shareholders. New strategies may not attract sufficient assets to
achieve investment, trading or other efficiencies.
•Non-Diversification
Risk. Because
a Fund is “non-diversified,” it may invest a greater percentage of its assets in
the securities of a single issuer or a lesser number of issuers than if it was a
diversified fund. As a result, a decline in the value of an investment in a
single issuer or a lesser number of issuers could cause a Fund’s overall value
to decline to a greater degree than if such Fund held a more diversified
portfolio. This may increase a Fund’s volatility and have a greater impact on
such Fund’s performance.
•Other
Investment Companies Risk (Medical
ETF only).
A Fund may invest in shares of other investment companies, such as ETFs. The
risks of investment in these securities typically reflect the risks of the types
of instruments in which the investment company invests. When a Fund invests in
investment company securities, shareholders of such Fund bear indirectly their
proportionate share of their fees and expenses, as well as their share of such
Fund’s fees and expenses. As a result, an investment by a Fund in an investment
company could cause such Fund’s operating expenses (taking into account indirect
expenses such as the fees and expenses of the investment company) to be higher
and, in turn, performance to be lower than if it were to invest directly in the
instruments underlying the investment company. Investments in ETFs are also
subject to the “ETF Risks” described above.
•Portfolio
Turnover Risk (SPAC
ETF only).
Because
the Fund may “turn over” some or all of its options as frequently as monthly,
the Fund may incur high levels of transaction costs from commissions or mark-ups
in the bid/offer spread. Higher portfolio turnover may result in the Fund paying
higher levels of transaction costs and generating greater tax liabilities for
shareholders. Portfolio turnover risk may cause the Fund’s performance to be
less than you expect. While the turnover of the warrants is not deemed
“portfolio turnover” for accounting purposes, the economic impact to the Fund is
similar to what could occur if the Fund experienced high portfolio turnover
(e.g.,
in excess of 100% per year).
•Sector
Risk (Medical
ETF only).
A Fund’s investing approach may result in an emphasis on certain sectors or
sub-sectors of the market at any given time. To the extent a Fund invests more
heavily in one sector or sub-sector of the market, it thereby presents a more
concentrated risk and its performance will be especially sensitive to
developments that significantly affect those sectors or sub-sectors. In
addition, the value of Shares may change at different rates compared to the
value of shares of a fund with investments in a more diversified mix of sectors
and industries. An individual sector or sub-sector of the market may have
above-average performance during particular periods, but may also move up and
down more than the broader market. The several industries that constitute a
sector may all react in the same way to economic, political or regulatory
events. A Fund’s performance could also be affected if the sectors or
sub-sectors do not perform as expected. Alternatively, the lack of exposure to
one or more sectors or sub-sectors may adversely affect
performance.
◦Manufacturing
Sector.
Companies
in the Manufacturing Sector can be significantly affected by supply and demand
both for their specific product or service and for Manufacturing Sector products
in general; a decline in demand for products due to rapid technological
developments and frequent new product introduction; government regulation, world
events and economic conditions; and the risks associated with potential
environmental damage and product liability claims.
•Tax
Risk (Medical
ETF only).
The writing of call options by a Fund may significantly reduce or eliminate its
ability to make distributions eligible to be treated as qualified dividend
income. Covered call options may also be subject to the federal tax rules
applicable to straddles under the Code. If positions held by a Fund were treated
as “straddles” for federal income tax purposes, or a Fund’s risk of loss with
respect to a position was otherwise diminished as set forth in Treasury
regulations, dividends on stocks that are a part of such positions would not
constitute qualified dividend income subject to such favorable income tax
treatment in the hands of non-corporate shareholders or eligible for the
dividends received deduction for corporate shareholders. In addition, generally,
straddles are subject to certain rules that may affect the amount, character and
timing of a Fund’s recognition of gains and losses with respect to straddle
positions by requiring, among other things, that: (1) any loss realized on
disposition of one position of a straddle may not be recognized to the extent
that a Fund has unrealized gains with respect to the other position in such
straddle; (2) a Fund’s holding period in straddle positions be suspended while
the straddle exists (possibly resulting in a gain being treated as short-term
capital gain rather than long-term capital gain); (3) the losses recognized with
respect to certain straddle positions that are part of a mixed straddle and that
are not subject to Section 1256 of the Internal Revenue Code be treated as 60%
long-term and 40% short-term capital loss; (4) losses recognized with respect to
certain straddle positions that would otherwise constitute short-term capital
losses be treated as long-term capital losses; and (5) the deduction of interest
and carrying charges attributable to certain straddle positions may be deferred.
•Warrants
and Rights Risk
(SPAC
ETF only).
The Fund may receive warrants or rights in connection with purchasing equity
securities, specifically SPAC Units. Investments in warrants or rights are pure
speculation in that they have no voting rights, pay no dividends and have no
rights with respect to the assets of the corporation issuing them. They do not
represent ownership of the securities, but only the right to buy them. The
prices of warrants or rights do not necessarily move parallel to the prices of
underlying securities. Warrants or rights involve the risk that the Fund could
lose the purchase value of the warrant if the warrant is not exercised or sold
prior to its expiration. They also involve the risk that the effective price
paid for the warrant or right added to the subscription price of the related
security may be greater than the value of the subscribed security’s market
price. If the Fund holds warrants or rights associated with a SPAC that does not
complete a business combination within the designated time period, the warrants
or rights held by the Fund will expire and lose all value.
PORTFOLIO
HOLDINGS INFORMATION
Information
about each Fund’s daily portfolio holdings is available at
www.horizonkinetics.com. A complete description of the Funds’ policies and
procedures with respect to the disclosure of the Funds’ portfolio holdings is
available in the Funds’ Statement of Additional Information (the “SAI”).
MANAGEMENT
Investment
Adviser
Horizon
Kinetics Asset Management LLC, located at 470 Park Avenue South, 3rd Floor
South, New York, New York 10016, serves as the investment adviser for the Funds.
The Adviser is subject to the oversight of the Board, provides an investment
management program for each Fund, and manages the day-to-day investment of the
Medical ETF’s assets. The Adviser also arranges for transfer agency, custody,
fund administration, distribution and all other services necessary for the Funds
to operate. The Adviser is an SEC-registered investment adviser that offers a
broad range of portfolio management, portfolio advisory and other business
activities.
The
Adviser continuously reviews, supervises, and administers each Fund’s investment
program. In particular, the Adviser provides investment and operational
oversight of the Sub-Adviser for the SPAC ETF. The Board supervises the Adviser
and establishes policies that the Adviser must follow in its day-to-day
management activities.
For
the services it provides to the Funds, the Adviser is entitled to a unified
management fee, which is calculated daily and paid monthly, at an annual rate
based on each Fund’s average daily net assets as set forth in the table below.
|
|
|
|
|
|
Fund |
Management
Fee |
Horizon
Kinetics Medical ETF |
0.85% |
Horizon
Kinetics SPAC Active ETF |
0.85% |
Pursuant
to an investment advisory agreement between the Trust, on behalf of each Fund,
and the Adviser (the “Advisory Agreement”), the Adviser has agreed to pay all
expenses of the Funds except the fee paid to the Adviser under the Advisory
Agreement, interest charges on any borrowings, dividends, and other expenses on
securities sold short, taxes, brokerage commissions and other expenses incurred
in placing orders for the purchase and sale of securities and other investment
instruments, acquired fund fees and expenses, accrued deferred tax liability,
extraordinary expenses, and distribution (12b-1) fees and expenses (if any). The
Adviser, in turn, compensates the Sub-Adviser from the management fee it
receives.
The
basis for the Board of Trustees’ approval of the Advisory Agreement for each
Fund will be available in the Funds’ first Semi-Annual Report to
Shareholders.
Manager
of Managers Structure
The
Fund and the Adviser intend to apply for exemptive relief from the SEC
permitting the Adviser (subject to certain conditions and the approval of the
Board to change or select new sub-advisers without obtaining shareholder
approval. The relief would also permit the Adviser to materially amend the terms
of agreements with a sub-adviser (including an increase in the fee paid by the
Adviser to the sub-adviser (and not paid by the Fund)) or to continue the
employment of a sub-adviser after an event that would otherwise cause the
automatic termination of services with Board approval, but without shareholder
approval. Shareholders will be notified of any sub-adviser changes. Unless and
until such exemptive relief is granted and the Fund’s reliance on such relief is
approved by Fund shareholders, shareholder approval will be required for changes
in a sub-adviser agreement or for the addition of a new
sub-adviser.
Sub-Adviser
to the SPAC ETF
Ryan
Heritage, LLP, a Delaware limited liability partnership located at Park 80 West
- Plaza Two, 250 Pehle Avenue, Suite 708, Saddle Brook, New Jersey 07663, is
responsible for the day-to-day management of the SPAC ETF. An SEC-registered
investment adviser formed in 2021, the Sub-Adviser is majority owned by Andrew
Dakos and Phillip Goldstein.
The
Sub-Adviser is responsible for trading portfolio securities for the SPAC ETF,
including selecting broker-dealers to execute purchase and sale transactions,
subject to the supervision of the Adviser and the Board. For its services, the
Sub-Adviser is entitled to a fee paid by the Adviser, which fee is calculated
daily and paid monthly, at an annual rate of 0.425% based on the average daily
net assets of the SPAC ETF.
The
basis for the Board of Trustees’ approval of the Sub-Advisory Agreement for the
SPAC ETF will be available in the Funds’ first Semi-Annual Report to
Shareholders.
Portfolio
Managers
The
individuals identified below are jointly and primarily responsible for the
day-to-day management of each Fund’s portfolio.
Horizon
Kinetics Medical ETF
B.
Paul Abel is Senior Portfolio Manager of the Adviser. He is responsible for
research and analysis of developing scientific technologies and innovations in
the medical and bio-pharmaceutical industries. Prior to joining the firm in
1999, Mr. Abel was with Brookhaven National Laboratory from 1989 to 1999, where
he researched, developed and implemented technical and scientific programs and
systems in the areas of nuclear physics, computer programming and industrial
design. During that time, he also provided freelance writing services for the
Academic Science and News Review, reporting and offering insight on a myriad of
issues and developments in the fields of science and technology. Mr. Abel earned
a Master’s degree in Mechanical and Nuclear Engineering from Manhattan College
in 1994 and a Bachelor’s degree in Physics from SUNY, Stony Brook in 1987.
Peter
B. Doyle is a Managing Director of the Adviser and the President of Kinetic
Mutual Funds, Inc. In 1994, he co-founded Horizon Asset Management, Inc. (n/k/a
Horizon Kinetics Asset Management LLC) and, in 1996, he co-founded Kinetics
Asset Management, Inc. (n/k/a Horizon Kinetics Asset Management LLC). From 1996
through 2011, Mr. Doyle was a dual employee of both Horizon and Kinetics. In
April 2019, Kinetics reorganized into Horizon and was renamed Horizon Kinetics
Asset Management, LLC.
Horizon
Kinetics SPAC Active ETF
Philip
Goldstein is a Partner of the Sub-Adviser, which he co-founded in 2019. Mr.
Goldstein also co-founded Bulldog Investors, LLP, an SEC-registered investment
adviser, in 1993, and is a Principal of the firm and its lead investment
strategist. He graduated from the University of Southern California in 1966 with
a Bachelor of Engineering degree and from City College, New York in 1968 with a
Master of Engineering degree. Mr. Goldstein appears on television and is widely
quoted on closed-end funds, SPACs, and shareholder activism.
Andrew
Dakos is a Partner of the Sub-Adviser, which he co-founded in 2019. Mr. Dakos
has also served as the Principal and Partner in Bulldog Investors, LLP, an
SEC-registered investment adviser, since 1999. He graduated from the University
of Delaware in 1988 with a BS in Business Administration.
Rajeev
Das has served as a Principal of the Sub-Adviser since 2019. Mr. Das has also
served a Portfolio Manager and Head of Trading for Bulldog Investors, LLP, an
SEC-registered investment adviser, since 1997. He received a Bachelor of Arts in
Economics from the University of Bombay in 1989 and a Master of Arts in
Economics from New York University in 1999. Mr. Das is a Chartered Financial
Analyst (CFA).
The
Funds’ SAI provides additional information about the Portfolio Managers’
compensation structure, other accounts managed by the Portfolio Managers, and
the Portfolio Managers’ ownership of Shares.
Other
Service Providers
Foreside
Fund Services, LLC (the “Distributor”) serves as the principal underwriter and
distributor of each Fund’s Shares. The Distributor’s principal address is Three
Canal Plaza, Suite 100, Portland, Maine 04101. The Distributor will not
distribute shares in less than whole Creation Units, and it does not maintain a
secondary market in the Shares. The Distributor is a broker-dealer registered
under the Securities Exchange Act of 1934, as amended, and a member of the
Financial Industry Regulatory Authority, Inc. (“FINRA”). The Distributor has no
role in determining the policies of the Funds or the securities that are
purchased or sold by a Fund and is not affiliated with the Adviser, Sub-Adviser,
or any of their respective affiliates.
U.S.
Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services,
located at 615 East Michigan Street, Milwaukee, Wisconsin 53202, serves as the
administrator, transfer agent and index receipt agent for the
Funds.
U.S.
Bank National Association, located at 1555 N. Rivercenter Drive, Suite 302,
Milwaukee, Wisconsin 53212, serves as the custodian for the Funds.
Morgan,
Lewis & Bockius LLP, located at 1111 Pennsylvania Avenue, N.W., Washington,
D.C. 20004, serves as legal counsel to the Trust.
Cohen
& Company, Ltd., located at 1350 Euclid Avenue, Suite 800, Cleveland, Ohio
44115, serves as the Funds’ independent registered public accounting firm. The
independent registered public accounting firm is responsible for auditing the
annual financial statements of the Funds.
HOW
TO BUY AND SELL SHARES
Each
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 a Fund, and only APs may tender their Shares for redemption
directly to a 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, and that has been accepted by the Funds’
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.
The Depository Trust Company (the “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
Funds impose 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 from the Funds, are an essential part of the ETF process and
help keep Share trading prices in line with NAV. As such, the Funds accommodate
frequent purchases and redemptions by APs. However, frequent purchases and
redemptions for cash may increase tracking error and portfolio transaction costs
and lead to the realization of capital gains. The Funds’ fair valuation of their
holdings consistent with the 1940 Act and Rule 2a-5 thereunder and their ability
to impose transaction fees on purchases and redemptions of Creation Units to
cover the custodial and other costs incurred by the Funds in effecting trades
help to minimize the potential adverse consequences of frequent purchases and
redemptions.
Determination
of Net Asset Value
Each
Fund’s NAV is calculated as of the scheduled close of regular trading on the New
York Stock Exchange (the “NYSE”), generally 4:00 p.m. Eastern time, each day the
NYSE is open for business. The NAV for a Fund is calculated by dividing the
applicable Fund’s net assets by its Shares outstanding.
In
calculating its NAV, each 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. In particular,
a Fund generally values equity securities at their readily available market
quotations. If such information is not available for a security held by a Fund
or is determined to be unreliable, the security will be valued by the Adviser at
fair value pursuant to procedures established by the Adviser and approved by the
Board (as described below).
Fair
Value Pricing
The
Adviser has been designated by the Board as the valuation designee for the Funds
pursuant to Rule 2a-5 under the 1940 Act. In its capacity as valuation designee,
the Adviser has adopted procedures and methodologies to fair value Fund
securities whose market prices are not “readily available” or are deemed to be
unreliable. For example, such circumstances may arise when: (i) a security has
been de-listed or has had its trading halted or suspended; (ii) a security’s
primary pricing source is unable or unwilling to provide a price; (iii) a
security’s primary trading market is closed during regular market hours; or (iv)
a security’s value is materially affected by events occurring after the close of
the security’s primary trading market. Generally, when fair valuing an
investment held by a Fund, the Adviser 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
established by the Adviser. Due to the subjective and variable nature of
determining the fair value of a security or other investment, there can be no
assurance that the Adviser’s determined fair value will match or closely
correlate to any market quotation that subsequently becomes available or the
price quoted or published by other sources. In addition, a Fund may not be able
to obtain the fair value assigned to an investment if the Fund were to sell such
investment at or near the time its fair value is determined.
Investments
by Registered Investment Companies
Section
12(d)(1) of the 1940 Act and the rules thereunder restrict investments by
registered investment companies in the securities of other investment companies.
Registered investment companies are permitted to invest in a Fund beyond the
limits set forth in section 12(d)(1), subject to certain terms and conditions,
including that such investment companies enter into an agreement with the Funds.
Delivery
of Shareholder Documents – Householding
Householding
is an option available to certain investors of the Funds. 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 Funds 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
Each
Fund intends to pay out dividends, if any, and distribute any net realized
capital gains to its shareholders at least annually. Each Fund will declare and
pay capital gain distributions, if any, in cash. Distributions in cash may be
reinvested automatically in additional whole Shares only if the broker through
whom you purchased Shares makes such option available. Your broker is
responsible for distributing the income and capital gain distributions to you.
Taxes
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in the Funds. Your investment
in a 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. This summary does not apply
to Shares held in an IRA or other tax-qualified plans, which are generally not
subject to current tax. Transactions relating to Shares held in such accounts
may, however, be taxable at some time in the future. This summary is based on
current tax laws, which may change.
Each
Fund intends to elect and intends to qualify each year for treatment as a
regulated investment company (a “RIC”). 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, a 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, you need to be aware of the possible tax consequences
when a Fund makes distributions, when you sell your Shares listed on the
Exchange, and when you purchase or redeem Creation Units (APs only).
Taxes
on Distributions
Each
Fund intends to distribute, at least annually, substantially all of its net
investment income and net capital gains. The distributions you receive may be
subject to federal, state, and local taxation, depending on your tax situation.
For federal income tax purposes, distributions of investment income are
generally taxable as ordinary income or qualified dividend income. Taxes on
distributions of capital gains (if any) are determined by how long a Fund owned
the investments that generated them, rather than how long a shareholder has
owned his or her Shares. Sales of assets held by a Fund for more than one year
generally result in long-term capital gains and losses, and sales of assets held
by a Fund for one year or less generally result in short-term capital gains and
losses. Distributions of a Fund’s net capital gain (the excess of net long-term
capital gains over net short-term capital losses) that are reported by such Fund
as capital gain dividends (“Capital Gain Dividends”) will be taxable as
long-term capital gains, which for non-corporate shareholders are subject to tax
at reduced rates of up to 20% (lower rates apply to individuals in lower tax
brackets). Distributions of short-term capital gain will generally be taxable as
ordinary income. Dividends and distributions are generally taxable to you
whether you receive them in cash or reinvest them in additional
Shares.
Distributions
reported by a Fund as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided holding period and other requirements are met. “Qualified dividend
income” generally is income derived from dividends paid by U.S. corporations or
certain foreign corporations that are either incorporated in a U.S. possession
or eligible for tax benefits under certain U.S. income tax treaties. In
addition, dividends that a 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
a Fund that are attributable to dividends received by the Fund from U.S.
corporations, subject to certain limitations. For such dividends to be taxed as
qualified dividend income to a non-corporate shareholder, a Fund must satisfy
certain holding period requirements with respect to the underlying stock and the
non-corporate shareholder must satisfy holding period requirements with respect
to his or her ownership of such Fund’s Shares. Holding periods may be suspended
for these purposes for stock that is hedged.
Shortly
after the close of each calendar year, you will be informed of the amount and
character of any distributions received from a Fund.
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are generally
taxable even if they are paid
from
income or gains earned by a Fund before your investment (and thus were included
in the Shares’ NAV when you purchased your Shares).
You
may wish to avoid investing in a Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable even though
it may economically represent a return of a portion of your
investment.
If
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
a Fund will generally be subject to a U.S. withholding tax at the rate of 30%,
unless a lower treaty rate applies. Gains from the sale or other disposition of
your Shares from non-U.S. shareholders generally are not subject to U.S.
taxation, unless you are a nonresident alien individual who is physically
present in the U.S. for 183 days or more per year. A Fund may, under certain
circumstances, report all or a portion of a dividend as an “interest-related
dividend” or a “short-term capital gain dividend,” which would generally be
exempt from this 30% U.S. withholding tax, provided certain other requirements
are met. Different tax consequences may result if you are a foreign shareholder
engaged in a trade or business within the United States or if a tax treaty
applies.
A
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 (currently 24%) of the taxable distributions and sale 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 the shareholder is not subject to such withholding.
Taxes
When Shares Are Sold on the Exchange
Provided
that a shareholder holds Shares as capital assets, any capital gain or loss
realized upon a sale or exchange of Shares generally is treated as a long-term
capital gain or loss if Shares have been held for more than one year and as a
short-term capital gain or loss if Shares have been held for one year or less.
However, any capital loss on a sale of Shares held for six months or less is
treated as long-term capital loss to the extent of Capital Gain Dividends paid
with respect to such Shares. Any loss realized on a sale will be disallowed to
the extent Shares of the Fund are acquired, including through reinvestment of
dividends, within a 61-day period beginning 30 days before and ending 30 days
after the disposition of Shares. The ability to deduct capital losses may be
limited.
The
cost basis of Shares of the Fund acquired by purchase will generally be based on
the amount paid for the Shares and then may be subsequently adjusted for other
applicable transactions as required by the Code. The difference between the
selling price and the cost basis of Shares generally determines the amount of
the capital gain or loss realized on the sale or exchange of Shares. Contact the
broker through whom you purchased your Shares to obtain information with respect
to the available cost basis reporting methods and elections for your account.
Taxes
on Purchases and Redemptions of Creation Units
An
AP having the U.S. dollar as its functional currency for U.S. federal income tax
purposes who exchanges securities for Creation Units generally recognizes a gain
or a loss. The gain or loss will be equal to the difference between the value of
the Creation Units at the time of the exchange and the exchanging AP’s aggregate
basis in the securities delivered plus the amount of any cash paid for the
Creation Units. An AP who exchanges Creation Units for securities will generally
recognize a gain or loss equal to the difference between the exchanging AP’s
basis in the Creation Units and the aggregate U.S. dollar market value of the
securities received, plus any cash received for such Creation Units. The
Internal Revenue Service may assert, however, that a loss that is realized upon
an exchange of securities for Creation Units may not be currently deducted under
the rules governing “wash sales” (for an AP who does not mark-to-market their
holdings) or on the basis that there has been no significant change in economic
position. APs exchanging securities should consult their own tax advisor with
respect to whether wash sale rules apply and when a loss might be
deductible.
A
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. A Fund may sell
portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause a 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, a Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
Net
Investment Income Tax
U.S.
individuals with income exceeding specified thresholds are subject to a 3.8% tax
on all or a portion of their “net investment income,” which includes interest,
dividends, and certain capital gains (generally including capital gains
distributions and capital gains realized on the sale of Shares). This 3.8% tax
also applies to all or a portion of the undistributed net investment income of
certain shareholders that are estates and trusts.
Investments
in Complex Securities
Certain
of each Fund’s investments, such as investments in commodity-linked derivatives,
when made directly, may not produce qualifying income to the Funds. To the
extent a Fund invests in commodity-linked derivatives, such Fund will seek to
restrict its income from such instruments that do not generate qualifying income
to a maximum of 10% of its gross income (when combined with its other
investments that produce non-qualifying income).
If
a Fund fails to qualify as a RIC and to avail itself of certain relief
provisions, it would be subject to tax at the regular corporate rate without any
deduction for distributions to shareholders, and its distributions would
generally be taxable as dividends. Please see the SAI for a more detailed
discussion, including the availability of certain relief provisions for certain
failures by a Fund to qualify as a RIC.
Foreign
Investments by a Fund
The
Medical ETF invests in foreign securities. Interest and other income received by
a Fund with respect to foreign securities may give rise to withholding and other
taxes imposed by foreign countries. Tax 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 a Fund’s assets consists of certain
foreign stock or securities, each such Fund will be eligible to elect to “pass
through” to investors the amount of foreign income and similar taxes (including
withholding taxes) paid by such 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 a Fund does
not so elect, each such Fund will be entitled to claim a deduction for certain
foreign taxes incurred by such Fund. A Fund (or a financial intermediary, such
as a broker, through which a shareholder owns Shares) 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 each Fund. It is not a substitute for
personal tax advice. You also may be subject to state and local tax on Fund
distributions and sales of Shares. Consult your personal tax advisor about the
potential tax consequences of an investment in Shares
under
all applicable tax laws. For more information, please see the section entitled
“Federal Income Taxes” in the SAI.
DISTRIBUTION
PLAN
The
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, each Fund is authorized
to pay an amount up to 0.25% of its average daily net assets each year for
certain distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Funds, 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, 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 each Fund’s Shares traded on the Exchange at a price above
(i.e.,
at a premium) or below (i.e.,
at a discount) its NAV is available on the Funds’ website at
www.horizonkinetics.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 the Fund’s 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 the Fund’s Shares in
connection with the administration, marketing, or trading of the Fund’s
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
On
January 27, 2023, (i) the Medical ETF acquired all of the assets and liabilities
of the Kinetics Medical Fund (the “Medical Predecessor Fund”) in exchange for
shares of beneficial interest of the Medical ETF, and (ii) the SPAC ETF acquired
all of the assets and liabilities of the Kinetics Alternative Income Fund (the
“Alternative Income Predecessor Fund” and together, with the Medical Predecessor
Fund, each a “Predecessor Fund” or the “Predecessor Funds”) (the
“Reorganization”). As a result of the Reorganization, each of the Medical ETF
and the SPAC ETF have adopted the financial history of the Medical Predecessor
Fund and the Alternative Income Predecessor Fund, respectively.
The
financial highlights table is intended to help you understand each Predecessor
Fund’s financial performance. Certain information reflects financial results for
a single Predecessor Fund share. The total returns in the table represent the
rate that an investor would have earned or lost, on an investment in a
Predecessor Fund (assuming reinvestment of all dividends and distributions).
This information has been audited by the Predecessor Funds’ prior independent
registered public accounting firm, whose report, along with each Predecessor
Fund’s financial statements, is included in the Predecessor Funds’ annual
report, which is available upon request.
Kinetics
Medical Fund
FINANCIAL
HIGHLIGHTS
No
Load Class
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Period Ended June 30, 2022 (Unaudited) |
|
For
the Year Ended December 31, 2021 |
|
For
the Year Ended December 31, 2020 |
|
For
the
Year
Ended December 31, 2019 |
|
For
the
Year
Ended December 31, 2018 |
|
For
the
Year
Ended December 31, 2017 |
PER
SHARE DATA:(1) |
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value,
Beginning
of Period |
$ |
30.78 |
|
|
$ |
28.13 |
|
|
$ |
26.53 |
|
|
$ |
23.47 |
|
|
$ |
25.33 |
|
|
$ |
26.62 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
Net
investment income(2) |
0.21 |
|
|
0.25 |
|
|
0.29 |
|
|
0.33 |
|
|
0.27 |
|
|
0.24 |
|
Net
realized and unrealized gain (loss) on investments |
(0.51) |
|
|
2.73 |
|
|
2.11 |
|
|
3.43 |
|
|
0.12 |
|
|
2.63 |
|
Total
from Investment Operations |
(0.30) |
|
|
2.98 |
|
|
2.40 |
|
|
3.76 |
|
|
0.39 |
|
|
2.87 |
|
Redemption
Fees(3) |
0.00 |
|
|
0.00 |
|
|
0.00 |
|
|
0.00 |
|
|
0.00 |
|
|
0.00 |
|
Less
Distributions: |
|
|
|
|
|
|
|
|
|
|
|
From
net investment income |
— |
|
|
(0.26) |
|
|
(0.31) |
|
|
(0.35) |
|
|
(0.29) |
|
|
(0.26) |
|
From
net realized gains |
— |
|
|
(0.07) |
|
|
(0.49) |
|
|
(0.35) |
|
|
(1.96) |
|
|
(3.90) |
|
Total
Distributions |
— |
|
|
(0.33) |
|
|
(0.80) |
|
|
(0.70) |
|
|
(2.25) |
|
|
(4.16) |
|
Net
Asset Value, End of Period |
$ |
30.48 |
|
|
$ |
30.78 |
|
|
$ |
28.13 |
|
|
$ |
26.53 |
|
|
$ |
23.47 |
|
|
$ |
25.33 |
|
Total
return |
(0.97) |
|
(6) |
10.59 |
% |
|
9.04 |
% |
|
16.04 |
% |
|
1.67 |
% |
|
10.71 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
|
|
Net
assets, end of Period (000’s) |
$ |
16,014 |
|
|
$ |
16,188 |
|
|
$ |
15,462 |
|
|
$ |
15,442 |
|
|
$ |
14,814 |
|
|
$ |
16,060 |
|
Ratio
of operating expenses to average net assets: |
|
|
|
|
|
|
|
|
|
|
|
Before
expense reimbursement |
2.18 |
% |
(7) |
2.18 |
% |
|
2.26 |
% |
|
2.34 |
% |
|
2.23 |
% |
|
2.15 |
% |
After
expense reimbursement(4) |
1.39 |
% |
(7) |
1.39 |
% |
|
1.39 |
% |
|
1.39 |
% |
|
1.39 |
% |
|
1.39 |
% |
Ratio
of net investment income to average net assets: |
1.41 |
% |
(7) |
0.84 |
% |
|
1.12 |
% |
|
1.34 |
% |
|
1.03 |
% |
|
0.86 |
% |
Portfolio
turnover rate(5) |
2 |
% |
|
1 |
% |
|
7 |
% |
|
6 |
% |
|
0 |
% |
|
0 |
% |
(1)
Information presented relates to a share of capital stock outstanding for each
year.
(2)
Net investment income per share represents net investment income divided by the
average shares outstanding throughout the year.
(3)
Amount calculated is less than $0.005.
(4)
See Note #3, Investment Adviser, for the waiver and expense reimbursement
discussion.
(5)
Portfolio turnover of The Medical Portfolio.
(6)
Not Annualized.
(7)
Annualized.
Kinetics
Alternative Income Fund
FINANCIAL
HIGHLIGHTS
No
Load Class
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the Period Ended June 30, 2022 (Unaudited) |
|
For
the Year Ended December 31, 2021 |
|
For
the Year Ended December 31, 2020 |
|
For
the
Year
Ended December 31, 2019 |
|
For
the
Year
Ended December 31, 2018 |
|
For
the
Year
Ended December 31, 2017 |
PER
SHARE DATA:(1) |
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value,
Beginning
of Period |
$ |
98.92 |
|
|
$ |
100.24 |
|
|
$ |
98.28 |
|
|
$ |
97.46 |
|
|
$ |
97.57 |
|
|
$ |
95.36 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income
from Investment Operations: |
|
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)(2) |
0.02 |
|
|
(0.15) |
|
|
0.25 |
|
|
1.39 |
|
|
0.92 |
|
|
0.08 |
|
Net
realized and unrealized gain (loss) on investments |
(3.96) |
|
|
(1.17) |
|
|
1.91 |
|
|
1.01 |
|
|
(0.03) |
|
|
2.12 |
|
Total
from Investment Operations |
(3.94) |
|
|
(1.32) |
|
|
2.16 |
|
|
2.40 |
|
|
0.89 |
|
|
2.20 |
|
Redemption
Fees |
0.00 |
. |
(3) |
0.00 |
|
(3) |
0.02 |
|
|
— |
|
|
0.01 |
|
|
0.01 |
|
Less
Distributions: |
|
|
|
|
|
|
|
|
|
|
|
From
net investment income |
— |
|
|
— |
|
|
(0.22) |
|
|
(1.58) |
|
|
(1.01) |
|
|
— |
|
Total
Distributions |
— |
|
|
— |
|
|
(0.22) |
|
|
(1.58) |
|
|
(1.01) |
|
|
— |
|
Net
Asset Value, End of Period |
$ |
94.98 |
|
|
$ |
98.92 |
|
|
$ |
100.24 |
|
|
$ |
98.28 |
|
|
$ |
97.46 |
|
|
$ |
97.57 |
|
Total
return |
(3.98 |
%) |
(6) |
(1.32 |
%) |
|
2.23 |
% |
|
2.47 |
% |
|
0.92 |
% |
|
2.32 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DATA AND RATIOS |
|
|
|
|
|
|
|
|
|
|
Net
assets, end of Period (000’s) |
$ |
2,473 |
|
|
$ |
2,656 |
|
|
$ |
2,642 |
|
|
$ |
3,482 |
|
|
$ |
4,265 |
|
|
$ |
4,968 |
|
Ratio
of operating expenses to average net assets: |
|
|
|
|
|
|
|
|
|
|
|
Before
expense reimbursement |
2.70 |
% |
(7) |
2.35 |
% |
|
2.16 |
% |
|
2.01 |
% |
|
1.88 |
% |
|
1.75 |
% |
After
expense reimbursement(4) |
0.95 |
% |
(7) |
0.95 |
% |
|
0.95 |
% |
|
0.95 |
% |
|
0.95 |
% |
|
0.95 |
% |
Ratio
of net investment income (loss) to average net assets: |
0.04 |
% |
(7) |
(0.15 |
%) |
|
0.25 |
% |
|
1.41 |
% |
|
0.94 |
% |
|
0.08 |
% |
Portfolio
turnover rate(5) |
0 |
% |
|
0 |
% |
|
0 |
% |
|
0 |
% |
|
0 |
% |
|
0 |
% |
(1)
Information presented relates to a share of capital stock outstanding for each
year.
(2)
Net investment income per share represents net investment income divided by the
average shares outstanding throughout the year.
(3)
Amount calculated is less than $0.005.
(4)
See Note #3, Investment Adviser, for the waiver and expense reimbursement
discussion.
(5)
Portfolio turnover of The Alternative Income Portfolio.
(6)
Not Annualized.
(7)
Annualized.
Horizon
Kinetics Medical ETF
Horizon
Kinetics SPAC Active ETF
|
|
|
|
|
|
|
|
|
|
|
|
Adviser |
Horizon
Kinetics Asset Management LLC
470
Park Avenue South
New
York, New York 10016 |
Transfer
Agent and Administrator |
U.S.
Bancorp Fund Services, LLC
d/b/a
U.S. Bank Global Fund Services
615
East Michigan Street
Milwaukee,
Wisconsin 53202 |
Sub-Adviser |
Ryan
Heritage, LLP
Park
80 West - Plaza Two
250
Pehle Avenue, Suite 708
Saddle
Brook, New Jersey 07663 |
Distributor |
Foreside
Fund Services, LLC
Three
Canal Plaza, Suite 100
Portland,
Maine 04101 |
Custodian |
U.S.
Bank National Association
1555
North Rivercenter Drive, Suite 302
Milwaukee,
Wisconsin 53212 |
Legal
Counsel |
Morgan,
Lewis & Bockius LLP
1111
Pennsylvania Avenue, NW
Washington,
DC 20004-2541 |
Independent
Registered Public Accounting Firm |
Cohen
& Company, Ltd.
1350
Euclid Avenue, Suite 800
Cleveland,
Ohio 44115 |
|
|
Investors
may find more information about the Funds in the following
documents:
Statement
of Additional Information: The
Funds’ SAI provides additional details about the investments of each Fund and
certain other additional information. The SAI is on file with the SEC and is
incorporated by reference into this Prospectus. It is legally considered a part
of this Prospectus.
Annual/Semi-Annual
Reports: Additional
information about each Fund’s investments will be available in the Funds’ annual
and semi-annual reports to shareholders. In the annual report, when available,
you will find a discussion of the market conditions and investment strategies
that significantly affected a Fund’s performance after the first fiscal year the
Fund is in operation.
You
can obtain free copies of these documents, request other information or make
general inquiries about the Funds by contacting the Funds at c/o U.S. Bank
Global Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or by
calling 1-800-617-0004.
Shareholder
reports and other information about the Funds 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 Funds’ Internet web site at www.horizonkinetics.com;
or
(SEC
Investment Company Act File No. 811-23226)