ck0001540305-20220331
PROSPECTUS
July 31,
2022
AlphaMark Actively Managed Small Cap
ETF
(SMCP)
Listed
on The Nasdaq Stock Market, LLC
The
U.S. Securities and Exchange Commission (“SEC”) has not approved or disapproved
of these securities or passed upon the accuracy or adequacy of this Prospectus.
Any representation to the contrary is a criminal offense.
AlphaMark
Actively Managed Small Cap ETF
FUND
SUMMARY
Investment Objective
The AlphaMark Actively Managed
Small Cap ETF (the “Fund”) seeks long-term growth of
capital.
Fees and Expenses of the Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
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Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
| Management
Fees |
0.90% |
| Distribution
and/or Service (12b-1) Fees |
None |
| Other
Expenses |
0.00% |
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Acquired
Fund Fees and Expenses1 |
0.31% |
| Total
Annual Fund Operating Expenses |
1.21% |
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1 Acquired Fund Fees
and Expenses (“AFFE”) are the indirect costs of investing in other investment
companies. Total Annual Fund Operating Expenses do not correlate to the expense
ratios in the Fund’s Financial Highlights because the Financial Highlights
include only the direct operating expenses incurred by the Fund and exclude
AFFE.
Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then continue to hold or redeem all of
your Shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The Example does not take into account brokerage commissions
that you may pay on your purchases and sales of Shares.
Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
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| 1
Year |
3
Years |
5
Years |
10
Years |
| $123 |
$384 |
$665 |
$1,466 |
Portfolio Turnover
The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Shares are held in a taxable account.
These costs, which are not reflected in annual fund operating expenses or in the
Example, affect the Fund’s performance. For the fiscal year ended March 31,
2022, the Fund’s portfolio turnover rate was 38% of the average value of its
portfolio.
Principal Investment Strategies of the
Fund
The
Fund is actively managed by AlphaMark Advisors, LLC, the Fund’s investment
adviser (the “Adviser”), and invests primarily in ETFs (“Underlying ETFs”) that
invest in equity securities of small cap companies listed on a U.S. or
international exchange (including in emerging markets). The Fund defines small
cap companies as companies with a total market capitalization of less than $5
billion at the time of purchase.
Under
normal circumstances, the Fund will invest at least 80% of its net assets (plus
any borrowings for investment purposes) directly or indirectly in small cap
companies. Investments in Underlying ETFs that, under normal circumstances,
invest at least 80% of their net assets (plus any borrowings for investment
purposes) in small cap companies will count toward the Fund’s 80% investment
policy.
The
Adviser expects that the Fund will generally invest in Underlying ETFs that
track an index of small cap companies in a particular country or geographic
region (e.g.,
U.S., developed markets, or emerging markets) or style (e.g.,
growth, core, or value). The Adviser seeks to identify the optimal risk-adjusted
investment options in the small cap universe, including investments that are
expected to reduce the inherent volatility of owning individual small cap stocks
by being highly diversified.
The
Adviser continually monitors global market conditions and the valuation of
specific styles to determine the allocations of the holdings in the Fund. The
Adviser utilizes valuation metrics, such as price to earnings ratios, price to
sales ratios, and
price to book ratios of companies in
various small cap styles relative to historic trends, as well as the relative
performance of such styles, to determine whether a style is overvalued or
undervalued. When the Adviser determines that a particular style or other
segment of the small cap market is exhibiting conditions of becoming overvalued,
the Adviser will reduce the allocation in that style and conversely increase the
allocation in the styles that exhibit a more compelling value
proposition.
Principal Risks of Investing in the Fund
The
principal risks of investing in the Fund are summarized below. The principal
risks are presented in alphabetical order to facilitate finding particular risks
and comparing them with other funds. Each risk summarized below is considered a
“principal risk” of investing in the Fund, regardless of the order in which it
appears. As with any investment, there is a risk that you could
lose all or a portion of your investment in the Fund. Some or
all of these risks may adversely affect the Fund’s net asset value per share
(“NAV”), trading price, yield, total return and/or ability to meet its
objectives. For more information about the risks of investing in the Fund, see
the section in the Fund’s Prospectus titled “Additional Information About the
Fund.”
•Equity
Market Risk. The
equity securities held directly or indirectly 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, or sectors in which
the Fund invests. Common stocks, such as those held indirectly by the Fund, are
generally exposed to greater risk than other types of securities, such as
preferred stock and debt obligations, because common stockholders generally have
inferior rights to receive payment from issuers. 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. For example, the global pandemic caused
by COVID-19, a novel coronavirus, and the aggressive responses taken by many
governments, including closing borders, restricting international and domestic
travel, and the imposition of prolonged quarantines or similar restrictions, has
had negative impacts, and in many cases severe impacts, on markets worldwide.
The COVID-19 pandemic has caused prolonged disruptions to the normal business
operations of companies around the world and the impact of such disruptions is
hard to predict. Such events may affect certain geographic regions, countries,
sectors and industries more significantly than others. Such events could
adversely affect the prices and liquidity of the Fund’s portfolio securities or
other instruments and could result in disruptions in the trading markets.
•ETF
Risks. The
Fund is an ETF, and, as a result of an ETF’s structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as Authorized
Participants (“APs”). In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, Shares may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading. Although
Shares are listed for trading on 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 Shares, and this could lead to differences
between the market price of the Shares and the underlying value of those
Shares.
•Foreign
and Emerging Markets Risk.
The Fund may invest in Underlying ETFs that invest primarily in
foreign securities. Investments in foreign securities involve certain risks that
may not be present with investments in U.S. securities. For example, investments
in foreign securities may be subject to risk of loss due to foreign currency
fluctuations
or to political or economic instability. Investments in foreign securities also
may be subject to withholding or other taxes and may be subject to additional
trading, settlement, custodial, and operational risks. These and other factors
can make investments in the Fund more volatile and potentially less liquid than
other types of investments. These risks may be enhanced for securities of
companies organized in emerging market nations.
Underlying ETFs that
provide exposure to securities traded in developing or emerging markets may
involve substantial risk with respect to such securities due to limited
information; different accounting, auditing, and financial reporting standards;
a country’s dependence on revenue from particular commodities or international
aid; and expropriation, nationalization, or other adverse political or economic
developments. Political and economic structures in many emerging market
countries may be undergoing significant evolution and rapid development, and
such countries may lack the social, political and economic stability
characteristics of more developed countries. Some of these countries may have in
the past failed to recognize private property rights and have at times
nationalized or expropriated the assets of private companies.
•Investment
Company Risk. The
risks of investing in investment companies, such as the Underlying 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.
•Management
Risk. The
Fund is actively managed and may not meet its investment objective based on the
Adviser’s success or failure to implement investment strategies for the Fund.
•Smaller
Companies Risk. The equity securities of smaller companies
have historically been subject to greater investment risk than securities of
larger companies. The prices of equity securities of smaller companies tend to
be more volatile and less liquid than the prices of equity securities of larger
companies.
Performance
The following
performance information indicates some of the risks of investing in the
Fund. The bar chart shows the Fund’s performance for the
calendar years ended December 31. The table illustrates how the Fund’s average
annual returns for the 1-year, 5-year, and since inception periods
compare with those of a broad measure of market performance. Performance for
periods prior to January 9, 2019 reflects the Fund’s previous principal
investment strategy of investing directly in equity securities, rather than
indirectly through Underlying ETFs. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is available on the
Fund’s website at www.alphamarkadvisors.com/etf/.
Calendar Year Total Returns
For the year-to-date period ended
June 30, 2022, the
Fund’s total return was -23.09%. During the period of time shown in the bar
chart, the Fund’s highest quarterly return
was 24.37% for the quarter ended December 31,
2020, and the lowest quarterly return was
-29.86% for the quarter ended March 31,
2020.
Average
Annual Total Returns
For
Periods Ended December 31, 2021
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| AlphaMark
Actively Managed Small Cap ETF |
1
Year |
5
Years |
Since
Inception
(4/20/2015) |
| Return Before
Taxes |
17.92% |
7.09% |
3.43% |
| Return After Taxes on
Distributions |
17.80% |
7.02% |
3.38% |
| Return After Taxes on Distributions and
Sale of Shares |
10.83% |
5.58% |
2.68% |
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Morningstar
US Small Cap TR USD
(reflects no deduction for
fees, expenses, or taxes) |
16.25% |
11.50% |
9.89% |
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.
Management
Investment
Adviser:
AlphaMark Advisors, LLC serves as investment adviser to the Fund.
Portfolio
Manager
Michael
L. Simon, President and Chief Investment Officer of the Adviser, is primarily
responsible for the day-to-day management of the Fund and has acted in this
capacity since its inception in 2015.
Purchase
and Sale of Shares
Shares
are listed on the Exchange, and individual Shares may only be bought and sold in
the secondary market through brokers at market prices, rather than NAV. Because
Shares trade at market prices rather than NAV, Shares may trade at a price
greater than NAV (premium) or less than NAV (discount).
The
Fund issues and redeems Shares at NAV only in large blocks known as “Creation
Units,” which only APs (typically, broker-dealers) may purchase or redeem. The
Fund generally issues and redeems Creation Units in exchange for a portfolio of
securities and/or a designated amount of U.S. cash.
Investors
may incur costs attributable to the difference between the highest price a buyer
is willing to pay to purchase Shares (bid) and the lowest price a seller is
willing to accept for Shares (ask) when buying or selling Shares in the
secondary market (the “bid-ask spread”). Recent information about the Fund,
including its NAV, market price, premiums and discounts, and bid-ask spreads is
available on the Fund’s website at www.alphamarkadvisors.com/etf/.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an IRA
or other tax-advantaged account. Distributions on investments made through
tax-deferred arrangements may be taxed later upon withdrawal of assets from
those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
ADDITIONAL
INFORMATION ABOUT THE FUND
Investment
Objective
The
Fund’s investment objective has been adopted as a non-fundamental investment
policy and may be changed without shareholder approval upon 60 days’ written
notice to shareholders.
Temporary
Defensive Positions.
From
time to time, the Fund may take temporary defensive positions that are
inconsistent with its principal investment strategies in attempting to respond
to adverse market, economic, political, or other conditions. In such instances,
the Fund may hold up to 100% of its assets in cash; short-term U.S. government
securities and government agency securities; investment grade money market
instruments; money market mutual funds; investment grade fixed-income
securities; repurchase agreements; commercial paper; cash equivalents; and ETFs
that principally invest in the foregoing instruments. As a result of engaging in
these temporary measures, the Fund may not achieve its investment
objective.
Principal
Risks of Investing in the Fund
This
section provides additional information regarding the principal risks described
in the Fund Summary. As in the Fund Summary, the principal risks below are
presented in alphabetical order to facilitate finding particular risks and
comparing them with other funds. Each risk described below is considered a
“principal risk” of investing in the Fund, regardless of the order in which it
appears. Each of the factors below could have a negative impact on the Fund’s
performance and trading prices.
•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; local, regional or global events
such
as acts of terrorism or war, including Russia’s invasion of Ukraine; and global
or regional political, economic, public health, and banking crises. If you held
common stock, or common stock equivalents, of any given issuer, you would
generally be exposed to greater risk than if you held preferred stocks and debt
obligations of the issuer because common stockholders, or holders of equivalent
interests, generally have inferior rights to receive payments from issuers in
comparison with the rights of preferred stockholders, bondholders, and other
creditors of such issuers.
Beginning
in the first quarter of 2020, financial markets in the United States and around
the world experienced extreme and, in many cases, unprecedented volatility and
severe losses due to the global pandemic caused by COVID-19, a novel
coronavirus. The pandemic resulted in a wide range of social and economic
disruptions, including closed borders, voluntary or compelled quarantines of
large populations, stressed healthcare systems, reduced or prohibited domestic
or international travel, and supply chain disruptions affecting the United
States and many other countries. Some sectors of the economy and individual
issuers have experienced particularly large losses as a result of these
disruptions, and such disruptions may continue for an extended period of time or
reoccur in the future to a similar or greater extent. In response, the U.S.
government and the Federal Reserve have taken extraordinary actions to support
the domestic economy and financial markets. Many countries, including the U.S.,
are subject to few restrictions related to the spread of COVID-19. It is unknown
how long circumstances related to the pandemic will persist, whether they will
reoccur in the future, whether efforts to support the economy and financial
markets will be successful, and what additional implications may follow from the
pandemic. The impact of these events and other epidemics or pandemics in the
future could adversely affect Fund performance.
•ETF
Risks. The
Fund is an ETF, and, as a result of an ETF’s structure, it is exposed to the
following risks:
◦APs,
Market Makers, and Liquidity Providers Concentration Risk.
The Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares may trade at a material discount to NAV and possibly face
delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
◦Costs
of Buying or Selling Shares.
Investors buying or selling Shares in the secondary market will pay brokerage
commissions or other charges imposed by brokers, as determined by that broker.
Brokerage commissions are often a fixed amount and may be a significant
proportional cost for investors seeking to buy or sell relatively small amounts
of Shares. In addition, secondary market investors will also incur the cost of
the difference between the price at
which
an investor is willing to buy Shares (the “bid” price) and the price at which an
investor is willing to sell Shares (the “ask” price). This difference in bid and
ask prices is often referred to as the “spread” or “bid-ask spread.” The bid-ask
spread varies over time for Shares based on trading volume and market liquidity,
and the spread is generally lower if Shares have more trading volume and market
liquidity and higher if Shares have little trading volume and market liquidity.
Further, a relatively small investor base in the Fund, asset swings in the Fund,
and/or increased market volatility may cause increased bid-ask spreads. Due to
the costs of buying or selling Shares, including bid-ask spreads, frequent
trading of Shares may significantly reduce investment results and an investment
in Shares may not be advisable for investors who anticipate regularly making
small investments.
◦Shares
May Trade at Prices Other Than NAV.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of market volatility, periods of
steep market declines, and periods when there is limited trading activity for
Shares in the secondary market, in which case such premiums or discounts may be
significant.
◦Trading.
Although Shares are listed for trading on the Exchange and may be listed or
traded on U.S. and non-U.S. stock exchanges other than the Exchange, there can
be no assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange “circuit breaker”
rules, which temporarily halt trading on the Exchange when a decline in the
S&P 500®
Index during a single day reaches certain thresholds (e.g.,
7%, 13%, and 20%). Additional rules applicable to the Exchange may halt trading
in Shares when extraordinary volatility causes sudden, significant swings in the
market price of Shares. There can be no assurance that Shares will trade with
any volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than Shares, and this
could lead to differences between the market price of the Shares and the
underlying value of those Shares.
•Foreign
and Emerging Markets Risk. Investments
in foreign securities involve certain risks that may not be present with
investments in U.S. securities. For example, investments in foreign securities
may be subject to risk of loss due to foreign currency fluctuations or to
political or economic instability. There may be less information publicly
available about a foreign issuer than a U.S. issuer. Foreign issuers may be
subject to different accounting, auditing, financial reporting and investor
protection standards than U.S. issuers. Investments in foreign securities may be
subject to withholding or other taxes and may be subject to additional trading,
settlement, custodial, and operational risks. With respect to certain countries,
there is the possibility of government intervention and expropriation or
nationalization of assets. Because legal systems differ, there is also the
possibility that it will be difficult to obtain or enforce legal judgments in
certain countries. Since foreign exchanges may be open on days when an
Underlying ETF does not price its shares, the value of the securities in such
Underlying ETF’s portfolio may change on days when shareholders will not be able
to purchase or sell the Underlying ETF’s or the Fund’s shares. Conversely, an
Underlying ETF’s and the Fund’s shares may trade on days when foreign exchanges
are closed. Each of these factors can make investments in the Fund more volatile
and potentially less liquid than other types of investments.
◦Capital
Controls and Sanctions Risk.
Economic
conditions, such as volatile currency exchange rates and interest rates,
political events, military action and other conditions may, without prior
warning, lead to government intervention (including intervention by the U.S.
government with respect to foreign governments, economic sectors, foreign
companies and related securities and interests) and the imposition of capital
controls and/or sanctions, which may also include retaliatory actions of one
government against another government, such as seizure of assets. Capital
controls and/or sanctions include the prohibition of, or restrictions on, the
ability to transfer currency, securities or other assets. Levies may be placed
on profits repatriated by foreign entities (such as the Underlying ETFs).
Capital controls and/or sanctions may also impact the ability of an Underlying
ETF to buy, sell or otherwise transfer securities or currency, negatively impact
the value and/or liquidity of such instruments, adversely affect the trading
market and price for shares of the Underlying ETF, and cause the Underlying ETF
and the Fund to decline in value.
◦Geopolitical
Risk. Some
countries and regions in which the Underlying ETFs invest have experienced
security concerns, war or threats of war and aggression, terrorism, economic
uncertainty, natural and environmental disasters and/or systemic market
dislocations that have led, and in the future may lead, to increased short-term
market volatility and may have adverse long-term effects on the U.S. and world
economies and markets generally. Such
geopolitical
and other events may also disrupt securities markets and, during such market
disruptions, the Fund’s exposure to the other risks described herein, through
the Underlying ETFs will likely increase. Each of the foregoing may negatively
impact the Fund’s investments.
•Investment
Company Risk. The
Fund invests in shares of investment companies, including the Underlying ETFs.
The risks of investment in these securities typically reflect the risks of the
types of instruments in which the investment company invests. When the Fund
invests in investment company securities, shareholders of the Fund bear
indirectly their proportionate share of their fees and expenses, as well as
their share of the Fund’s fees and expenses. As a result, an investment by the
Fund in an investment company could cause the Fund’s operating expenses (taking
into account indirect expenses such as the fees and expenses of the investment
company) to be higher and, in turn, performance to be lower than if it were to
invest directly in the instruments underlying the investment company.
Investments in the Underlying ETFs are subject to the “ETF Risks” described
above.
•Management
Risk. The
Fund is actively managed and may not meet its investment objective based on the
Adviser’s success or failure to implement investment strategies for the Fund.
•Small
Cap Companies 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. 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.
PORTFOLIO
HOLDINGS INFORMATION
Information
about the Fund’s daily portfolio holdings is available at
www.alphamarkadvisors.com/etf/. A complete description of the Fund’s policies
and procedures with respect to the disclosure of the Fund’s portfolio holdings
is available in the Fund’s Statement of Additional Information (“SAI”).
MANAGEMENT
Investment
Adviser
AlphaMark
Advisors, LLC, located at 810 Wright’s Summit Parkway, Suite 100, Fort Wright,
Kentucky 41011, serves as investment adviser to the Fund and has overall
responsibility for the general management and administration of the Fund. The
Adviser also arranges for transfer agency, custody, fund administration, and all
other related services necessary for the Fund to operate. For the services it
provides to the Fund, the Fund pays the Adviser a unified management fee, which
is calculated daily and paid monthly, at an annual rate of 0.90% of the Fund’s
average daily net assets. Under the Investment Advisory Agreement, the Adviser
has agreed to pay all expenses incurred by the Fund except for interest charges
on any borrowings, taxes, brokerage commissions and other expenses incurred in
placing orders for the purchase and sale of securities and other investment
instruments, acquired fund fees and expenses, accrued deferred tax liability,
extraordinary expenses, distribution fees and expenses paid by the Fund under
any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act,
and the unified management fee payable to the Adviser.
The
Adviser was founded in 1999 and is registered with the SEC as an investment
adviser. The Adviser is controlled by Michael L. Simon, the
Adviser’s President and Chief Investment Officer and the Fund’s Portfolio
Manager.
The
basis for the Board’s approval of the Fund’s Investment Advisory Agreement is
available in the Fund’s Annual
Report
to Shareholders for the period ended March 31, 2022.
Portfolio
Manager
Michael
L. Simon, CFA, is primarily responsible for managing the Fund’s portfolio. He
has served as the Fund’s portfolio manager since its inception in 2015. Mr.
Simon founded the Adviser in 1999 and is the President and Chief Investment
Officer of the Adviser. Mr. Simon has worked in the financial analysis and
investment fields since 1991 and previously worked as a Managing Financial
Service Advisor at a money management firm and a Senior Portfolio Manager at a
regional bank.
The
Fund’s SAI provides additional information about the Portfolio Manager’s
compensation structure, other accounts that the Portfolio Manager manages and
the Portfolio Manager’s ownership of Shares.
HOW
TO BUY AND SELL SHARES
The
Fund issues and redeems Shares at NAV only in Creation Units. Only APs may
acquire Shares directly from the Fund, and only APs may tender their Shares for
redemption directly to the Fund, at NAV. APs must be a member or participant of
a clearing agency registered with the SEC and must execute a Participant
Agreement that has been agreed to by the Distributor (defined below), and that
has been accepted by the Fund’s transfer agent, with respect to purchases and
redemptions of Creation Units. Once created, Shares trade in the secondary
market in quantities less than a Creation Unit.
Most
investors buy and sell Shares in secondary market transactions through brokers.
Shares are listed for trading on the secondary market on the Exchange and can be
bought and sold throughout the trading day like other publicly traded
securities.
When
buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the bid-ask spread on
your transactions. In addition, because secondary market transactions occur at
market prices, you may pay more than NAV when you buy Shares and receive less
than NAV when you sell those Shares.
Book-Entry
Shares
are held in book-entry form, which means that no stock certificates are issued.
The Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding Shares.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares. DTC’s
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other institutions that directly or indirectly
maintain a custodial relationship with DTC. As a beneficial owner of Shares, you
are not entitled to receive physical delivery of stock certificates or to have
Shares registered in your name, and you are not considered a registered owner of
Shares. Therefore, to exercise any right as an owner of Shares, you must rely
upon the procedures of DTC and its participants. These procedures are the same
as those that apply to any other securities that you hold in book entry or
“street name” through your brokerage account.
Frequent
Purchases and Redemptions of Shares
The
Fund imposes no restrictions on the frequency of purchases and redemptions of
Shares. In determining not to approve a written, established policy, the Board
evaluated the risks of market timing activities by Fund shareholders. Purchases
and redemptions by APs, who are the only parties that may purchase or redeem
Shares directly with the Fund, are an essential part of the ETF process and help
keep Share trading prices in line with NAV. As such, the Fund accommodates
frequent purchases and redemptions by APs. However, the Board has also
determined that frequent purchases and redemptions for cash may increase
tracking error and portfolio transaction costs and may lead to the realization
of capital gains. To minimize these potential consequences of frequent purchases
and redemptions, the Fund employs fair value pricing and may impose transaction
fees on purchases and redemptions of Creation Units to cover the custodial and
other costs incurred by the Fund in effecting trades. In addition, the Fund and
the Adviser reserve the right to reject any purchase order at any time.
Determination
of NAV
The
Fund’s NAV is calculated as of the scheduled close of regular trading on the New
York Stock Exchange (“NYSE”), generally 4:00 p.m. Eastern time, each day
the NYSE is open for business. The NAV is calculated by dividing the Fund’s net
assets by its Shares outstanding.
In
calculating its NAV, the Fund generally values its assets on the basis of market
quotations, last sale prices, or estimates of value furnished by a pricing
service or brokers who make markets in such instruments. If such information is
not available for a security held by the Fund or is determined to be unreliable,
the security will be valued at fair value estimates under guidelines established
by the Board (as described below).
Fair
Value Pricing
The
Board has adopted procedures and methodologies to fair value Fund securities
whose market prices are not “readily available” or are deemed to be unreliable.
For example, such circumstances may arise when: (i) a security has been
de-listed or has had its trading halted or suspended; (ii) a security’s
primary pricing source is unable or unwilling to provide a price; (iii) a
security’s primary trading market is closed during regular market hours; or
(iv) a security’s value is materially affected by events occurring after
the close of the security’s primary trading market. Generally, when fair valuing
a security, the Fund will take into account all reasonably available information
that may be relevant to a particular valuation including, but not limited to,
fundamental analytical data regarding the issuer, information relating to the
issuer’s business, recent trades or offers of the security, general and/or
specific market conditions and the specific facts giving rise to the need to
fair value the security. Fair value determinations are made in good faith and in
accordance with the fair value methodologies included in
the
Board-adopted valuation procedures. Due to the subjective and variable nature of
fair value pricing, there can be no assurance that the Adviser will be able to
obtain the fair value assigned to the security upon the sale of such security.
Investments
by Registered Investment Companies
Section 12(d)(1)
of the 1940 Act restricts investments by registered investment companies in the
securities of other investment companies, including Shares. Although the SEC has
adopted Rule 12d1-4 under the 1940 Act permitting registered investment
companies that enter into an agreement with the Trust (“Investing Funds”) to
invest in series of the Trust beyond the limits of Section 12(d)(1) subject to
certain terms and conditions, such regulatory relief is not applicable to the
Fund. Accordingly, Investing Funds must adhere to the limits set forth in
Section 12(d)(1) when investing in the Fund.
Delivery
of Shareholder Documents – Householding
Householding
is an option available to certain investors of the Fund. Householding is a
method of delivery, based on the preference of the individual investor, in which
a single copy of certain shareholder documents can be delivered to investors who
share the same address, even if their accounts are registered under different
names. Householding for the Fund is available through certain broker-dealers. If
you are interested in enrolling in householding and receiving a single copy of
prospectuses and other shareholder documents, please contact your broker-dealer.
If you are currently enrolled in householding and wish to change your
householding status, please contact your broker-dealer.
DIVIDENDS,
DISTRIBUTIONS, AND TAXES
Dividends
and Distributions
The
Fund intends to pay out dividends, if any, and distribute any net realized
capital gains to its shareholders at least annually. The Fund will declare and
pay capital gain distributions, if any, in cash. Distributions in cash may be
reinvested automatically in additional whole Shares only if the broker through
whom you purchased Shares makes such option available. Your broker is
responsible for distributing the income and capital gain distributions to
you.
Taxes
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in the Fund. Your investment
in the Fund may have other tax implications. Please consult your tax advisor
about the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws.
The
Fund has elected and intends to qualify each year for treatment as a regulated
investment company (“RIC”) under the Code. If it meets certain minimum
distribution requirements, a RIC is not subject to tax at the fund level on
income and gains from investments that are timely distributed to shareholders.
However, the Fund’s failure to qualify as a RIC or to meet minimum distribution
requirements would result (if certain relief provisions were not available) in
fund-level taxation and, consequently, a reduction in income available for
distribution to shareholders.
Unless
your investment in Shares is made through a tax-exempt entity or tax-advantaged
account, such as an IRA, you need to be aware of the possible tax consequences
when the Fund makes distributions, when you sell your Shares listed on the
Exchange, and when you purchase or redeem Creation Units (APs
only).
Taxes
on Distributions
The
Fund intends to distribute, at least annually, substantially all of its net
investment income and net capital gains. For federal income tax purposes,
distributions of investment income are generally taxable as ordinary income or
qualified dividend income. Taxes on distributions of capital gains (if any) are
determined by how long the Fund owned the investments that generated them,
rather than how long a shareholder has owned his or her Shares. Sales of assets
held by the Fund for more than one year generally result in long-term capital
gains and losses, and sales of assets held by the Fund for one year or less
generally result in short-term capital gains and losses. Distributions of the
Fund’s net capital gain (the excess of net long-term capital gains over net
short-term capital losses) that are reported by the Fund as capital gain
dividends (“Capital Gain Dividends”) will be taxable as long-term capital gains,
which for non-corporate shareholders are subject to tax at reduced rates of up
to 20% (lower rates apply to individuals in lower tax brackets). Distributions
of short-term capital gain will generally be taxable as ordinary income.
Dividends and distributions are generally taxable to you whether you receive
them in cash or reinvest them in additional Shares.
Distributions
reported by the Fund as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided holding period and other requirements are met. “Qualified dividend
income” generally is income derived from dividends paid by U.S. corporations or
certain foreign corporations that are either incorporated in a U.S. possession
or eligible for tax benefits under certain U.S. income tax treaties. In
addition, dividends that the Fund received in respect of stock of certain
foreign corporations may be qualified dividend income if that stock is readily
tradable
on an established U.S. securities market. Dividends received by the Fund from an
ETF, a REIT, or an underlying fund taxable as a RIC may be treated as qualified
dividend income generally only to the extent so reported by such ETF, REIT or
underlying fund. Corporate shareholders may be entitled to a dividends received
deduction for the portion of dividends they receive from the Fund that are
attributable to dividends received by the Fund from U.S. corporations, subject
to certain limitations.
Shortly
after the close of each calendar year, you will be informed of the amount and
character of any distributions received from the Fund.
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are generally
taxable even if they are paid from income or gains earned by the Fund before
your investment (and thus were included in the Shares’ NAV when you purchased
your Shares).
You
may wish to avoid investing in the Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable even though
it may economically represent a return of a portion of your investment.
If
the Fund’s distributions exceed its earnings and profits, all or a portion of
the distributions made for a taxable year may be recharacterized as a return of
capital to shareholders. A return of capital distribution will generally not be
taxable, but will reduce each shareholder’s cost basis in Shares and result in a
higher capital gain or lower capital loss when the Shares are sold. After a
shareholder’s basis in Shares has been reduced to zero, distributions in excess
of earnings and profits in respect of those Shares will be treated as gain from
the sale of the Shares.
If
you are neither a resident nor a citizen of the United States or if you are a
foreign entity, distributions (other than Capital Gain Dividends) paid to you by
the Fund will generally be subject to a U.S. withholding tax at the rate of 30%,
unless a lower treaty rate applies. Gains from the sale or other disposition of
Shares by 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. The Fund may, under certain circumstances,
report all or a portion of a dividend as an “interest-related dividend” or a
“short-term capital gain dividend,” which would generally be exempt from this
30% U.S. withholding tax, provided certain other requirements are met.
Different tax consequences may result if you are a foreign shareholder engaged
in a trade or business within the United States or if a tax treaty applies.
The
Fund (or a financial intermediary, such as a broker, through which a shareholder
owns Shares) generally is required to withhold and remit to the U.S. Treasury a
percentage of the taxable distributions and sale or redemption proceeds paid to
any shareholder who fails to properly furnish a correct taxpayer identification
number, who has underreported dividend or interest income, or who fails to
certify that the shareholder is not subject to such withholding.
Taxes
When Shares are Sold on the Exchange
Any
capital gain or loss realized upon a sale of Shares generally is treated as a
long-term capital gain or loss if Shares have been held for more than one year
and as a short-term capital gain or loss if Shares have been held for one year
or less. However, any capital loss on a sale of Shares held for six months or
less is treated as long-term capital loss to the extent of Capital Gain
Dividends paid with respect to such Shares. Any loss realized on a sale will be
disallowed to the extent Shares of the Fund are acquired, including through
reinvestment of dividends, within a 61-day period beginning 30 days before and
ending 30 days after the disposition of Shares. The ability to deduct capital
losses may be limited.
The
cost basis of Shares of the Fund acquired by purchase will generally be based on
the amount paid for the Shares and then may be subsequently adjusted for other
applicable transactions as required by the Code. The difference between the
selling price and the cost basis of Shares generally determines the amount of
the capital gain or loss realized on the sale or exchange of Shares. Contact the
broker through whom you purchased your Shares to obtain information with respect
to the available cost basis reporting methods and elections for your account.
Taxes
on Purchases and Redemptions of Creation Units
An
AP having the U.S. dollar as its functional currency for U.S. federal income tax
purposes who exchanges securities for Creation Units generally recognizes a gain
or a loss. The gain or loss will be equal to the difference between the value of
the Creation Units at the time of the exchange and the exchanging AP’s aggregate
basis in the securities delivered, plus the amount of any cash paid for the
Creation Units. An AP who exchanges Creation Units for securities will generally
recognize a gain or loss equal to the difference between the exchanging AP’s
basis in the Creation Units and the aggregate U.S. dollar market value of the
securities received, plus any cash received for such Creation Units. The
Internal Revenue Service may assert, however, that a loss that is realized upon
an exchange of securities for Creation Units may not be currently deducted under
the rules governing “wash sales” (for an AP who does not mark-to-market its
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 sales rules apply and
when a loss might be deductible.
The
Fund may include a payment of cash in addition to, or in place of, the delivery
of a basket of securities upon the redemption of Creation Units. The Fund may
sell portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause the Fund to recognize investment income and/or capital
gains or losses that it might not have recognized if it had completely satisfied
the redemption in-kind. As a result, the Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
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.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in the Fund. It is not a substitute for
personal tax advice. You also may be subject to state and local tax on Fund
distributions and sales of Shares. Consult your personal tax advisor about the
potential tax consequences of an investment in Shares under all applicable tax
laws. For more information, please see the section entitled “Federal Income
Taxes” in the SAI.
DISTRIBUTION
The
Distributor, Quasar Distributors, LLC, is a broker-dealer registered with the
SEC. The Distributor distributes Creation Units for the Fund on an agency basis
and does not maintain a secondary market in Shares. The Distributor has no role
in determining the policies of the Fund or the securities that are purchased or
sold by the Fund. The Distributor’s principal address is 111 East Kilbourn
Avenue, Suite 2200, Milwaukee, Wisconsin 53202.
The
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, the Fund is authorized to
pay an amount up to 0.25% of its average daily net assets each year for certain
distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Fund, and there are no plans to impose
these fees. However, in the event Rule 12b-1 fees are charged in the future,
because the fees are paid out of the Fund’s assets, over time these fees will
increase the cost of your investment and may cost you more than certain other
types of sales charges.
PREMIUM/DISCOUNT
INFORMATION
Information
regarding how often Shares traded on the Exchange at a price above (i.e.,
at a premium) or below (i.e.,
at a discount) the NAV per Share is available, free of charge, on the Fund’s
website at www.alphamarkadvisors.com/etf/.
ADDITIONAL
NOTICES
Shares
are not sponsored, endorsed, or promoted by the Exchange. The Exchange is not
responsible for, nor has it participated in the determination of the timing,
prices, or quantities of Shares to be issued, nor in the determination or
calculation of the equation by which Shares are redeemable. The Exchange has no
obligation or liability to owners of Shares in connection with the
administration, marketing, or trading of Shares.
Without
limiting any of the foregoing, in no event shall the Exchange have any liability
for any lost profits or indirect, punitive, special, or consequential damages
even if notified of the possibility thereof.
The
Adviser and the Fund make no representation or warranty, express or implied, to
the owners of Shares or any member of the public regarding the advisability of
investing in securities generally or in the Fund particularly.
FINANCIAL
HIGHLIGHTS
The
financial highlights table is intended to help you understand the Fund’s
financial performance for the Fund’s five most recent fiscal years. Certain
information reflects financial results for a single Fund share. The total
returns in the table represent the rate that an investor would have earned or
lost on an investment in the Fund (assuming reinvestment of all dividends and
distributions). This information has been audited by Cohen & Company, Ltd.,
the Fund’s independent registered public accounting firm, whose report, along
with the Fund’s financial statements, is included in the Fund’s annual report,
which is available upon request.
AlphaMark
Actively Managed Small Cap ETF
For
a capital share outstanding throughout the year
|
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|
Year
Ended March 31, |
|
2022 |
|
2021 |
|
2020 |
|
2019 |
|
2018 |
| Net
asset value, beginning of year |
$ |
29.92 |
|
|
$ |
17.63 |
|
|
$ |
23.46 |
|
|
$ |
25.00 |
|
|
$ |
24.40 |
|
|
INCOME
(LOSS) FROM INVESTMENT OPERATIONS: |
|
|
|
|
|
|
|
|
|
|
Net
investment income (loss)(1) |
0.23 |
|
(2) |
0.12 |
|
(2) |
0.25 |
|
(2) |
(0.04) |
|
(2) |
(0.14) |
|
|
Net
realized and unrealized gain (loss) on investments |
(1.22) |
|
|
12.32 |
|
|
(5.93) |
|
|
(1.50) |
|
|
0.74 |
|
|
Total
from investment operations |
(0.99) |
|
|
12.44 |
|
|
(5.68) |
|
|
(1.54) |
|
|
0.60 |
|
|
DISTRIBUTIONS
TO SHAREHOLDERS: |
|
|
|
|
|
|
|
|
|
| From
net investment income |
(0.22) |
|
|
(0.15) |
|
|
(0.15) |
|
|
— |
|
|
— |
|
| Total
distributions to shareholders |
(0.22) |
|
|
(0.15) |
|
|
(0.15) |
|
|
— |
|
|
— |
|
| Net
asset value, end of year |
$ |
28.71 |
|
|
$ |
29.92 |
|
|
$ |
17.63 |
|
|
$ |
23.46 |
|
|
$ |
25.00 |
|
|
Total
return |
-3.37% |
|
70.63% |
|
-24.37% |
|
-6.15% |
|
2.47% |
|
SUPPLEMENTAL
DATA: |
|
|
|
|
|
|
|
|
|
| Net
assets at end of year (000’s) |
$ |
24,407 |
|
|
$ |
25,436 |
|
|
$ |
15,871 |
|
|
$ |
23,461 |
|
|
$ |
26,248 |
|
|
RATIOS
TO AVERAGE NET ASSETS: |
|
|
|
|
|
|
|
|
|
|
Expenses
to average net assets |
0.90 |
% |
(3) |
0.90 |
% |
(3) |
0.90 |
% |
(3) |
0.90% |
(3) |
0.90% |
|
Net
investment income (loss) to average net assets |
0.74 |
% |
(2) |
0.51 |
% |
(2) |
1.07 |
% |
(2) |
(0.18) |
% |
(2) |
(0.56) |
% |
|
Portfolio
turnover rate(4) |
38 |
% |
|
44 |
% |
|
62 |
% |
|
360% |
|
41% |
(1) Calculated
based on average shares outstanding during the year.
(2) Recognition
of net investment income by the Fund is affected by the timing of the
declaration of dividends by the underlying investment companies in which the
Fund invests. The ratio does not include net investment income of the underlying
investment companies in which the Fund invests.
(3) Does
not include expenses of the investment companies in which the Fund
invests.
(4) Excludes
the impact of in-kind transactions.
ALPHAMARK
ACTIVELY MANAGED SMALL CAP ETF
|
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| Adviser |
AlphaMark
Advisors, LLC
810
Wright’s Summit Parkway
Suite
100
Fort
Wright, Kentucky 41011 |
Transfer
Agent, Fund Accountant and Fund Administrator |
U.S.
Bancorp Fund Services, LLC
d/b/a
U.S. Bank Global Fund Services
615
East Michigan Street
Milwaukee,
Wisconsin 53202 |
| Custodian |
U.S.
Bank National Association
1555
N. Rivercenter Drive, Suite 302
Milwaukee,
Wisconsin 53212 |
Distributor |
Quasar
Distributors, LLC
111
East Kilbourn Avenue, Suite 2200
Milwaukee,
Wisconsin 53202 |
| Legal
Counsel |
Morgan,
Lewis & Bockius LLP
1111
Pennsylvania Avenue, NW
Washington,
DC 20004-2541 |
Independent
Registered Public Accounting Firm |
Cohen
& Company, Ltd.
342
North Water Street, Suite 830
Milwaukee,
Wisconsin 53202 |
Investors
may find more information about the Fund in the following documents:
Statement
of Additional Information: The
Fund’s SAI provides additional details about the investments and techniques of
the Fund and certain other additional information. A current SAI dated
July 31, 2022 is on file with the SEC and is herein incorporated by
reference into this Prospectus. It is legally considered a part of this
Prospectus.
Annual/Semi-Annual
Reports: Additional
information about the Fund’s investments is available in the Fund’s annual and
semi-annual reports to shareholders. In the annual
report
you will find a discussion of the market conditions and investment strategies
that significantly affected the Fund’s performance.
You
can obtain free copies of these documents, request other information or make
general inquiries about the Fund by contacting the Fund at AlphaMark Actively
Managed Small Cap ETF, c/o U.S. Bank Global Fund Services, P.O. Box 701,
Milwaukee, Wisconsin 53201-0701 or calling 1-800-617-0004.
Shareholder
reports and other information about the Fund are available:
◦Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov; or
◦Free
of charge from the Fund’s Internet website at www.alphamarkadvisors.com/etf/;
or
(SEC
Investment Company Act File No. 811-22668)
