ck0001540305-20230930
4979/30/2023ETF Series
Solutions0001540305false12/4/202312/4/2023N-1A00015403052023-12-042023-12-040001540305ck0001540305:S000082648Member2023-12-042023-12-040001540305ck0001540305:S000082648Memberck0001540305:C000245967Member2023-12-042023-12-040001540305ck0001540305:S000082649Member2023-12-042023-12-040001540305ck0001540305:C000245968Memberck0001540305:S000082649Member2023-12-042023-12-04xbrli:pureiso4217:USD
PROSPECTUS
October 23,
2023
The Brinsmere Fund – Growth
ETF (
TBFG)
The Brinsmere Fund –
Conservative ETF (
TBFC)
Listed
on NYSE
Arca, Inc.
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.
Investment
Objective
The
Brinsmere Fund – Growth ETF (the “Growth ETF” or “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.
|
|
|
|
|
|
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
Management
Fees |
0.35% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses1 |
0.00% |
Acquired
Fund Fees and Expenses1,2 |
0.07% |
Total
Annual Fund Operating Expenses |
0.42% |
|
|
1 Estimated for
the current fiscal year.
2 Acquired Fund Fees
and Expenses (“AFFE”) are the indirect costs of investing in other investment
companies.
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. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
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. Because the
Fund is newly organized, portfolio turnover information is not yet
available.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed fund of funds, which seeks to achieve its investment
objective by investing in a globally diversified portfolio of equity and bond
markets.
The
Fund systematically adjusts its holdings using two proprietary strategies
developed by the Fund’s investment adviser, The Milwaukee Company (the
“Adviser”), that are run independently. Those strategies are the Systematic
Market Beta Strategy (“SMB”) and the Classic Asset Allocation Revisited Strategy
(“CAAR”). SMB and CAAR systematically rebalance the underlying funds in which
the Fund may invest based on a set of proprietary risk-management techniques.
The Adviser may occasionally deviate from the model portfolio directed by a
strategy’s algorithm when the data utilized by the strategy does not reflect
current market conditions, in the Adviser’s sole discretion.
The
underlying funds in which the SMB strategy may invest represent distinct asset
classes, such as (1) the aggregate U.S. equity market, (2) large-capitalization
U.S. equities, (3) small-cap U.S. equities, (4) U.S. real estate sector equities
through a broad real estate index-based ETF, (5) the aggregate U.S. bond market,
(6) short-term U.S. Treasuries, and (7) diversified commodity exposure through
No K-1 ETFs, which may hold futures contracts.
The
underlying funds in which the CAAR strategy may invest represent distinct asset
classes, such as (1) large-cap U.S. equities, (2) mid-cap U.S. equities, (3)
small-cap U.S. equities, (4) U.S. mortgage-backed securities, (5) the aggregate
foreign
equity
market, (6) foreign developed market equities, (7) foreign emerging market
equities, (8) the aggregate U.S. bond market, and (9) U.S. Treasuries.
The Adviser
plans to allocate the Fund's portfolio using a combination of both SMB and CAAR
strategies. This allocation decision will be based on factors like risk
assessment, market movements, and other considerations.
SMB
SMB
is a rules-based, tactical asset allocation investment strategy that seeks to
reduce risk and enhance performance by adjusting asset allocations based on its
risk assessment, as determined by a set of proprietary indicators (the “SMB
Equity Risk Indicator”). SMB’s goal is to capture market beta, while limiting
volatility by hedging the risk of an extended bear market for stocks, bonds, or
both.
When
market risk is estimated to be low to moderate, SMB will invest in a “market
beta portfolio” that is reflective of the broad stock and bond markets. When
either the stock or bond market (or both) appear to be vulnerable to an extended
decline, SMB will adopt a relatively conservative approach by lessening exposure
to those securities that are most susceptible to the risk at hand. The Fund,
through its exposure to the underlying funds, can invest in fixed income
securities with varying quality and maturity.
SMB
assesses stock market risk by modeling the performance of a basket consisting of
the 500 largest U.S. companies on two fronts: (1) price-trend behavior, based on
several measures of moving averages over varying time frames; and (2) return
volatility using the standard deviation for various rolling periods for daily
return.
The
SMB Equity Risk Indicator is dynamic and interacts with the basket’s price trend
and return volatility to adapt to changing market conditions for optimizing risk
management. If the price trend is bullish, the aggregate volatility signal
determines risk-on and risk-off conditions. By contrast, if the price trend is
bearish, the price trend signal dominates and determines how long a risk-off
condition applies.
When
risk-on is indicated for equities, SMB’s equity exposure is invested in a
portfolio of index-tracking ETFs that correspond to the asset classes referenced
above. When risk-off is signaled for equities, the allocation to stocks is
reduced and the proceeds are rotated into short-term U.S. Treasuries.
Bond
market risk is evaluated using a two-factor model that estimates the probability
of interest rates rising or falling in the near term. This indicator is derived
from (1) a fair-value model of the 10-year Treasury yield, and (2) trending
behavior for several Treasury market yields. When risk-off is signaled for
bonds, a portion of the allocations to short-, medium-, and long-term bonds are
rotated into low-duration bond funds.
The
indicators are tracked daily, and the changes are implemented in short order
following the detection of a change in signal. In addition to the signal-based
trigger, SMB also incorporates a drift-based monthly rebalance, which takes
place when the securities drift outside their pre-determined tolerance bands.
CAAR
CAAR
is a rules-based, tactical asset allocation investment strategy that uses a
statistical process known as “mean-variance optimization” to tactically adapt
its portfolio to changing market conditions. The CAAR investment universe
includes a wide range of index-tracking ETFs that are tied to well-established
market risk factors (such as market capitalization, value, and size).
The
Fund uses a version of CAAR that seeks to create a growth-focused portfolio with
the highest expected return for a given set of constraints that are consistent
with a growth investment objective using the critical line algorithm.
CAAR
further refines the optimization process to manage the volatility of the
portfolio by adjusting some of those constraints based on stock market
volatility as measured by the recent values VIX® Index, a market-based estimate
of 30-day expected volatility of a basket consisting of the 500 largest U.S.
companies.
CAAR also places floors and caps on the model portfolio’s targeted
exposure to equities. For the Fund, CAAR’s equity floor target is 35% and the
equity cap target is 85%. CAAR’s model portfolio is re-evaluated, and the
necessary changes are implemented at the beginning of every
month.
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.”
•Commodities
Risk. The
Fund may invest in underlying funds that principally invest in commodities and
related investments, the value of which may be affected by changes in overall
market movements, commodity index volatility, changes in interest rates, or
factors affecting a particular industry or commodity, such as drought, floods,
weather, livestock disease, embargoes, and tariffs. The prices of industrial
metals, precious metals, agriculture, and livestock commodities may fluctuate
widely due to factors such as changes in value, supply and demand, and
governmental regulatory policies.
•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 Fund’s
sub-adviser, Penserra Capital Management LLC (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 Shares,
potentially resulting in financial losses to the Fund and its shareholders.
•Emerging
Markets Risk.
The Fund may invest in underlying funds that principally invest in companies
organized in emerging market nations. Investments in securities and instruments
traded in developing or emerging markets, or that provide exposure to such
securities or markets, can involve additional risks relating to political,
economic, or regulatory conditions not associated with investments in U.S.
securities and instruments or investments in more developed international
markets. Such conditions may impact the ability of the Fund to buy, sell or
otherwise transfer securities, adversely affect the trading market and price for
Shares and cause the Fund to decline in value.
•Equity
Market Risk.
The
equity securities held in the Fund’s portfolio through the underlying funds 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 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 (such as the global pandemic caused by the
COVID-19 virus), recessions, rising inflation, or other events could have a
significant negative impact on the Fund and its investments. 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 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 NYSE Arca, Inc. (the “Exchange”) and may be
traded on U.S. exchanges other than the Exchange, there can be no assurance that
Shares will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of Shares may begin to mirror the liquidity of
the Fund’s underlying portfolio holdings, which can be significantly less liquid
than Shares, and this could lead to differences between the market price of the
Shares and the underlying value of those Shares.
•Fixed
Income Securities Risk.
The value of the Fund’s investments in fixed income securities held through
the underlying funds will
fluctuate with changes in interest rates. Typically, a rise in interest rates
causes a decline in the value of fixed income securities. On the other hand, if
rates fall, the value of fixed income securities generally increases. In
general, the market price of fixed income securities with longer maturities will
increase or decrease more in response to changes in interest rates than
shorter-term securities. Changes in government intervention may have adverse
effects on investments, volatility, and illiquidity in debt markets. Credit risk
refers to the possibility that the issuer of a security will not be able to make
principal and interest payments when due. Changes in an issuer’s credit rating
or the market’s perception of an issuer’s creditworthiness may also affect the
value of an investment in that issuer. The degree of credit risk depends on both
the financial condition of the issuer and the terms of the obligation.
•Foreign
Securities Risk.
The Fund may invest in underlying funds 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.
•Futures
Contracts Risks.
The Fund may invest in underlying funds that invest primarily in
futures contracts. The value of a futures contract tends to increase and
decrease in tandem with the value of the underlying instrument. Depending on the
terms of the particular contract, futures contracts are settled through either
physical delivery of the underlying instrument on the settlement date or by
payment of a cash settlement amount on the settlement date.
•Government
Obligations Risk.
The Fund may invest in underlying funds that invest primarily in
government obligations. No assurance can be given that the U.S. government will
provide financial support to U.S. government-sponsored agencies or
instrumentalities where it is not obligated to do so by law, such as the Federal
National Mortgage Association (“Fannie Mae”) and the Federal Home Loan Mortgage
Corporation (“Freddie Mac”). Securities issued by Fannie Mae and Freddie Mac
have historically been supported only by the discretionary authority of the U.S.
government. While the U.S. government provides financial support to various U.S.
government-sponsored agencies and instrumentalities, such as Fannie Mae and
Freddie Mac, no assurance can be given that it will always do so.
•Investment
Company Risk. The
risks of investing in investment companies, such as the underlying funds,
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.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing.
The securities of large-capitalization companies may be relatively mature
compared to smaller companies and therefore subject to slower growth during
times of economic expansion. Large-capitalization companies may also be unable
to respond quickly to new competitive challenges, such as changes in technology
and consumer tastes.
◦Mid-Capitalization
Investing. The
securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies, but they may also be subject to slower growth
than small-capitalization companies during times of economic expansion. 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, but they may also be
nimbler and more responsive to new challenges than large-capitalization
companies. 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. 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.
•Models
and Data Risk.
The composition of the Fund is heavily dependent on proprietary quantitative
models as well as information and data supplied by third parties (“Models and
Data”).
When
Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon may lead to securities being included in or excluded from the
Fund that would have been excluded or included had the Models and Data been
correct and complete.
•New
Fund Risk.
The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision. Additionally, the Adviser
has not previously managed a registered fund, which may increase the risk of
investing in the Fund.
•Tax
Risk. The
contribution of the initial assets of the Fund was structured as a transaction
in which no gain or loss was intended to be recognized for U.S. federal income
tax purposes, however, there are no assurances that the Internal Revenue Service
(the “IRS”) will agree that such contribution qualifies for nonrecognition. If
the contribution did not qualify as a nonrecognition transaction for U.S.
federal income tax purposes, such treatment could affect the Fund’s ability to
qualify as a regulated investment company (“RIC”) under the Internal Revenue
Code of 1986, as amended (the “Code”), and affect whether gains and losses
recognized by the Fund are treated as ordinary income or capital gain and
potentially cause the Fund to be subject to income or excise taxes for under
distributions. In turn, such treatment may also affect the amount, timing or
character of income distributed to you by the Fund such that the Fund may be
required to reclassify distributions previously distributed to
you.
Performance
Performance information for the Fund is not
included because the Fund has not yet commenced operations as of the date of
this Prospectus. In the future, performance information for the
Fund will be presented in this section. Updated performance information will be
available on the Fund’s website at www.thebrinsmerefunds.com.
Management
|
|
|
|
|
|
Adviser: |
Estate
Counselors, LLC, d/b/a The Milwaukee Company |
Sub-Adviser: |
Penserra
Capital Management LLC |
Portfolio
Managers: |
Shrey
Patel, Chief Portfolio Manager for the Adviser, and Dustin Lewellyn, CFA,
Managing Director, Ernesto Tong, CFA, Managing Director, and Anand Desai,
Associate of the Sub-Adviser, have been portfolio managers of the Fund
since its inception in December 2023. |
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.thebrinsmerefunds.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an
individual retirement account (“IRA”) or other tax-advantaged account.
Distributions on investments made through tax-deferred arrangements may be taxed
later upon withdrawal of assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Such arrangements do not result in increased Fund
expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
Investment
Objective
The
Brinsmere Fund – Conservative ETF (the “Conservative ETF” or “Fund”) seeks
long-term capital appreciation in a manner that is consistent with capital
preservation.
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.
|
|
|
|
|
|
Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
Management
Fees |
0.35% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses1 |
0.00% |
Acquired
Fund Fees and Expenses1,2 |
0.06% |
Total
Annual Fund Operating Expenses |
0.41% |
|
|
1 Estimated
for the current fiscal year.
2 Acquired Fund Fees
and Expenses (“AFFE”) are the indirect costs of investing in other investment
companies.
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. Although your actual
costs may be higher or lower, based on these assumptions your costs would
be:
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. Because the
Fund is newly organized, portfolio turnover information is not yet
available.
Principal Investment
Strategies of the Fund
The
Fund is an actively managed fund of funds, which seeks to achieve its investment
objective by investing in a globally diversified portfolio of equity and bond
markets.
The
Fund systematically adjusts its holdings using two proprietary strategies
developed by the Fund’s investment adviser, The Milwaukee Company (the
“Adviser”), that are run independently. Those strategies are the Systematic
Market Beta Strategy (“SMB”) and the Classic Asset Allocation Revisited Strategy
(“CAAR”). SMB and CAAR systematically rebalance the underlying funds in which
the Fund may invest based on a set of proprietary risk-management techniques.
The Adviser may occasionally deviate from the model portfolio directed by a
strategy’s algorithm when the data utilized by the strategy does not reflect
current market conditions, in the Adviser’s sole discretion.
The
underlying funds in which the SMB strategy may invest represent distinct asset
classes, such as (1) the aggregate U.S. equity market, (2) large-capitalization
U.S. equities, (3) small-cap U.S. equities, (4) U.S. real estate sector equities
through a broad real estate index-based ETF, (5) the aggregate U.S. bond market,
(6) short-term U.S. Treasuries, and (7) diversified commodity exposure through
No K-1 ETFs, which may hold futures contracts.
The
underlying funds in which the CAAR strategy may invest represent distinct asset
classes, such as (1) large-capitalization U.S. equities, (2) mid-cap U.S.
equities, (3) small-cap U.S. equities, (4) U.S. mortgage-backed securities, (5)
the aggregate
foreign
equity market, (6) foreign developed market equities, (7) foreign emerging
market equities, (8) the aggregate U.S. bond market, and (9) U.S. Treasuries.
The Adviser
plans to allocate the Fund's portfolio using a combination of both SMB and CAAR
strategies. This allocation decision will be based on factors like risk
assessment, market movements, and other
considerations.
SMB
SMB
is a rules-based, tactical asset allocation investment strategy that seeks to
reduce risk and enhance performance by adjusting asset allocations based on its
risk assessment, as determined by a set of proprietary indicators (the “SMB
Equity Risk Indicator”). SMB’s goal is to capture market beta, while limiting
volatility by hedging the risk of an extended bear market for stocks, bonds, or
both.
When
market risk is estimated to be low to moderate, SMB will invest in a “market
beta portfolio” that is reflective of the broad stock and bond markets. When
either the stock or bond market (or both) appear to be vulnerable to an extended
decline, SMB will adopt a relatively conservative approach by lessening exposure
to those securities that are most susceptible to the risk at hand. The Fund,
through its exposure to the underlying funds, can invest in fixed income
securities with varying quality and maturity.
SMB
assesses stock market risk by modeling the performance of a basket consisting of
the 500 largest U.S. companies on two fronts: (1) price-trend behavior, based on
several measures of moving averages over varying time frames; and (2) return
volatility using the standard deviation for various rolling periods for daily
return.
The
SMB Equity Risk Indicator is dynamic and interacts with the basket’s price trend
and return volatility to adapt to changing market conditions for optimizing risk
management. If the price trend is bullish, the aggregate volatility signal
determines risk-on and risk-off conditions. By contrast, if the price trend is
bearish, the price trend signal dominates and determines how long a risk-off
condition applies.
When
risk-on is indicated for equities, SMB’s equity exposure is invested in a
portfolio of index-tracking ETFs that correspond to the total U.S. stock market.
When risk-off is signaled for equities, the allocation to stocks is reduced and
the proceeds are rotated into short-term U.S. Treasuries.
Bond
market risk is evaluated using a two-factor model that estimates the probability
of interest rates rising or falling in the near-term. This indicator is derived
from (1) a fair-value model of the 10-year Treasury yield, and (2) trending
behavior for several Treasury market yields. When risk-off is signaled for
bonds, a portion of the allocations to short-, medium-, and long-term bonds are
rotated into low-duration bond funds.
The
indicators are tracked daily and the changes are implemented in short order
following the detection of a change in signal. In addition to the signal-based
trigger, SMB also incorporates a drift-based monthly rebalance, which takes
place when the securities drift outside their pre-determined tolerance bands.
CAAR
CAAR
is a rules-based, tactical asset allocation investment strategy that uses a
statistical process known as “mean-variance optimization” to tactically adapt
its portfolio to changing market conditions. The CAAR investment universe
includes a wide range of index-tracking ETFs that are tied to well-established
market risk factors (such as market capitalization, value, and size).
The
Fund uses a version of CAAR that seeks to create a conservative portfolio with
the highest expected return for a given set of constraints that are consistent
with a conservative investment objective using the critical line algorithm.
CAAR
further refines the optimization process to manage the volatility of the
portfolio by adjusting some of those constraints based on stock market
volatility as measured by the recent values VIX® Index, a market-based estimate
of 30-day expected volatility of a basket consisting of the 500 largest U.S.
companies.
CAAR also places floors and caps on the model portfolio’s targeted
exposure to equities. For the Fund, CAAR’s equity floor target is 20% and the
equity cap target is 40%. CAAR’s model portfolio is re-evaluated, and the
necessary changes are implemented at the beginning of every
month.
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.”
•Commodities
Risk. The
Fund may invest in underlying funds that principally invest in commodities and
related investments, the value of which may be affected by changes in overall
market movements, commodity index volatility, changes in interest rates, or
factors affecting a particular industry or commodity, such as drought, floods,
weather, livestock disease, embargoes, and tariffs. The prices of industrial
metals, precious metals, agriculture, and livestock commodities may fluctuate
widely due to factors such as changes in value, supply and demand, and
governmental regulatory policies.
•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 Fund’s
sub-adviser, Penserra Capital Management LLC (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 Shares,
potentially resulting in financial losses to the Fund and its shareholders.
•Emerging
Markets Risk.
The Fund may invest in underlying funds that principally invest in companies
organized in emerging market nations. Investments in securities and instruments
traded in developing or emerging markets, or that provide exposure to such
securities or markets, can involve additional risks relating to political,
economic, or regulatory conditions not associated with investments in U.S.
securities and instruments or investments in more developed international
markets. Such conditions may impact the ability of the Fund to buy, sell or
otherwise transfer securities, adversely affect the trading market and price for
Shares and cause the Fund to decline in value.
•Equity
Market Risk.
The
equity securities held in the Fund’s portfolio through the underlying funds 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 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 (such as the global pandemic caused by the
COVID-19 virus), recessions, rising inflation, or other events could have a
significant negative impact on the Fund and its investments. 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 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 NYSE Arca, Inc. (the “Exchange”) and may be
traded on U.S. exchanges other than the Exchange, there can be no assurance that
Shares will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of Shares may begin to mirror the liquidity of
the Fund’s underlying portfolio holdings, which can be significantly less liquid
than Shares, and this could lead to differences between the market price of the
Shares and the underlying value of those Shares.
•Fixed
Income Securities Risk.
The value of the Fund’s investments in fixed income securities held through the
underlying funds will fluctuate with changes in interest rates. Typically, a
rise in interest rates causes a decline in the value of fixed income securities.
On the other hand, if rates fall, the value of fixed income securities generally
increases. In general, the market price of fixed income securities with longer
maturities will increase or decrease more in response to changes in interest
rates than shorter-term securities. Changes in government intervention may have
adverse effects on investments, volatility, and illiquidity in debt markets.
Credit risk refers to the possibility that the issuer of a security will not be
able to make principal and interest payments when due. Changes in an issuer’s
credit rating or the market’s perception of an issuer’s creditworthiness may
also affect the value of an investment in that issuer. The degree of credit risk
depends on both the financial condition of the issuer and the terms of the
obligation.
•Foreign
Securities Risk.
The Fund may invest in underlying funds 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.
•Futures
Contracts Risks.
The Fund may invest in underlying funds that invest primarily in
futures contracts. The value of a futures contract tends to increase and
decrease in tandem with the value of the underlying instrument. Depending on the
terms of the particular contract, futures contracts are settled through either
physical delivery of the underlying instrument on the settlement date or by
payment of a cash settlement amount on the settlement date.
•Government
Obligations Risk.
The Fund may invest in underlying funds that invest primarily in government
obligations. No assurance can be given that the U.S. government will provide
financial support to U.S. government-sponsored agencies or instrumentalities
where it is not obligated to do so by law, such as the Federal National Mortgage
Association (“Fannie Mae”) and the Federal Home Loan Mortgage Corporation
(“Freddie Mac”). Securities issued by Fannie Mae and Freddie Mac have
historically been supported only by the discretionary authority of the U.S.
government. While the U.S. government provides financial support to various U.S.
government-sponsored agencies and instrumentalities, such as Fannie Mae and
Freddie Mac, no assurance can be given that it will always do so.
•Investment
Company Risk. The
risks of investing in investment companies, such as the underlying funds,
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.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing.
The securities of large-capitalization companies may be relatively mature
compared to smaller companies and therefore subject to slower growth during
times of economic expansion. Large-capitalization companies may also be unable
to respond quickly to new competitive challenges, such as changes in technology
and consumer tastes.
◦Mid-Capitalization
Investing. The
securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies, but they may also be subject to slower growth
than small-capitalization companies during times of economic expansion. 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, but they may also be
nimbler and more responsive to new challenges than large-capitalization
companies. 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. 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.
•Models
and Data Risk.
The composition of the Fund is heavily dependent on proprietary quantitative
models as well as information and data supplied by third parties (“Models and
Data”).
When
Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon may lead to securities being included in or excluded from the
Fund that would have been excluded or included had the Models and Data been
correct and complete.
•New
Fund Risk.
The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision. Additionally, the Adviser
has not previously managed a registered fund, which may increase the risk of
investing in the Fund.
•Tax
Risk. The
contribution of the initial assets of the Fund was structured as a transaction
in which no gain or loss was intended to be recognized for U.S. federal income
tax purposes, however, there are no assurances that the IRS will agree that such
contribution qualifies for nonrecognition. If the contribution did not qualify
as a nonrecognition transaction for U.S. federal income tax purposes, such
treatment could affect the Fund’s ability to qualify as a RIC under the Code,
and affect whether gains and losses recognized by the Fund are treated as
ordinary income or capital gain and potentially cause the Fund to be subject to
income or excise taxes for under distributions. In turn, such treatment may also
affect the amount, timing or character of income distributed to you by the Fund
such that the Fund may be required to reclassify distributions previously
distributed to you.
Performance
Performance information for the Fund is not
included because the Fund had not yet commenced operations as of the date of
this Prospectus. In the future, performance information for the
Fund will be presented in this section. Updated performance information will be
available on the Fund’s website at www.thebrinsmerefunds.com.
Management
|
|
|
|
|
|
Adviser: |
Estate
Counselors, LLC, d/b/a The Milwaukee Company |
Sub-Adviser: |
Penserra
Capital Management LLC |
Portfolio
Managers: |
Shrey
Patel, Chief Portfolio Manager for the Adviser, and Dustin Lewellyn, CFA,
Managing Director, Ernesto Tong, CFA, Managing Director, and Anand Desai,
Associate of the Sub-Adviser, have been portfolio managers of the Fund
since its inception in December 2023. |
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.thebrinsmerefunds.com.
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an
individual retirement account (“IRA”) or other tax-advantaged account.
Distributions on investments made through tax-deferred arrangements may be taxed
later upon withdrawal of assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange-traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Such arrangements do not result in increased Fund
expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
Investment
Objectives
Each
Fund’s investment objective has been adopted as a non-fundamental investment
policy and may be changed without shareholder approval upon written notice to
shareholders.
Principal
Investment Risks
This
section provides additional information regarding the principal risks described
in each Fund Summary. As in each 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 applicable Fund, regardless of the order in
which it appears. Each of the factors below could have a negative impact on the
applicable Fund’s performance and trading prices.
•Commodities
Risk. The
Fund may invest in underlying funds that principally invest in commodities and
related investments, the value of which may be affected by changes in overall
market movements, commodity index volatility, changes in interest rates, or
factors affecting a particular industry or commodity, such as drought, floods,
weather, livestock disease, embargoes, and tariffs. The prices of industrial
metals, precious metals, agriculture, and livestock commodities may fluctuate
widely due to factors such as changes in value, supply and demand, and
governmental regulatory policies.
•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 the 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 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,
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 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 the 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 the 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 Shares, and other data integral to the
functioning of the Fund inaccessible or inaccurate or incomplete. The Fund also
may incur substantial costs for cybersecurity risk management to prevent cyber
incidents in the future. The Fund and its shareholders could be negatively
impacted as a result.
•Emerging
Markets Risk.
Investments
in securities and instruments traded in developing or emerging markets, or that
provide exposure to such securities or markets, can involve additional risks
relating to political, economic, or regulatory conditions not associated with
investments in U.S. securities and instruments. For example, developing and
emerging markets may be subject to (i) greater market volatility,
(ii) lower trading volume and liquidity, (iii) greater social,
political and economic uncertainty, (iv) governmental controls on foreign
investments and limitations on repatriation of invested capital, (v) lower
disclosure, corporate governance, auditing and financial reporting standards,
(vi) fewer protections of property rights, (vii) fewer investor rights
and limited legal or practical remedies available to investors against emerging
market companies, (viii) restrictions on the transfer of securities or
currency, and (ix) settlement and trading practices that differ from those
in U.S. markets. Each of these factors may impact the ability of the Fund to
buy, sell or otherwise transfer securities, adversely affect the trading market
and price for Shares and cause the Fund to decline in value.
•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 experienced particularly large losses as a result of these disruptions.
Although the immediate effects of the COVID-19 pandemic have begun to dissipate,
global markets and economies continue to contend with the ongoing and long-term
impact of the COVID-19 pandemic and the resultant market volatility and economic
disruptions. 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. Each
Fund is an ETF, and, as a result of an ETF’s structure, 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 or periods of
steep market declines. The market price of Fund shares during the trading day,
like the price of any exchange-traded security, includes a “bid-ask” spread
charged by the exchange specialist, market makers or other participants that
trade the Fund shares. In times of severe market disruption, the bid-ask spread
can increase significantly. At those times, Fund shares are most likely to be
traded at a discount to NAV, and the discount is likely to be greatest when the
price of Fund shares is falling fastest, which may be the time that you most
want to sell your Fund shares. The Adviser believes that, under normal market
conditions, large market price discounts or premiums to NAV will not be
sustained because of arbitrage opportunities.
◦Trading.
Although Shares are listed for trading on the Exchange and may be listed or
traded on U.S. and non-U.S. stock exchanges other than the Exchange, there can
be no assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange “circuit breaker”
rules, which temporarily halt trading on the Exchange when a decline in the
S&P 500®
Index during a single day reaches certain thresholds (e.g.,
7%, 13%, and 20%). Additional rules applicable to the Exchange may halt trading
in Shares when extraordinary volatility causes sudden, significant swings in the
market price of Shares. There can be no assurance
that
Shares will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of Shares may begin to mirror the liquidity of
the Fund’s underlying portfolio holdings, which can be significantly less liquid
than Shares, and this could lead to differences between the market price of the
Shares and the underlying value of those Shares.
•Fixed
Income Securities Risk.
Each Fund may invest in underlying
funds that invests primarily in fixed
income securities, such as bonds and certain asset-backed securities, involve
certain risks, which include:
◦Credit
Risk.
Credit risk refers to the possibility that the issuer of a security will not be
able to make principal and interest payments when due. Changes in an issuer’s
credit rating or the market’s perception of an issuer’s creditworthiness may
also affect the value of an investment in that issuer. The degree of credit risk
depends on both the financial condition of the issuer and the terms of the
obligation.
◦Extension
Risk.
When interest rates rise, certain obligations will be paid off by the obligor
more slowly than anticipated, causing the value of these securities to fall.
Rising interest rates tend to extend the duration of securities, making them
more sensitive to future changes in interest rates. The value of longer-term
securities generally changes more in response to changes in interest rates than
the value of shorter-term securities. As a result, in a period of rising
interest rates, securities may exhibit additional volatility and may lose
value.
◦Interest
Rate Risk.
Generally, the value of fixed income securities will change inversely with
changes in interest rates. As interest rates rise, the market value of fixed
income securities tends to decrease. Conversely, as interest rates fall, the
market value of fixed income securities tends to increase. This risk will be
greater for long-term securities than for short-term securities. The Fund may
take steps to attempt to reduce the exposure of its portfolio to interest rate
changes; however, there can be no guarantee that the Fund will take such actions
or that the Fund will be successful in reducing the impact of interest rate
changes on the portfolio. In recent periods, governmental financial regulators,
including the U.S. Federal Reserve, have taken steps to increase interest rates.
Changes in government intervention may have adverse effects on investments,
volatility, and illiquidity in debt markets.
◦Prepayment
Risk.
When interest rates fall, certain obligations will be paid off by the obligor
more quickly than originally anticipated, and the Fund may have to invest the
proceeds in securities with lower yields. In periods of falling interest rates,
the rate of prepayments tends to increase (as does price fluctuation) as
borrowers are motivated to pay off debt and refinance at new lower rates. During
such periods, reinvestment of the prepayment proceeds by the management team
will generally be at lower rates of return than the return on the assets that
were prepaid. Prepayment reduces the yield to maturity and the average life of
the security.
◦Variable
and Floating Rate Instrument Risk.
The absence of an active market for these securities could make it difficult for
the Fund to dispose of them if the issuer defaults.
•Foreign
Securities Risk.
Each Fund may invest in underlying
funds that invest primarily in foreign securities. 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 a Fund does
not price its Shares, the value of the securities in a 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 a Fund more volatile and
potentially less liquid than other types of investments.
•Futures
Contracts Risks.
Each Fund may invest in underlying
funds that invest primarily in futures contracts. The
value of a futures contract tends to increase and decrease in tandem with the
value of the underlying instrument. Depending on the terms of the particular
contract, futures contracts are settled through either physical delivery of the
underlying instrument on the settlement date or by payment of a cash settlement
amount on the settlement date. A decision as to whether, when, and how to use
futures involves the exercise of skill and judgment and even a well-conceived
futures transaction may be unsuccessful because of market behavior or unexpected
events. In addition to the risks associated with all derivatives, the prices of
futures can be highly volatile, using futures can lower total return, and the
potential loss from futures can exceed a Fund’s initial investment in such
contracts and could be unlimited.
•Government
Obligations Risk.
Each
Fund may invest in underlying funds that invests primarily in securities issued,
sponsored or guaranteed by the U.S. government, its agencies and
instrumentalities. However, no assurance can be given that the U.S. government
will provide financial support to U.S. government-sponsored agencies or
instrumentalities where it is not obligated to do so by law. For instance,
securities issued by the Government National Mortgage Association (“Ginnie Mae”)
are supported by the full faith and credit of the United States. Securities
issued by Fannie Mae and Freddie Mac have historically been supported only by
the discretionary authority of the U.S. government. While the U.S. government
provides financial support to various U.S. government-sponsored agencies and
instrumentalities, such as those listed above, no assurance can be given that it
will always do so. In September 2008, at the direction of the U.S. Department of
the Treasury, Fannie Mae and Freddie Mac were placed into conservatorship under
the Federal Housing Finance Agency (“FHFA”), an independent regulator, and they
remain in such status as of the date of this Prospectus. The U.S. government
also took steps to provide additional financial support to Fannie Mae and
Freddie Mac.
•Investment
Company Risk.
Each Fund may invest in shares of investment companies, such as ETFs, that
invest in a wide range of instruments designed to track the performance of a
particular securities market index (or sector of an index) or that are actively
managed. The risks of investment in these securities typically reflect the risks
of the types of instruments in which the investment company invests. When a 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 a
Fund in an investment company will cause the Fund’s operating expenses (taking
into account indirect expenses such as the fees and expenses of the investment
company) to be higher and, in turn, performance to be lower than if it were to
invest directly in the instruments underlying the investment company.
Additionally, there may not be an active trading market available for shares of
some ETFs. Shares of an ETF may also trade in the market at a premium or
discount to their NAV.
•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 such Fund.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing.
The securities of large-capitalization companies may be relatively mature
compared to smaller companies and therefore subject to slower growth during
times of economic expansion. Large-capitalization companies may also be unable
to respond quickly to new competitive challenges, such as changes in technology
and consumer tastes.
◦Mid-Capitalization
Investing. The
securities of mid-capitalization companies may be more vulnerable to adverse
issuer, market, political, or economic developments than securities of
large-capitalization companies, but they may also be subject to slower growth
than small-capitalization companies during times of economic expansion. 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, but they may also be
nimbler and more responsive to new challenges than large-capitalization
companies. 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. 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.
•Models
and Data Risk. When
Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon expose a Fund to potential risks. For example, by relying on
Models and Data, the Adviser may be induced to buy certain investments at prices
that are too high, to sell certain other investments at prices that are too low,
or to miss favorable opportunities altogether. Similarly, any hedging based on
faulty Models and Data may prove to be unsuccessful.
Some
of the models used by the Adviser for a Fund are predictive in nature. The use
of predictive models has inherent risks. For example, such models may
incorrectly forecast future behavior, leading to potential losses on a cash flow
and/
or
a mark-to-market basis. In addition, in unforeseen or certain low-probability
scenarios (often involving a market disruption of some kind), such models may
produce unexpected results, which can result in losses for a Fund. Furthermore,
because predictive models are usually constructed based on historical data
supplied by third parties, the success of relying on such models may depend
heavily on the accuracy and reliability of the supplied historical data.
All
models rely on correct market data inputs. If incorrect market data is entered
into even a well-founded model, the resulting information will be incorrect.
However, even if market data is input correctly, “model prices” will often
differ substantially from market prices, especially for instruments with complex
characteristics, such as derivative instruments.
•New
Fund Risk.
Each Fund is a recently organized investment company with no operating history.
As a result, prospective investors have no track record or history on which to
base their investment decision. Additionally, the Adviser has not previously
managed a registered fund, which may increase the risk of investing in the
Funds.
•Tax
Risk.
The
contributions of the initial assets of each Fund were structured as transactions
in which no gain or loss was intended to be recognized for U.S. federal income
tax purposes, however, there are no assurances that the IRS will agree that such
contributions qualify for nonrecognition. If the contributions did not qualify
as a nonrecognition transactions for U.S. federal income tax purposes, such
treatment could affect each Fund’s ability to qualify as a RIC under the Code,
and affect whether gains and losses recognized by each Fund are treated as
ordinary income or capital gain and potentially cause each Fund to be subject to
income or excise taxes for under distributions.
In
turn, such treatment may also affect the amount, timing or character of income
distributed to you by each Fund such that the Funds may be required to
reclassify distributions previously distributed to you.
Information
about the Funds’ daily portfolio holdings is available at
www.thebrinsmerefunds.com. A 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 (“SAI”).
Investment
Adviser
Estate
Counselors, LLC, d/b/a The Milwaukee Company, located at 414 North Main Street,
Thiensville, Wisconsin 53092, serves as investment adviser to the Funds and has
overall responsibility for the general management and administration of each
Fund. The Adviser was founded in 2004 and is registered with the SEC as an
investment adviser.
The
Adviser also arranges for sub-advisory, transfer agency, custody, fund
administration, and all other related services necessary for the Funds to
operate. The Adviser provides oversight of the Funds’ Sub-Adviser, monitoring of
the Sub-Adviser’s buying and selling of securities for the Funds, and review of
the Sub-Adviser’s performance. For the services it provides to the Funds, the
Fund pays the Adviser a unified management fee, which is calculated daily and
paid monthly, at an annual rate based on the applicable Fund’s average daily net
assets as set forth in the table below.
|
|
|
|
|
|
Name
of Fund |
Management
Fee |
The
Brinsmere Fund – Growth ETF |
0.35% |
The
Brinsmere Fund – Conservative ETF |
0.35% |
Under
the Investment Advisory Agreement, the Adviser has agreed to pay all expenses
incurred by each 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, in turn, compensates the
Sub-Adviser from the management fee it receives.
The
basis for the approval by the Board of Trustees (the “Board”) of the Fund’s
Investment Advisory Agreement will be available in the Funds’ first Annual or
Semi-Annual Report to Shareholders.
Sub-Adviser
The
Adviser has retained Penserra Capital Management LLC to serve as sub-adviser for
the Funds. The Sub-Adviser is a registered investment adviser and New York
limited liability company whose principal office is located at 4 Orinda Way,
Suite 100-A, Orinda, California 94563. The Sub-Adviser provides investment
management services to investment companies and other investment advisers. The
Sub-Adviser is responsible for trading portfolio securities on behalf of the
Funds,
including
selecting broker-dealers to execute purchase and sale transactions as instructed
by the Adviser, subject to the supervision of the Adviser and the
Board.
For
its services, the Sub-Adviser is paid a fee by the Adviser, which fee is
calculated daily and paid monthly, at an annual rate based on the aggregate
average daily net assets for each fund advised by the Adviser, including the
Funds, and for which the Sub-Adviser serves as sub-adviser, as follows: 0.03% on
net assets under management or $60,000 annual minimum, whichever is
greater.
The
basis for the Board’s approval of the Sub-Advisory Agreement for the Funds will
be available in the Funds’ first Annual or Semi-Annual Report to
Shareholders.
Portfolio
Managers
Shrey
Patel, Chief Portfolio Manager of the Adviser, Dustin Lewellyn, CFA, Managing
Director of the Sub-Adviser, Ernesto Tong, CFA, Managing Director of the
Sub-Adviser, and Anand Desai, Associate of the Sub-Adviser, are the Funds’
portfolio managers (the “Portfolio Managers”) and are jointly responsible for
the day-to-day management of the Funds. The Portfolio Managers are responsible
for various functions related to portfolio management, including, but not
limited to, investing cash inflows, implementing investment strategy,
researching and reviewing investment strategy, and overseeing members of their
portfolio management team with more limited responsibilities.
Mr.
Patel is the Chief Portfolio Manager of the Adviser. As such, he is primarily
responsible for the design, implementation, and execution of the Adviser’s
proprietary investment strategies, as well as the management of client
portfolios. Mr. Patel joined the Adviser in 2014, serving under various
capacities before assuming his current role in 2018. He has earned both a
Master’s degree in Finance from IIT Stuart School of Business (Chicago) and a
Bachelor’s degree in Computer Engineering. He is Series 65 registered with the
Financial Industry Regulatory Authority (FINRA).
Mr.
Lewellyn has been a Managing Director with the Sub-Adviser since 2012. He was
President and Founder of Golden Gate Investment Consulting LLC from 2011 through
2015. Prior to that, Mr. Lewellyn was a managing director at Charles Schwab
Investment Management, Inc. (“CSIM”), which he joined in 2009, and head of
portfolio management for Schwab ETFs. Prior to joining CSIM, he worked for two
years as director of ETF product management and development at a major financial
institution focused on asset and wealth management. Prior to that, he was a
portfolio manager for institutional clients at a large financial services firm
for three years. In addition, he held roles in portfolio accounting and
portfolio management at a large asset management firm for more than 6 years.
Mr.
Tong has been a Managing Director with the Sub-Adviser since 2015. Prior to
joining the Sub-Adviser, Mr. Tong spent seven years as a vice president at
Blackrock, where he was a portfolio manager for a number of the iShares ETFs,
and prior to that, he spent two years in the firm’s index research group.
Mr.
Desai has been a Director with the Sub-Adviser since 2023 and was a Senior Vice
President with the Sub-Adviser since 2021 and was previously an Associate since
2015. Prior to joining Penserra, Mr. Desai spent five years as a portfolio fund
accountant at State Street.
The
Funds’ SAI provides additional information about the Portfolio Managers’
compensation structure, other accounts that the Portfolio Managers manage and
the Portfolio Managers’ ownership of Shares.
Each
Fund issues and redeems Shares at NAV only in Creation Units. 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 (defined below), and that has been
accepted by a 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 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 (“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 with a Fund, 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, 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 Funds employ fair value pricing and may impose transaction
fees on purchases and redemptions of Creation Units to cover the custodial and
other costs incurred by a Fund in effecting trades. In addition, the Funds and
the Adviser reserve the right to reject any purchase order at any time.
Determination
of NAV
Each
Fund’s NAV is calculated as of the scheduled close of regular trading on the New
York Stock Exchange (“NYSE”), generally 4:00 p.m. Eastern time, each day
the NYSE is open for business. The NAV for each Fund is calculated by dividing
the 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. 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. The Board has appointed the Adviser as
each Fund’s valuation designee to perform all fair valuations of the Funds’
portfolio investments, subject to the Board’s oversight. Accordingly, the
Adviser has established procedures for its fair valuation of each Fund’s
portfolio investments. Generally, when fair valuing a security 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 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 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 Funds. Accordingly, Investing
Funds must adhere to the limits set forth in Section 12(d)(1) when investing in
a Fund.
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
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 intends to
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 certain 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 RIC
under the Code. If a Fund 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. 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 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 a Fund from an
underlying fund taxable as a RIC may be treated as qualified dividend income
generally only to the extent so reported by such underlying fund. 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.
Certain of a Fund’s
investment
strategies may limit its ability to make distributions eligible for the reduced
rates applicable to qualified dividend income.
A
RIC that receives business interest income may pass through its net business
interest income for purposes of the tax rules applicable to the interest expense
limitations under Section 163(j) of the Code. A RIC’s total “Section 163(j)
Interest Dividend” for a tax year is limited to the excess of the RIC’s business
interest income over the sum of its business interest expense and its other
deductions properly allocable to its business interest income. A RIC may, in its
discretion, designate all or a portion of ordinary dividends as Section 163(j)
Interest Dividends, which would allow the recipient shareholder to treat the
designated portion of such dividends as interest income for purposes of
determining such shareholder’s interest expense deduction limitation under
Section 163(j) of the Code. This can potentially increase the amount of a
shareholder’s interest expense deductible under Section 163(j) of the Code. In
general, to be eligible to treat a Section 163(j) Interest Dividend as interest
income, you must have held your shares in a Fund for more than 180 days during
the 361-day period beginning on the date that is 180 days before the date on
which the share becomes ex-dividend with respect to such dividend. Section
163(j) Interest Dividends, if so designated by a Fund, will be reported to your
financial intermediary or otherwise in accordance with the requirements
specified by the IRS.
Shortly
after the close of each calendar year, you will be informed of the amount and
character of any distributions received from the Funds.
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.
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 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
a 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
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
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. 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.
Each
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 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 a 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 a 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 IRS may
assert, however, that a loss that is realized upon an exchange of securities for
Creation Units may not be currently deducted under the rules governing “wash
sales” (for an AP who does not mark-to-market 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 the wash
sales rule applies and when a loss might be deductible.
Each
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. Such Fund may
sell portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause such 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, such Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
Foreign
Investments by the Funds
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.
Foreign
tax credits, if any, received by a Fund as a result of an investment in another
RIC will not be passed through to you unless the Fund qualifies as a “qualified
fund-of-funds” under the Code. If a Fund is a “qualified fund-of-funds” it will
be eligible to file an election with the IRS that will enable the Fund to pass
along these foreign tax credits to its shareholders. A Fund will be treated as a
“qualified fund-of-funds” under the Code if at least 50% of the value of the
Fund’s total assets (at the close of each quarter of the Fund’s taxable year) is
represented by interests in other RICs.
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.
The
Distributor, Quasar Distributors, LLC, is a broker-dealer registered with the
SEC. The Distributor distributes Creation Units for the Funds on an agency basis
and does not maintain a secondary market in Shares. The Distributor has no role
in determining the policies of the Funds or the securities that are purchased or
sold by the Funds. 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, 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.
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 Funds’
website at www.thebrinsmerefunds.com.
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 Funds 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 Funds particularly.
Financial
information is not available because the Funds had not commenced operations
prior to the date of this Prospectus.
The
Brinsmere Fund – Growth ETF
The
Brinsmere Fund – Conservative ETF
|
|
|
|
|
|
|
|
|
|
|
|
Adviser |
The
Milwaukee Company
414
North Main Street
Thiensville,
Wisconsin 53092 |
Sub-Adviser |
Penserra
Capital Management LLC
4
Orinda Way, Suite 100-A
Orinda,
California 94563 |
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 |
Distributor |
Quasar
Distributors, LLC
111
East Kilbourn Avenue, Suite 2200
Milwaukee,
Wisconsin 53202 |
Custodian |
U.S.
Bank National Association
1555
N. 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.
342
North Water Street, Suite 830
Milwaukee,
Wisconsin 53202 |
|
|
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 and techniques of
each Fund and certain other additional information. A current SAI dated October
23, 2023 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 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 each 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 calling
1-800-617-0004.
Shareholder
reports and other information about each Fund are also available:
◦Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov; or
◦Free
of charge from the Funds’ Internet website at www.thebrinsmerefunds.com;
or
(SEC
Investment Company Act File No. 811-22668)