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Prospectus
January
14, 2022
U.S.
Global ETFs
Exchange-Traded
Fund (“ETF”)
U.S. Global Sea to Sky Cargo ETF
(NYSE Arca Ticker: SEA)
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.
U.S.
Global Sea to Sky Cargo ETF
TABLE
OF CONTENTS
The U.S. Global Sea to Sky
Cargo ETF (the “Fund”) seeks to track the performance, before fees and expenses,
of the U.S. Global Sea to Sky Cargo Index (the “Index”).
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 |
0.60% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses1 |
1.30% |
Total
Annual Fund Operating Expenses |
1.90% |
Less:
Fee Waiver and/or Expense Reimbursement |
(1.30)% |
Total
Annual Fund Operating Expenses After Fee Waiver and/or Expense
Reimbursement2 |
0.60% |
(1)
Estimated for the current
fiscal year.
(2)
Pursuant to a contractual
operating expense limitation between U.S. Global Investors, Inc., the Fund’s
investment adviser (the “Adviser”), and the Fund, the Adviser has agreed to
waive its management fees and/or reimburse Fund expenses to ensure that Total
Annual Fund Operating Expenses (excluding 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,
and distribution fees and expenses paid by the Fund under any distribution plan
adopted pursuant to Rule 12b‑1 (collectively, “Excludable Expenses”)) do not
exceed 0.60% for the first $100 million of the Fund’s average daily net assets
and 0.70% for net assets greater than $100 million, through at least
April 30,
2023, unless terminated sooner by, or with the consent of, the
Trust’s Board of Trustees (the “Board of Trustees” or the “Board”). To the
extent the Fund incurs Excludable Expenses, Total Annual Fund Operating Expenses
After Fee Waiver and/or Expense Reimbursement will exceed the applicable expense
limitation. The Adviser may request recoupment of previously waived fees and
paid expenses from the Fund for up to three years from the date such fees and
expenses were waived or paid, if such reimbursement will not cause the Fund’s
total expense ratio to exceed the lesser of: (1) the expense limitation in place
at the time of the waiver and/or expense payment; or (2) the expense limitation
in place at the time of the recoupment.
Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then continue to hold or redeem all of
your Shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. The Example does not take into account brokerage commissions
that you may pay on your purchases and sales of Shares.
Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
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 Strategy
The
Fund uses a “passive management” (or indexing) approach to track the
performance, before fees and expenses, of the Index. The Index is composed of
the exchange-listed common stock (or depositary receipts) of marine shipping,
air freight and courier, and port and harbor operating companies of any size
across the globe in developed or emerging markets.
U.S.
Global Sea to Sky Cargo Index
The
Index tracks the performance of marine shipping, air freight and courier, and
port and harbor operating companies (collectively, “Cargo
Companies”).
At
the time of each quarterly reconstitution and rebalance of the Index, 70% of the
Index’s weight is allocated to marine shipping and port/harbor companies and 30%
of the Index’s weight is allocated to air freight/courier companies. The
universe of Cargo Companies is screened for investibility (e.g.,
must be listed on a securities exchange), a minimum market capitalization of
$100 million, and a minimum three-month average dollar value traded of $5
million. As June 30, 2021, the Index consisted of 29 Cargo Companies. The Index
is reconstituted and rebalanced quarterly at the close of trading on the second
Friday in each March, June, September, and December based on data as of a prior
date (the “Selection Date”).
As
of each Selection Date, each Cargo Company is ranked based on four factors (each
assigned a factor weighting): cash flow return on invested capital (“CFROIC”)
(33%), market capitalization (33%), earnings-to-price ratio (33%), and
cash-flow-to-price ratio (1%). A composite score is assigned to each Cargo
Company based on such rankings.
At
the time of each reconstitution and rebalance of the Index, the top six marine
shipping and port/harbor companies with the highest composite scores and a
minimum market capitalization of US$400 million each receive a five percent
weighting allocation of the Index; the next top seven marine shipping and
port/harbor companies with the highest composite scores and a minimum market
capitalization of US$300 million each receive a four percent weighting
allocation of the Index; the next top six marine shipping and port/harbor
companies with the highest composite scores and a minimum market capitalization
of US$100 million each receive a two percent weighting allocation of the
Index; and the top ten air freight/courier companies with the highest composite
scores and a minimum market capitalization of US$200 million each receive a
three percent weighting allocation of the Index.
As
of June 30, 2021, the Index had significant exposure to companies in China/Hong
Kong and Taiwan. The Index’s geographic exposure may change significantly with
each reconstitution or based on market movements in between reconstitutions.
The
Index was developed by U.S. Global Indices, LLC (the “Index Provider”), a
wholly-owned subsidiary of the Adviser, in 2021 in anticipation of the
commencement of operations of the Fund and is constructed using an objective,
rules-based methodology.
The
Index calculation agent is Indxx, LLC, which is not affiliated with the Fund,
the Adviser, the Index Provider, or the Fund’s distributor. The Index
calculation agent provides information to the Fund about the constituents of the
Index and does not provide investment advice with respect to the desirability of
investing in, purchasing or selling securities.
The
Fund’s Investment Strategy
Under
normal circumstances, the Fund will invest at least 80% of its net assets (plus
borrowings for investment purposes) in Cargo Companies. The foregoing policy may
be changed without shareholder approval upon 60 days’ written notice to
shareholders.
The
Fund will generally use a “replication” strategy to achieve its investment
objective, meaning it generally will invest in all of the component securities
of the Index in approximately the same proportion as in the Index. However, the
Fund may use a “representative sampling” strategy, meaning it may invest in a
sample of the securities in the Index whose risk, return and other
characteristics closely resemble the risk, return and other characteristics of
the Index as a whole, when the Adviser believes it is in the best interests of
the Fund (e.g.,
when replicating the Index involves practical difficulties or substantial costs,
an Index constituent becomes temporarily illiquid, unavailable or less liquid,
or as a result of legal restrictions or limitations that apply to the Fund but
not to the Index).
The
Fund generally may invest in securities or other investments not included in the
Index, but which the Adviser believes will help the Fund track the Index. For
example, the Fund may invest in securities that are not components of the Index
to reflect various corporate actions and other changes to the Index (such as
reconstitutions, additions, and deletions).
The
Fund is considered to be non-diversified, which means that it may invest more of
its assets in the securities of a single issuer or a smaller number of issuers
than if it were a diversified fund.
To
the extent the Index concentrates (i.e., holds more than 25 percent of its total
assets) in the securities of a particular industry or group of related
industries, the Fund will concentrate its investments to approximately the same
extent as the Index. The Adviser expects that the Index, and consequently the
Fund, will generally be concentrated in the securities of Cargo
Companies.
Principal Investment Risks
The
principal risks of investing in the Fund are summarized below. The principal
risks are presented in alphabetical order to facilitate finding particular risks
and comparing them with 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.”
•Concentration
in Cargo Companies Risk.
The
Index, and consequently the Fund, is expected to concentrate its investments
(i.e.,
hold more than 25% of its total assets) in the securities of Cargo Companies. As
a result, the value of the Fund’s shares may rise and fall more than the value
of shares of a fund that invests in securities of companies in a broader range
of industries. In addition, at times, the marine shipping, port/harbor
operators, and air freight/courier industries may be out of favor and
underperform other industries or groups of industries or the market as a whole.
Cargo
Companies may be adversely affected by a downturn in economic conditions that
can result in decreased demand for marine shipping, ports, and air freight.
Cargo Companies may also be significantly affected by changes in fuel prices,
which may be very volatile, the imposition of tariffs or trade wars, changes in
labor relations or availability, insurance costs, commodities prices in general,
international politics and conflicts, changes in airborne or seaborne
transportation patterns, changes to marine shipping and air freight routes,
weather patterns and events, including hurricane activity, maritime accidents,
canal closures, and port congestion. Cargo Companies may also be highly
dependent on aircraft, ships, or related equipment from a small number of
suppliers, and consequently, issues affecting the availability, reliability,
safety, or longevity of such aircraft, ships, or equipment (e.g.,
the inability of a supplier to meet demand or the grounding of an aircraft due
to safety concerns) may have a significant effect on the operations and
profitability of Cargo Companies.
•Currency
Exchange Rate Risk.
The Fund’s assets may include investments denominated in non-U.S. currencies or
in securities that provide exposure to such currencies. Changes in currency
exchange rates and the relative value of non-U.S. currencies will affect the
value of the Fund’s investment and the value of your Shares. Currency exchange
rates can be very volatile and can change quickly and unpredictably. As a
result, the value of an investment in the Fund may change quickly and without
warning and you may lose money.
•Depositary
Receipt Risk. Depositary
receipts involve risks similar to those associated with investments in foreign
securities, such as changes in political or economic conditions of other
countries and changes in the exchange rates of foreign currencies. Depositary
receipts listed on U.S. exchanges are issued by banks or trust companies and
entitle the holder to all dividends and capital gains that are paid out on the
underlying foreign shares (“Underlying Shares”). When the Fund invests in
depositary receipts as a substitute for an investment directly in the Underlying
Shares, the Fund is exposed to the risk that the depositary receipts may not
provide a return that corresponds precisely with that of the Underlying Shares.
•Emerging
Markets Risk.
The Fund may 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. Less
information may be available about companies in emerging markets than in
developed markets because such emerging markets companies may not be subject to
accounting, auditing and financial reporting standards or to other regulatory
practices required by U.S. companies.
•Equity
Market Risk. The
equity securities held in the Fund’s portfolio may experience sudden,
unpredictable drops in value or long periods of decline in value. This may occur
because of factors that affect securities markets generally or factors affecting
specific issuers, industries, 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, acts of terrorism, spread of
infectious diseases or other public health issues, recessions, or other events
could have a significant negative impact on the Fund and its investments. For
example, the global pandemic caused by COVID-19, a novel coronavirus, and the
aggressive responses taken by many governments, including closing borders,
restricting international and domestic travel, and the imposition of prolonged
quarantines or similar restrictions, has had negative impacts, and in many cases
severe impacts, on markets worldwide. The COVID-19 pandemic has caused prolonged
disruptions to the normal business operations of companies around the world and
the impact of such disruptions is hard to predict. Such events may affect
certain geographic regions, countries, sectors and industries more significantly
than others. Such events could adversely affect the prices and liquidity of the
Fund’s portfolio securities or other instruments and could result in disruptions
in the trading markets.
•ETF
Risks. The
Fund is an ETF, and, as a result of an ETF’s structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as Authorized
Participants (“APs”). In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, Shares may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant. Because
securities held by the Fund may trade on foreign exchanges that are closed when
the Fund’s primary listing exchange is open, the Fund is likely to experience
premiums and discounts greater than those of domestic ETFs.
◦Trading. Although
Shares are listed for trading on the 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.
•Foreign
Securities Risk.
Investments in non-U.S. securities involve certain risks that may not be present
with investments in U.S. securities. For example, investments in non-U.S.
securities may be subject to risk of loss due to foreign currency fluctuations
or to political or economic instability. There may be less information publicly
available about a non-U.S. issuer than a U.S. issuer. Non-U.S. issuers may be
subject to different accounting, auditing, financial reporting and investor
protection standards than U.S. issuers. Investments in non-U.S. securities may
be subject to withholding or other taxes and may be subject to additional
trading, settlement, custodial, and operational risks. With respect to certain
countries, there is the possibility of government intervention and expropriation
or nationalization of assets. Because legal systems differ, there is also the
possibility that it will be difficult to obtain or enforce legal judgments in
certain countries. Since foreign exchanges may be open on days when the Fund
does not price its Shares, the value of the securities in the Fund’s portfolio
may change on days when shareholders will not be able to purchase or sell the
Shares. Conversely, Shares may trade on days when foreign exchanges are closed.
Each of these factors can make investments in the Fund more volatile and
potentially less liquid than other types of investments.
•Geographic
Investment Risk.
To
the extent that the Fund invests a significant portion of its assets in the
securities of companies of a single country or region, it is more likely to be
impacted by events or conditions affecting that country or region. For example,
political and economic conditions and changes in regulatory, tax, or economic
policy in a country could significantly affect the market in that country and in
surrounding or related countries and have a negative impact on the Fund’s
performance. Currency developments or restrictions, political and social
instability, and changing economic conditions have resulted in significant
market volatility.
◦Risks
of Investing in China. Investments
in Chinese issuers subject the Fund to risks specific to China. China may be
subject to considerable degrees of economic, political and social instability.
China is a developing market and demonstrates significantly higher volatility
from time to time in comparison to developed markets. Over the past 25 years,
the Chinese government has undertaken reform of economic and market practices
and is expanding the sphere of private ownership of property in China. However,
Chinese markets generally continue to experience inefficiency, volatility and
pricing anomalies resulting from governmental influence, a lack of publicly
available information and/or political and social instability. Internal social
unrest or confrontations with other neighboring countries, including military
conflicts in response to such events, may also disrupt economic development in
China and result in a greater risk of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation. Export
growth continues to be a major driver of China’s rapid economic growth.
Reduction in spending on Chinese products and services, institution of tariffs
or other trade barriers, or a downturn in any of the economies of China’s key
trading partners may have an adverse impact on the Chinese economy. China is
also vulnerable economically to the impact of a public health crisis, which
could depress consumer demand, reduce economic output, and potentially lead to
market
closures,
travel restrictions, and quarantines, all of which would negatively impact
China’s economy and could affect the economies of its trading partners.
◦Risks
of Investing in Taiwan. Investments
in Taiwanese issuers may subject the Fund to risks specific to Taiwan. Taiwan is
a small island state with few raw material resources and limited land area and
is reliant on imports for its commodity needs. Any fluctuations or shortages in
the commodity markets could have a negative impact on the Taiwanese economy.
Also, continued labor outsourcing may adversely affect the Taiwanese economy.
Taiwan’s economy is intricately linked with economies of Asian countries that
have experienced over-extensions of credit, frequent and pronounced currency
fluctuations, currency devaluations, currency repatriation, rising unemployment
and fluctuations in inflation. The Taiwanese economy is dependent on the
economies of Japan and China, as well as the United States, and negative changes
in their economies or a reduction in purchases by any of them of Taiwanese
products and services would likely have an adverse impact on the Taiwanese
economy. Taiwan’s geographic proximity to China and Taiwan’s history of
political contention with China have resulted in ongoing tensions with China,
including the risk of war with China. These tensions may materially affect the
Taiwanese economy and securities markets.
•Index
Provider Risk. There
is no assurance that the Index Provider, or any agents that act on its behalf,
will compile the Index accurately, or that the Index will be determined,
maintained, constructed, reconstituted, rebalanced, composed, calculated or
disseminated accurately. The Adviser relies upon the Index Provider and its
agents to compile, determine, maintain, construct, reconstitute, rebalance,
compose, calculate (or arrange for an agent to calculate), and disseminate the
Index accurately. Any losses or costs associated with errors made by the Index
Provider or its agents generally will be borne by the Fund and its
shareholders.
•New
Fund Risk. The
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.
•Non-Diversification
Risk. The Fund is considered to be non-diversified,
which means that it may invest more of its assets in the securities of a single
issuer or a smaller number of issuers than if it were a diversified fund. As a
result, the Fund may be more exposed to the risks associated with and
developments affecting an individual issuer or a smaller number of issuers than
a fund that invests more widely. This may increase the Fund’s volatility and
cause the performance of a relatively smaller number of issuers to have a
greater impact on the Fund’s performance. However, the Fund intends to satisfy
the diversification requirements for qualifying as a regulated investment
company (a “RIC”) under Subchapter M of the Internal Revenue Code of 1986, as
amended (the “Code”).
•Passive
Investment Risk.
The Fund is not actively managed and the Adviser would not sell shares of an
equity security due to current or projected underperformance of a security,
industry or sector, unless that security is removed from the Index or the
selling of shares of that security is otherwise required upon a reconstitution
of the Index in accordance with the Index methodology.
•Portfolio
Turnover Risk. The
Fund may trade all or a significant portion of the securities in its portfolio
in connection with each rebalance and reconstitution of its Index. A high
portfolio turnover rate increases transaction costs, which may increase the
Fund’s expenses. Frequent trading may also cause adverse tax consequences for
investors in the Fund due to an increase in short-term capital gains.
•Smaller-Companies
Risk. The
Fund may invest in the securities of smaller-capitalization companies. As a
result, the Fund may be more volatile than funds that invest in larger, more
established companies. The securities of smaller-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. Smaller-capitalization companies may be particularly
sensitive to changes in interest rates, government regulation, borrowing costs
and earnings.
•Tax
Risk.
To qualify for the favorable tax treatment generally available to a regulated
investment company (“RIC”), the Fund must satisfy, among other requirements
described in the SAI, certain diversification requirements. Given the
concentration of the Index in a relatively small number of securities, it may
not always be possible for the Fund to fully implement a replication strategy or
a representative sampling strategy while satisfying these diversification
requirements. The Fund’s efforts to replicate or represent the Index may cause
it inadvertently to fail to satisfy the diversification requirements. If the
Fund were to fail to satisfy the diversification requirements, it could be
eligible for relief provisions if the failure is due to reasonable cause and not
willful neglect and if a penalty tax is paid with respect to each failure to
satisfy the applicable requirements. Additionally, relief is provided for
certain de minimis failures of the diversification requirements where the Fund
corrects the failure within a specified period. If the Fund were to fail to
qualify as a RIC for a tax year, and the relief provisions are not available, it
would be taxed in the same manner as an ordinary corporation, and distributions
to its shareholders would not be deductible by the Fund in computing its taxable
income. In such case, its shareholders would be taxed as if they received
ordinary dividends, although corporate shareholders could be eligible for the
dividends received deduction (subject to certain limitations) and individuals
may
be
able to benefit from the lower tax rates available to qualified dividend income.
In addition, the Fund could be required to recognize unrealized gains, pay
substantial taxes and interest, and make substantial distributions before
requalifying as a RIC.
•Tracking
Error Risk. As
with all index funds, the performance of the Fund and the Index may differ from
each other for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by the Index. In addition,
the Fund may not be fully invested in the securities of the Index at all times
or may hold securities not included in the Index.
Performance
Performance information for the Fund is not
included because the Fund did not have a full calendar year of performance prior
to the date of this Prospectus. In the future, performance
information for the Fund will be presented in this section. Updated performance
information is available on the Fund’s website at www.usglobaletfs.com.
Management
Investment
Adviser
U.S.
Global Investors, Inc. serves as investment adviser to the Fund.
Portfolio
Managers
The
Fund is managed by a team consisting of the following individuals: Frank E.
Holmes, Chief Executive Officer and Director for the Adviser; and Ralph P.
Aldis, CFA, a Portfolio Manager for the Adviser.
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.usglobaletfs.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 IRA
or other tax-advantaged account. Distributions on investments made through
tax-deferred arrangements may be taxed later upon withdrawal of assets from
those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
Investment
Objective
The
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.
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Glossary
Cash
Flow Return On Invested Capital (CFROIC): A
company’s net cash flow from operations divided by average invested
capital.
Cash-Flow-to-Price
Ratio: A
company’s operating cash flow per share divided by its price per
share.
Earnings-to-Price
Ratio: A
company’s earnings per share divided by its price per
share. |
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The
Index tracks the performance of marine shipping, air freight and courier, and
port and harbor operating companies (as determined by the FactSet Revere
Business and Industry Classification System (“FactSet RBICS”) or the North
American Industry Classification System (“NAICS”)). The Index uses industry data
from FactSet RBICS to determine the companies included in the marine shipping
and air freight/courier industries. FactSet RBICS determines a company’s
classification using artificial intelligence that scans public filings and
market data. To be classified by FactSet RBICS as a marine shipping company or
an air freight/courier company, a company must derive at least 50% of its
revenue from either the marine shipping or the air freight/courier industries or
at least 50% of their revenue from a combination of the marine shipping and the
air freight/courier industries.
The
Index uses industry data from NAICS to determine the companies included in the
port/harbor operating industries if those companies were not identified by
FactSet RBICS as either marine shipping or air freight/courier companies. NAICS
determines a company’s classification using U.S. Census data that considers the
activities that generate the most revenue for a company.
A
Cargo Company is excluded from the Index if (i) its common stock is listed
solely on a securities exchange in a country that does not allow the transfer of
securities “free of payment,” except Taiwan and South Korea, and (ii) no
depositary receipts for such company are listed on a securities exchange in a
country other than those that do not allow the transfer of securities “free of
payment.”
The
Index Provider’s Index Committee is responsible for setting policy, determining
Index composition, and administering the Index in accordance with the Index
methodology. The Index Provider cannot foresee all possible facts and
circumstances that may render the inclusion or exclusion of a stock in or from
the Index inappropriate for the investibility of the Index. Consequently, under
unusual circumstances, the Index Committee may consider qualitative factors to
include, exclude, adjust, or postpone the inclusion of a stock in the Index in
keeping with the Index theme, and a stock may be considered for exclusion by the
Index Committee on the basis of corporate governance, accounting policies, lack
of transparency, and lack of representation, despite meeting all the criteria
provided in the Index methodology.
The
Fund and the Adviser have received exemptive relief from the SEC permitting the
Adviser (subject to certain conditions and the approval of the Fund’s Board of
Trustees) to select or change sub-advisers without obtaining shareholder
approval. The relief also permits the Adviser to materially amend the terms
of agreements with a sub-adviser (including an increase in the fee paid by the
Adviser to the sub-adviser (and not paid by the Fund)) or to continue the
employment of a sub-adviser after an event that would otherwise cause the
automatic termination of services with Board approval, but without shareholder
approval. Shareholders will be notified of any sub-adviser
changes.
This
section provides additional information regarding the principal risks described
in the Fund Summary. As in the Fund Summary, the principal risks below are
presented in alphabetical order to facilitate finding particular risks and
comparing them with other funds. Each risk described below is considered a
“principal risk” of investing in the Fund, regardless of the order in which it
appears. Each of the factors below could have a negative impact on the Fund’s
performance and trading prices.
•Concentration
in Cargo Companies Risk.
The
Index, and consequently the Fund, is expected to concentrate its investments
(i.e.,
hold more than 25% of its total assets) in the securities of Cargo Companies. As
a result, the value of the Fund’s shares may rise and fall more than the value
of shares of a fund that invests in securities of companies in a broader range
of industries. In addition, at times, the marine shipping, port/harbor
operators, and air freight/courier industries may be out of favor and
underperform other industries or groups of industries or the market as a whole.
Cargo
Companies may be adversely affected by a downturn in economic conditions that
can result in decreased demand for marine shipping and air freight. Due to the
discretionary nature of consumer spending on many goods that are shipped by air
or sea, Cargo Companies’ revenues are heavily influenced by the condition of the
U.S. economy and economies in other
regions
of the world. Cargo Companies may also be significantly affected by changes in
fuel or oil prices, which may be very volatile. Due to the competitive nature of
the marine shipping and air freight industries, Cargo Companies may not be able
to pass on increased fuel prices to customers by increasing fees or prices.
Cargo Companies may also be significantly affected by the imposition of tariffs,
trade wars, and/or changes in labor relations or availability, insurance costs,
and the imposition by the United States or other countries of taxes or tariffs
applicable to ship or aircraft equipment.
Cargo
Companies may also be highly dependent on aircraft, ships, or related equipment
from a small number of suppliers, and consequently, issues affecting the
availability, reliability, safety, or longevity of such aircraft, ships, or
equipment (e.g.,
the inability of a supplier to meet aircraft demand or the grounding of an
aircraft due to safety concerns) may have a significant effect on the operations
and profitability of Cargo Companies. Cargo Companies may be greatly affected by
changes in statutes or regulations of the United States or other countries,
which may affect levels of competition, the cost of providing marine shipping or
air freight services, or the prices that they can charge customers. Cargo
Companies are also subject to disruptions that may be caused by cyberattacks on
their businesses, operations, or third-party companies on which they depend for
part of their operations.
Additionally,
marine shipping and port/harbor operating companies are subject to volatile
fluctuations in the price and supply of steel, raw materials, and other products
transported by containerships. In particular, a decreased demand for coal
shipping resulting from a shift to cleaner fuel sources may negatively impact
Cargo Companies. In addition, international politics and conflicts, changes in
seaborne transportation patterns, changes to marine shipping and air freight
routes, weather patterns and events, including hurricane activity and other
natural disasters, maritime accidents, canal closures, port congestion, spill
events, embargoes, acts of terrorism or piracy, and labor strikes, can
significantly affect Cargo Companies involved in the maritime shipping of crude
oil, dry bulk, and container cargo. Marine shipping and port/harbor operating
companies are also subject to numerous safety, environmental, and other laws and
regulations that impact their operations, are costly to comply with, and could
expose them to materially adverse liabilities. Marine shipping and port/harbor
operating companies may be negatively affected by capacity constraints at ports
or a lack of available labor.
Air
freight and courier companies are subject to the additional risk that a small
number of companies may represent a large portion of the industry, and these
companies can be particularly sensitive to adverse economic, regulatory, or
financial developments. The air freight industry can also be significantly
affected by policies of various domestic and foreign governments, which can
affect the profitability of individual carriers as well as the entire industry.
Air freight companies may also be affected by a significant reduction on the
number of aircraft that are in current operation, which may limit an air freight
company’s ability to take advantage of increased demand.
•Currency
Exchange Rate Risk. Changes
in currency exchange rates and the relative value of non-U.S. currencies will
affect the value of the Fund’s investments and the value of your Shares. Because
the Fund’s NAV is determined on the basis of U.S. dollars, the U.S. dollar value
of your investment in the Fund may go down if the value of the local currency of
the non-U.S. markets in which the Fund invests depreciates against the U.S.
dollar. This is true even if the local currency value of securities in the
Fund’s holdings goes up. Conversely, the dollar value of your investment in the
Fund may go up if the value of the local currency appreciates against the U.S.
dollar. The value of the U.S. dollar measured against other currencies is
influenced by a variety of factors. These factors include: national debt levels
and trade deficits, changes in balances of payments and trade, domestic and
foreign interest and inflation rates, global or regional political, economic or
financial events, monetary policies of governments, actual or potential
government intervention, and global energy prices. Political instability, the
possibility of government intervention and restrictive or opaque business and
investment policies may also reduce the value of a country’s currency.
Government monetary policies and the buying or selling of currency by a
country’s government may also influence exchange rates. Currency exchange rates
can be very volatile and can change quickly and unpredictably. As a result, the
value of an investment in the Fund may change quickly and without warning, and
you may lose money.
•Depositary
Receipt Risk.
The Fund may hold the securities of non-U.S. companies in the form of ADRs and
Global Depositary Receipts (“GDRs”). ADRs are negotiable certificates issued by
a U.S. financial institution that represent a specified number of shares in a
foreign stock and trade on a U.S. national securities exchange, such as the New
York Stock Exchange (“NYSE”). Sponsored ADRs are issued with the support of the
issuer of the foreign stock underlying the ADRs and carry all of the rights of
common shares, including voting rights. GDRs are similar to ADRs, but may be
issued in bearer form and are typically offered for sale globally and held by a
foreign branch of an international bank. The underlying issuers of certain
depositary receipts, particularly unsponsored or unregistered depositary
receipts, are under no obligation to distribute shareholder communications to
the holders of such receipts, or to pass through to them any voting rights with
respect to the deposited securities. Issuers of unsponsored depositary receipts
are not contractually obligated to disclose material information in the U.S.
and, therefore, such information may not correlate to the market value of the
unsponsored depositary receipt. The underlying securities of the ADRs and GDRs
in the Fund’s portfolio are usually denominated or quoted in currencies other
than the U.S. Dollar. As a result, changes in foreign currency exchange rates
may affect the value
of
the Fund’s portfolio. In addition, because the underlying securities of ADRs and
GDRs trade on foreign exchanges at times when the U.S. markets are not open for
trading, the value of the securities underlying the ADRs and GDRs may change
materially at times when the U.S. markets are not open for trading, regardless
of whether there is an active U.S. market for the shares.
•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) restrictions on the transfer of securities or
currency, and (viii) 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.
◦Capital
Controls and Sanctions Risk.
Economic conditions, such as volatile currency exchange rates and interest
rates, political events, military action and other conditions may, without prior
warning, lead to government intervention (including intervention by the U.S.
government with respect to foreign governments, economic sectors, foreign
companies and related securities and interests) and the imposition of capital
controls and/or sanctions, which may also include retaliatory actions of one
government against another government, such as seizure of assets. Capital
controls and/or sanctions include the prohibition of, or restrictions on, the
ability to transfer currency, securities or other assets. Levies may be placed
on profits repatriated by foreign entities (such as the Fund). Capital controls
and/or sanctions may also impact the ability of the Fund to buy, sell or
otherwise transfer securities or currency, negatively impact the value and/or
liquidity of such instruments, adversely affect the trading market and price for
Shares, and cause the Fund to decline in value.
◦Geopolitical
Risk.
Some countries and regions in which the Fund invests have experienced security
concerns, war or threats of war and aggression, terrorism, economic uncertainty,
natural and environmental disasters and/or systemic market dislocations that
have led, and in the future may lead, to increased short-term market volatility
and may have adverse long-term effects on the U.S. and world economies and
markets generally. Such geopolitical and other events may also disrupt
securities markets and, during such market disruptions, the Fund’s exposure to
the other risks described herein will likely increase. Each of the foregoing may
negatively impact the Fund’s investments.
•Equity
Market Risk.
Common stocks are susceptible to general stock market fluctuations and to
volatile increases and decreases in value as market confidence in and
perceptions of their issuers change. These investor perceptions are based on
various and unpredictable factors including: expectations regarding government,
economic, monetary and fiscal policies; inflation and interest rates; economic
expansion or contraction; and global or regional political, economic, 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 has resulted in a wide range of social and economic
disruptions, including closed borders, voluntary or compelled quarantines of
large populations, stressed healthcare systems, reduced or prohibited domestic
or international travel, and supply chain disruptions affecting the United
States and many other countries. Some sectors of the economy and individual
issuers have experienced particularly large losses as a result of these
disruptions, and such disruptions may continue for an extended period of time or
reoccur in the future to a similar or greater extent. In response, the U.S.
government and the Federal Reserve have taken extraordinary actions to support
the domestic economy and financial markets, resulting in very low interest rates
and in some cases negative yields. It is unknown how long circumstances related
to the pandemic will persist, whether they will reoccur in the future, whether
efforts to support the economy and financial markets will be successful, and
what additional implications may follow from the pandemic. The impact of these
events and other epidemics or pandemics in the future could adversely affect
Fund performance.
•ETF
Risks. The
Fund is an ETF, and, as a result of an ETF’s structure, it is exposed to the
following risks:
•APs,
Market Makers, and Liquidity Providers Concentration Risk.
The Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares may trade at a material discount to NAV and possibly face
delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption
orders
and no other APs step forward to perform these services, or (ii) market makers
and/or liquidity providers exit the business or significantly reduce their
business activities and no other entities step forward to perform their
functions.
•Costs
of Buying or Selling Shares.
Investors buying or selling Shares in the secondary market will pay brokerage
commissions or other charges imposed by brokers, as determined by that broker.
Brokerage commissions are often a fixed amount and may be a significant
proportional cost for investors seeking to buy or sell relatively small amounts
of Shares. In addition, secondary market investors will also incur the cost of
the difference between the price at which an investor is willing to buy Shares
(the “bid” price) and the price at which an investor is willing to sell Shares
(the “ask” price). This difference in bid and ask prices is often referred to as
the “spread” or “bid-ask spread.” The bid-ask spread varies over time for Shares
based on trading volume and market liquidity, and the spread is generally lower
if Shares have more trading volume and market liquidity and higher if Shares
have little trading volume and market liquidity. Further, a relatively small
investor base in the Fund, asset swings in the Fund, and/or increased market
volatility may cause increased bid-ask spreads. Due to the costs of buying or
selling Shares, including bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small
investments.
•Shares
May Trade at Prices Other Than NAV.
As with all ETFs, Shares may be bought and sold in the secondary market at
market prices. Although it is expected that the market price of Shares will
approximate the Fund’s NAV, there may be times when the market price of Shares
is more than the NAV intra-day (premium) or less than the NAV intra-day
(discount) due to supply and demand of Shares or during periods of market
volatility. This risk is heightened in times of market volatility, periods of
steep market declines, and periods when there is limited trading activity for
Shares in the secondary market, in which case such premiums or discounts may be
significant.
Because
securities held by the Fund may trade on foreign exchanges that are closed when
the Fund’s primary listing exchange is open, the Fund is likely to experience
premiums and discounts greater than those of domestic ETFs.
•Trading.
Although Shares are listed for trading on the Exchange and may be listed or
traded on U.S. and non-U.S. stock exchanges other than the Exchange, there can
be no assurance that an active trading market for such Shares will develop or be
maintained. Trading in Shares may be halted due to market conditions or for
reasons that, in the view of the Exchange, make trading in Shares inadvisable.
In addition, trading in Shares on the Exchange is subject to trading halts
caused by extraordinary market volatility pursuant to Exchange “circuit breaker”
rules, which temporarily halt trading on the Exchange when a decline in the
S&P 500®
Index during a single day reaches certain thresholds (e.g.,
7%, 13%, and 20%). Additional rules applicable to the Exchange may halt trading
in Shares when extraordinary volatility causes sudden, significant swings in the
market price of Shares. There can be no assurance that Shares will trade with
any volume, or at all, on any stock exchange. In stressed market conditions, the
liquidity of Shares may begin to mirror the liquidity of the Fund’s underlying
portfolio holdings, which can be significantly less liquid than Shares, and this
could lead to differences between the market price of the Shares and the
underlying value of those Shares.
•Foreign
Securities Risk.
Investments
in non-U.S. securities involve certain risks that may not be present with
investments in U.S. securities. For example, investments in non-U.S. securities
may be subject to risk of loss due to foreign currency fluctuations or to
political or economic instability. There may be less information publicly
available about a non-U.S. issuer than a U.S. issuer. Non-U.S. issuers may be
subject to different accounting, auditing, financial reporting and investor
protection standards than U.S. issuers. Investments in non-U.S. securities may
be subject to withholding or other taxes and may be subject to additional
trading, settlement, custodial, and operational risks. With respect to certain
countries, there is the possibility of government intervention and expropriation
or nationalization of assets. Because legal systems differ, there is also the
possibility that it will be difficult to obtain or enforce legal judgments in
certain countries. Since foreign exchanges may be open on days when the Fund
does not price its Shares, the value of the securities in the Fund’s portfolio
may change on days when shareholders will not be able to purchase or sell the
Fund’s Shares. Conversely, Shares may trade on days when foreign exchanges are
closed. Each of these factors can make investments in the Fund more volatile and
potentially less liquid than other types of investments.
•Geographic
Investment Risk.
To
the extent that the Fund invests a significant portion of its assets in the
securities of companies of a single country or region, it is more likely to be
impacted by events or conditions affecting that country or region. For example,
political and economic conditions and changes in regulatory, tax, or economic
policy in a country could significantly affect the market in that country and in
surrounding or related countries and have a negative impact on the Fund’s
performance. Currency developments or restrictions, political and social
instability, and changing economic conditions have resulted in significant
market volatility.
◦Risks
of Investing in China. The
Chinese economy is subject to a considerable degree of economic, political and
social instability:
•Political
and Social Risk: The
Chinese government is authoritarian and has periodically used force to suppress
civil dissent. Disparities of wealth and the pace of economic liberalization may
lead to social turmoil, violence and labor unrest. In addition, China continues
to experience disagreements related to integration with Hong Kong and religious
and nationalist disputes in Tibet and Xinjiang. There is also a greater risk in
China than in many other countries of currency fluctuations, currency
convertibility, interest rate fluctuations and higher rates of inflation as a
result of internal social unrest or conflicts with other countries.
Unanticipated political or social developments may result in sudden and
significant investment losses. China’s growing income inequality and worsening
environmental conditions also are factors that may affect the Chinese economy.
China is also vulnerable economically to the impact of a public health crisis,
which could depress consumer demand, reduce economic output, and potentially
lead to market closures, travel restrictions, and quarantines, all of which
would negatively impact China’s economy and could affect the economies of its
trading partners.
•Government
Control and Regulations:
The Chinese government has implemented significant economic reforms in order to
liberalize trade policy, promote foreign investment in the economy, reduce
government control of the economy and develop market mechanisms. There can be no
assurance these reforms will continue or that they will be effective. Despite
recent reform and privatizations, significant regulation of investment and
industry is still pervasive, and the Chinese government may restrict foreign
ownership of Chinese corporations and/or repatriate assets. Chinese markets
generally continue to experience inefficiency, volatility and pricing anomalies
that may be connected to governmental influence, a lack of publicly-available
information and/or political and social instability.
•Economic
Risk:
The Chinese economy has grown rapidly during the past several years and there is
no assurance that this growth rate will be maintained. In fact, the Chinese
economy may experience a significant slowdown as a result of, among other
things, a deterioration in global demand for Chinese exports, as well as
contraction in spending on domestic goods by Chinese consumers. In addition,
China may experience substantial rates of inflation or economic recessions,
which would have a negative effect on the economy and securities market. Delays
in enterprise restructuring, slow development of well-functioning financial
markets and widespread corruption have also hindered performance of the Chinese
economy. China continues to receive substantial pressure from trading partners
to liberalize official currency exchange rates. Chinese companies are subject to
the risk that the U.S. government or other governments may sanction Chinese
issuers or otherwise prohibit U.S. persons or funds from investing in certain
Chinese issuers and a lack of transparency with respect to economic activity and
transactions in China. Recent developments in relations between the United
States and China have heightened concerns of increased tariffs and restrictions
on trade between the two countries. It is unclear whether further tariffs and
sanctions may be imposed or other escalating actions may be taken in the future.
•Expropriation
Risk: The
Chinese government maintains a major role in economic policymaking, and
investing in China involves risk of loss due to expropriation, nationalization,
confiscation of assets and property, or the imposition of restrictions on
foreign investments and on repatriation of capital invested.
•Hong
Kong Political Risk:
Hong Kong reverted to Chinese sovereignty on July 1, 1997 as a Special
Administrative Region (SAR) of the PRC under the principle of “one country, two
systems.” Although China is obligated to maintain the current capitalist
economic and social system of Hong Kong through June 30, 2047, the
continuation of economic and social freedoms enjoyed in Hong Kong is dependent
on the government of China. Any attempt by China to tighten its control over
Hong Kong’s political, economic, legal or social policies may result in an
adverse effect on Hong Kong’s markets. In addition, the Hong Kong dollar trades
at a fixed exchange rate in relation to (or, is “pegged” to) the U.S. dollar,
which has contributed to the growth and stability of the Hong Kong economy.
However, it is uncertain how long the currency peg will continue or what effect
the establishment of an alternative exchange rate system would have on the Hong
Kong economy. Because the Fund’s NAV is denominated in U.S. dollars, the
establishment of an alternative exchange rate system could result in a decline
in the Fund’s NAV.
•Risks
of Investing in Taiwan: Investments
in Taiwanese issuers may subject the Fund to risks specific to Taiwan. Taiwan is
a small island state with few raw material resources and limited land area and
is reliant on imports for its
commodity
needs. Any fluctuations or shortages in the commodity markets could have a
negative impact on the Taiwanese economy. Also, continued labor outsourcing may
adversely affect the Taiwanese economy. Taiwan’s economy is intricately linked
with economies of Asian countries that have experienced over-extensions of
credit, frequent and pronounced currency fluctuations, currency devaluations,
currency repatriation, rising unemployment and fluctuations in inflation. The
Taiwanese economy is dependent on the economies of Japan and China, as well as
the United States, and negative changes in their economies or a reduction in
purchases by any of them of Taiwanese products and services would likely have an
adverse impact on the Taiwanese economy. Taiwan’s geographic proximity to China
and Taiwan’s history of political contention with China have resulted in ongoing
tensions with China, including the risk of war with China. These tensions may
materially affect the Taiwanese economy and securities markets.
•Index
Provider Risk. There
is no assurance that the Index Provider, or any agents that act on its behalf,
will compile the Index accurately, or that the Index will be determined,
maintained, constructed, reconstituted, rebalanced, composed, calculated or
disseminated accurately. The Adviser relies upon the Index Provider and its
agents to compile, determine, maintain, construct, reconstitute, rebalance,
compose, calculate (or arrange for an agent to calculate), and disseminate the
Index accurately. Any losses or costs associated with errors made by the Index
Provider or its agents generally will be borne by the Fund and its shareholders.
To correct any such error, the Index Provider or its agents may carry out an
unscheduled rebalance of the Index or other modification of Index constituents
or weightings. When the Fund in turn rebalances its portfolio, any transaction
costs and market exposure arising from such portfolio rebalancing will be borne
by the Fund and its shareholders. Unscheduled rebalances also expose the Fund to
additional tracking error risk. Errors in respect of the quality, accuracy, and
completeness of the data used to compile the Index may occur from time to time
and may not be identified and corrected by the Index Provider for a period of
time or at all, particularly where the Index is less commonly used as a
benchmark by funds or advisers. For example, during a period where the Index
contains incorrect constituents, the Fund tracking the Index would have market
exposure to such constituents and would be underexposed to the Index’s other
constituents. Such errors may negatively impact the Fund and its shareholders.
The Index Provider and its agents rely on various sources of information to
assess the criteria of issuers included in the Index, including information that
may be based on assumptions and estimates. Neither the Fund nor the Adviser can
offer assurances that the Index’s calculation methodology or sources of
information will provide an accurate assessment of included
issuers.
•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.
•New
Fund Risk. The
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.
•Non-Diversification
Risk. The
Fund is considered to be non-diversified, which means that it may invest more of
its assets in the securities of a single issuer or a smaller number of issuers
than if it were a diversified fund. As a result, the Fund may be more exposed to
the risks associated with and developments affecting an individual issuer or a
smaller number of issuers than a fund that invests more widely. This may
increase the Fund’s volatility and cause the performance of a relatively smaller
number of issuers to have a greater impact on the Fund’s performance. However,
the Fund intends to satisfy the diversification requirements for qualifying as a
regulated investment company (a “RIC”) under Subchapter M of the Internal
Revenue Code of 1986, as amended (the “Code”).
•Passive
Investment Risk.
The Fund invests in the securities included in, or representative of, the Index
regardless of their investment merit. The Fund does not attempt to outperform
the Index or take defensive positions in declining markets. As a result, the
Fund’s performance may be adversely affected by a general decline in the market
segments relating to the Index. The returns from the types of securities in
which the Fund invests may underperform returns from the various general
securities markets or different asset classes. This may cause the Fund to
underperform other investment vehicles that invest in different asset classes.
Different types of securities (for example, large-, mid- and
small-capitalization stocks) tend to go through cycles of doing better – or
worse – than the general securities markets. In the past, these periods have
lasted for as long as several years.
•Portfolio
Turnover Risk. The
Fund may trade all or a significant portion of the securities in its portfolio
in connection with each rebalance and reconstitution of its Index. A high
portfolio turnover rate increases transaction costs, which may increase the
Fund’s expenses. Frequent trading may also cause adverse tax consequences for
investors in the Fund due to an increase in short-term capital gains.
•Tax
Risk.
To qualify for the favorable tax treatment generally available to RICs, the Fund
must satisfy, among other requirements described in the SAI, certain
diversification requirements. In particular, at the close of each quarter of the
Fund’s taxable year: (A) at least 50% of the value of its total assets must be
represented by cash and cash items, U.S. government securities, securities of
other RICs and other securities, with such other securities limited, in respect
to any one issuer, to an amount not greater than 5% of the value of the Fund’s
total assets and that does not represent more than 10% of the outstanding voting
securities of such issuer, including the equity securities of a qualified
publicly traded partnership, and (B) not more than 25% of the value of its total
assets is invested, including through corporations in which the Fund owns a 20%
or more voting stock interest, in the securities (other than U.S. government
securities or securities of other RICs) of any one issuer or the securities
(other than the securities of another RIC) of two or more issuers that the Fund
controls and which are engaged in the same or similar trades or businesses or
related trades or businesses, or the securities of one or more qualified
publicly traded partnerships. While the weighting of the Index is not
inconsistent with these rules, given the concentration of the Index in a
relatively small number of securities, it may not always be possible for the
Fund to fully implement a replication strategy or a representative sampling
strategy while satisfying these diversification requirements. The Fund’s efforts
to satisfy the diversification requirements may affect the Fund’s execution of
their investment strategy and may cause the Fund’s return to deviate from that
of the Index, and the Fund’s efforts to replicate or represent the Index may
cause it inadvertently to fail to satisfy the diversification requirements. If
the Fund were to fail to satisfy the diversification requirements, it could be
eligible for relief provisions if the failure is due to reasonable cause and not
willful neglect and if a penalty tax is paid with respect to each failure to
satisfy the applicable requirements. Additionally, relief is provided for
certain de
minimis
failures of the diversification requirements where the Fund corrects the failure
within a specified period. If the Fund were to fail to qualify as a RIC for a
tax year, and the relief provisions are not available, it would be taxed in the
same manner as an ordinary corporation, and distributions to its shareholders
would not be deductible by the Fund in computing its taxable income. In such
case, the Fund’s shareholders would be taxed as if they received ordinary
dividends, although corporate shareholders could be eligible for the dividends
received deduction (subject to certain limitations) and individuals may be able
to benefit from the lower tax rates available to qualified dividend income. In
addition, the Fund could be required to recognize unrealized gains, pay
substantial taxes and interest, and make substantial distributions before
requalifying as a RIC.
•Tracking
Error Risk. As
with all index funds, the performance of the Fund and the Index may differ from
each other for a variety of reasons. For example, the Fund incurs operating
expenses and portfolio transaction costs not incurred by the Index. In addition,
the Fund may not be fully invested in the securities of the Index at all times
or may hold securities not included in the Index.
Information
about the Fund’s daily portfolio holdings is available at www.usglobaletfs.com.
A complete description of the Fund’s policies and procedures with respect to the
disclosure of the Fund’s portfolio holdings is available in the Fund’s Statement
of Additional Information (“SAI”).
Pursuant
to an investment advisory agreement between the Trust, on behalf of the Fund,
and U.S. Global Investors, Inc. (the “Adviser”) (the “Advisory Agreement”), the
Adviser manages and supervises the investment operations and business affairs of
the Fund. The Adviser also furnishes the Fund with office space and certain
administrative services and provides personnel needed to fulfill its obligations
under the Advisory Agreement. For the services it provides to the Fund, the Fund
pays the Adviser a management fee, which is calculated daily and paid monthly,
at an annual rate of 0.60% of the Fund’s average daily net assets.
Fund
Expenses
The
Fund is responsible for its own operating expenses. However, pursuant to an
operating expense limitation agreement between the Adviser and the Fund, the
Adviser has agreed to waive its management fees and/or reimburse expenses to
ensure that the total amount of the Fund’s operating expenses (excluding
Excludable Expenses) does not exceed 0.60% for the first $100 million of the
Fund’s average daily net assets and 0.70% for net assets greater than $100
million. To the extent the Fund incurs Excludable Expenses, Total Annual Fund
Operating Expenses After Fee Waiver and/or Expense Reimbursement will exceed the
applicable expense limitation. The Adviser may request recoupment of previously
waived fees and paid expenses from the Fund for up to three years from the date
such fees and expenses were waived or paid, subject to the operating expense
limitation agreement, if such reimbursement will not cause the Fund’s total
expense ratio to exceed the lesser of: (1) the expense limitation in place at
the time of the waiver and/or expense payment; or (2) the expense limitation in
place at the time of the recoupment. The Fund must pay its current ordinary
operating expenses before the Adviser is entitled to any recoupment of
management fees and/or expenses. This operating expense limitation agreement is
in effect through at least April 30, 2023, and may be terminated only by, or
with the consent of, the Board of Trustees.
The
Adviser has managed various investment portfolios for clients since 1968,
including other investment companies. The Adviser is a Texas corporation and is
located at 7900 Callaghan Road, San Antonio, Texas 78229.
The
basis for the Board’s approval of the Fund’s Advisory Agreement will be
available in the Fund’s Annual Report to Shareholders for the period ended
December 31, 2021.
The
Fund is managed by a team consisting of the following individuals, each of whom
is equally responsible for the day to day management of the Fund’s portfolio.
Frank E. Holmes has served as Chief Executive Officer and Director for the
Adviser since 1989. Ralph P. Aldis, CFA, has been a Portfolio Manager for the
Adviser since 2001.
The
Fund’s SAI provides additional information about the Portfolio Managers’
compensation structure, other accounts managed by the Portfolio Managers, and
the Portfolio Managers’ ownership of Shares.
The
Fund issues and redeems Shares at NAV only in Creation Units. Only APs may
acquire Shares directly from the Fund, and only APs may tender their Shares for
redemption directly to the Fund, at NAV. APs must be a member or participant of
a clearing agency registered with the SEC and must execute a Participant
Agreement that has been agreed to by the Distributor (defined below), and that
has been accepted by the Fund’s transfer agent, with respect to purchases and
redemptions of Creation Units. Once created, Shares trade in the secondary
market in quantities less than a Creation Unit.
Most
investors buy and sell Shares in secondary market transactions through brokers.
Shares are listed for trading on the secondary market on the Exchange and can be
bought and sold throughout the trading day like other publicly traded
securities.
When
buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the bid-ask spread on
your transactions. In addition, because secondary market transactions occur at
market prices, you may pay more than NAV when you buy Shares and receive less
than NAV when you sell those Shares.
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.
The
Fund imposes no restrictions on the frequency of purchases and redemptions of
Shares. In determining not to approve a written, established policy, the Board
evaluated the risks of market timing activities by Fund shareholders. Purchases
and redemptions by APs, who are the only parties that may purchase or redeem
Shares directly with the Fund, are an essential part of the ETF process and help
keep Share trading prices in line with NAV. As such, the Fund accommodates
frequent purchases and redemptions by APs. However, the Board has also
determined that frequent purchases and redemptions for cash may increase
tracking error and portfolio transaction costs and may lead to the realization
of capital gains. To minimize these potential consequences of frequent purchases
and redemptions, the Fund employs fair value pricing and may impose transaction
fees on purchases and redemptions of Creation Units to cover the custodial and
other costs incurred by the Fund in effecting trades. In addition, the Fund and
the Adviser reserve the right to reject any purchase order at any time.
The
Fund’s NAV is calculated as of the scheduled close of regular trading on the New
York Stock Exchange (“NYSE”), generally 4:00 p.m. Eastern time, each day
the NYSE is open for business. The NAV is calculated by dividing the Fund’s net
assets by its Shares outstanding.
In
calculating its NAV, the Fund generally values its assets on the basis of market
quotations, last sale prices, or estimates of value furnished by a pricing
service or brokers who make markets in such instruments. If such information is
not available for a security held by the Fund or is determined to be unreliable,
the security will be valued at fair value estimates under guidelines established
by the Board (as described below).
In
calculating its NAV, the Fund generally values equity securities traded on any
recognized U.S. or non-U.S. exchange at the last sale price or official closing
price on the exchange or system on which they are principally traded. In
addition, the Fund may invest in money market funds that are valued at their NAV
per share.
The
Board has adopted procedures and methodologies to fair value Fund securities
whose market prices are not “readily available” or are deemed to be unreliable.
For example, such circumstances may arise when: (i) a security has been
de-listed or has had its trading halted or suspended; (ii) a security’s
primary pricing source is unable or unwilling to provide a price; (iii) a
security’s primary trading market is closed during regular market hours; or
(iv) a security’s value is materially affected by events occurring after
the close of the security’s primary trading market. Generally, when fair valuing
a security, the Fund will take into account all reasonably available information
that may be relevant to a particular valuation including, but not limited to,
fundamental analytical data regarding the issuer, information relating to the
issuer’s business, recent trades or offers of the security, general and/or
specific market conditions and the specific facts giving rise to the need to
fair value the security. Fair value determinations are made in good faith and in
accordance with the fair value methodologies included in the Board-adopted
valuation procedures. Due to the subjective and variable nature of fair value
pricing, there can be no assurance that the Adviser will be able to obtain the
fair value assigned to the security upon the sale of such security.
Section 12(d)(1)
of the 1940 Act restricts investments by registered investment companies in the
securities of other investment companies, including Shares. Registered
investment companies are permitted to invest in the Fund beyond the limits set
forth in section 12(d)(1) subject to certain terms and conditions set forth in a
rule under the 1940 Act, including that such investment companies enter into an
agreement with the Fund.
Householding
is an option available to certain investors of the Fund. Householding is a
method of delivery, based on the preference of the individual investor, in which
a single copy of certain shareholder documents can be delivered to investors who
share the same address, even if their accounts are registered under different
names. Householding for the Fund is available through certain broker-dealers. If
you are interested in enrolling in householding and receiving a single copy of
prospectuses and other shareholder documents, please contact your broker-dealer.
If you are currently enrolled in householding and wish to change your
householding status, please contact your broker-dealer.
The
Fund intends to pay out dividends, if any, and distribute any net realized
capital gains to its shareholders at least annually. The Fund will declare and
pay capital gain distributions, if any, in cash. Distributions in cash may be
reinvested automatically in additional
whole
Shares only if the broker through whom you purchased Shares makes such option
available. Your broker is responsible for distributing the income and capital
gain distributions to you.
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in the Fund. Your investment
in the Fund may have other tax implications. Please consult your tax advisor
about the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws.
The
Fund intends to elect and qualify each year for treatment as a regulated
investment company (“RIC”) under the Code. If it meets certain minimum
distribution requirements, a RIC is not subject to tax at the fund level on
income and gains from investments that are timely distributed to shareholders.
However, the Fund’s failure to qualify as a RIC or to meet minimum distribution
requirements would result (if certain relief provisions were not available) in
fund-level taxation and, consequently, a reduction in income available for
distribution to shareholders.
Unless
your investment in Shares is made through a tax-exempt entity or tax-advantaged
account, such as an IRA plan, you need to be aware of the possible tax
consequences when the Fund makes distributions, when you sell your Shares listed
on the Exchange, and when you purchase or redeem Creation Units (APs only).
The
Fund intends to distribute, at least annually, substantially all of its net
investment income and net capital gains. For federal income tax purposes,
distributions of investment income are generally taxable as ordinary income or
qualified dividend income. Taxes on distributions of capital gains (if any) are
determined by how long the Fund owned the investments that generated them,
rather than how long a shareholder has owned his or her Shares. Sales of assets
held by the Fund for more than one year generally result in long-term capital
gains and losses, and sales of assets held by the Fund for one year or less
generally result in short-term capital gains and losses. Distributions of the
Fund’s net capital gain (the excess of net long-term capital gains over net
short-term capital losses) that are reported by the Fund as capital gain
dividends (“Capital Gain Dividends”) will be taxable as long-term capital gains,
which for non-corporate shareholders are subject to tax at reduced rates of up
to 20% (lower rates apply to individuals in lower tax brackets). Distributions
of short-term capital gain will generally be taxable as ordinary income.
Dividends and distributions are generally taxable to you whether you receive
them in cash or reinvest them in additional Shares.
Distributions
reported by the Fund as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided holding period and other requirements are met. “Qualified dividend
income” generally is income derived from dividends paid by U.S. corporations or
certain foreign corporations that are either incorporated in a U.S. possession
or eligible for tax benefits under certain U.S. income tax treaties. In
addition, dividends that the Fund received in respect of stock of certain
foreign corporations may be qualified dividend income if that stock is readily
tradable on an established U.S. securities market. Dividends received by the
Fund from an ETF or underlying fund taxable as a RIC may be treated as qualified
dividend income generally only to the extent so reported by such ETF or
underlying fund. Corporate shareholders may be entitled to a dividends received
deduction for the portion of dividends they receive from the Fund that are
attributable to dividends received by the Fund from U.S. corporations, subject
to certain limitations.
Shortly
after the close of each calendar year, you will be informed of the amount and
character of any distributions received from the Fund.
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 the Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable even though
it may economically represent a return of a portion of your investment.
If
the Fund’s distributions exceed its earnings and profits, all or a portion of
the distributions made for a taxable year may be recharacterized as a return of
capital to shareholders. A return of capital distribution will generally not be
taxable, but will reduce each shareholder’s cost basis in Shares and result in a
higher capital gain or lower capital loss when the Shares are sold. After a
shareholder’s basis in Shares has been reduced to zero, distributions in excess
of earnings and profits in respect of those Shares will be treated as gain from
the sale of the Shares.
If
you are neither a resident nor a citizen of the United States or if you are a
foreign entity, distributions (other than Capital Gain Dividends) paid to you by
the Fund will generally be subject to a U.S. withholding tax at the rate of 30%,
unless a lower treaty rate applies. Gains from the sale or other disposition of
your Shares generally are not subject to U.S. taxation, unless you are a
nonresident alien individual who is physically present in the U.S. for 183 days
or more per year. The Fund may, under certain circumstances, report all or a
portion of a dividend as an “interest-related dividend” or a “short-term capital
gain dividend,” which would generally be exempt from this 30%
U.S. withholding tax, provided certain other requirements are met.
Different tax consequences may result if you are a foreign shareholder engaged
in a trade or business within the United States or if a tax treaty applies.
Under
legislation generally known as “FATCA” (the Foreign Account Tax Compliance Act),
the Fund is required to withhold 30% of certain ordinary dividends it pays to
shareholders that are foreign entities and that fail to meet prescribed
information reporting or certification requirements.
The
Fund (or a financial intermediary, such as a broker, through which a shareholder
owns Shares) generally is required to withhold and remit to the U.S. Treasury a
percentage of the taxable distributions and sale or redemption proceeds paid to
any shareholder who fails to properly furnish a correct taxpayer identification
number, who has underreported dividend or interest income, or who fails to
certify that he, she or it is not subject to such withholding.
Any
capital gain or loss realized upon a sale of Shares generally is treated as a
long-term capital gain or loss if Shares have been held for more than one year
and as a short-term capital gain or loss if Shares have been held for one year
or less. However, any capital loss on a sale of Shares held for six months or
less is treated as long-term capital loss to the extent of Capital Gain
Dividends paid with respect to such Shares. Any loss realized on a sale will be
disallowed to the extent Shares of the Fund are acquired, including through
reinvestment of dividends, within a 61-day period beginning 30 days before and
ending 30 days after the disposition of Shares. The ability to deduct capital
losses may be limited.
The
cost basis of Shares of the Fund acquired by purchase will generally be based on
the amount paid for the Shares and then may be subsequently adjusted for other
applicable transactions as required by the Code. The difference between the
selling price and the cost basis of Shares generally determines the amount of
the capital gain or loss realized on the sale or exchange of Shares. Contact the
broker through whom you purchased your Shares to obtain information with respect
to the available cost basis reporting methods and elections for your account.
An
AP having the U.S. dollar as its functional currency for U.S. federal income tax
purposes who exchanges securities for Creation Units generally recognizes a gain
or a loss. The gain or loss will be equal to the difference between the value of
the Creation Units at the time of the exchange and the exchanging AP’s aggregate
basis in the securities delivered, plus the amount of any cash paid for the
Creation Units. An AP who exchanges Creation Units for securities will generally
recognize a gain or loss equal to the difference between the exchanging AP’s
basis in the Creation Units and the aggregate U.S. dollar market value of the
securities received, plus any cash received for such Creation Units. The
Internal Revenue Service may assert, however, that a loss that is realized upon
an exchange of securities for Creation Units may not be currently deducted under
the rules governing “wash sales” (for an AP who does not mark-to-market their
holdings), or on the basis that there has been no significant change in economic
position. APs exchanging securities should consult their own tax advisor with
respect to whether wash sale rules apply and when a loss might be
deductible.
Any
gain or loss realized upon a creation or redemption of Creation Units will be
treated as capital or ordinary gain or loss, depending on the circumstances. Any
capital gain or loss realized upon redemption of Creation Units is generally
treated as 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.
The
Fund may include a payment of cash in addition to, or in place of, the delivery
of a basket of securities upon the redemption of Creation Units. The Fund may
sell portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause the Fund to recognize investment income and/or capital
gains or losses that it might not have recognized if it had completely satisfied
the redemption in-kind. As a result, the Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
Interest
and other income received by the Fund with respect to foreign securities may
give rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. If as of the close of a taxable year more than 50% of the
value of the Fund’s assets consists of certain foreign stock or securities, the
Fund will be eligible to elect to “pass through” to investors the amount of
foreign income and similar taxes (including withholding taxes) paid by the Fund
during that taxable year. This means that investors would be considered to have
received as additional income their respective Shares of such foreign taxes, but
may be entitled to either a corresponding tax deduction in calculating taxable
income, or,
subject
to certain limitations, a credit in calculating federal income tax. If the Fund
does not so elect, the Fund will be entitled to claim a deduction for certain
foreign taxes incurred by the Fund. The Fund (or its administrative agent) will
notify you if it makes such an election and provide you with the information
necessary to reflect foreign taxes paid on your income tax return.
The
foregoing discussion summarizes some of the possible consequences under current
federal tax law of an investment in the Fund. It is not a substitute for
personal tax advice. You also may be subject to 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
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, the Fund is authorized to
pay an amount up to 0.25% of its average daily net assets each year for certain
distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Fund, and there are no plans to impose
these fees. However, in the event Rule 12b-1 fees are charged in the future,
because the fees are paid out of the Fund’s assets, over time these fees will
increase the cost of your investment and may cost you more than certain other
types of sales charges.
Information
regarding how often Shares traded on the Exchange at a price above (i.e.,
at a premium) or below (i.e.,
at a discount) the NAV per Share is available, free of charge, on the Fund’s
website at www.usglobaletfs.com.
Shares
are not sponsored, endorsed, or promoted by the Exchange. The Exchange makes no
representation or warranty, express or implied, to the owners of Shares or any
member of the public regarding the ability of the Fund to track the total return
performance of the Index or the ability of the Index identified herein to track
the performance of its constituent securities. The Exchange is not responsible
for, nor has it participated in, the determination of the compilation or the
calculation of the Index, nor 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 the Shares.
The
Exchange does not guarantee the accuracy and/or the completeness of the Index or
the data included therein. The Exchange makes no warranty, express or implied,
as to results to be obtained by the Fund, owners of Shares, or any other person
or entity from the use of the Index or the data included therein. The Exchange
makes no express or implied warranties, and hereby expressly disclaims all
warranties of merchantability or fitness for a particular purpose with respect
to the Index or the data included therein. Without limiting any of the
foregoing, in no event shall the Exchange have any liability for any lost
profits or indirect, punitive, special, or consequential damages even if
notified of the possibility thereof.
The
Adviser, the Exchange, and the Fund make no representation or warranty, express
or implied, to the owners of Shares or any member of the public regarding the
advisability of investing in securities generally or in the Fund particularly or
the ability of the Index to track general stock market performance. The Fund and
the Adviser do not guarantee the accuracy, completeness, or performance of the
Index or the data included therein and shall have no liability in connection
with the Index or Index calculation. The index calculation agent maintains and
calculates the Index used by the Fund. The index calculation agent shall have no
liability for any errors or omissions in calculating the Index.
Financial
highlights are not shown for the Fund because the Fund had not commenced
operations as of the date of this Prospectus.
U.S.
Global Sea to Sky Cargo ETF
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Adviser |
U.S.
Global Investors, Inc.
7900
Callaghan Road
San
Antonio, Texas 78229 |
Distributor |
Quasar
Distributors, LLC
111
East Kilbourn Avenue, Suite 2200 Milwaukee, Wisconsin
53202 |
Index
Provider |
U.S.
Global Indices, LLC
7900 Callaghan Road
San
Antonio, Texas 78229 |
Index
Calculation Agent |
Indxx,
LLC
470
Park Avenue South, Suite 8S
New
York, NY 10016 |
Custodian |
U.S.
Bank National Association
1555
North Rivercenter Drive, Suite 302
Milwaukee,
Wisconsin 53212 |
Transfer
Agent, Fund Accountant and Administrator |
U.S.
Bancorp Fund Services, LLC
615
East Michigan Street
Milwaukee,
Wisconsin 53202 |
Legal
Counsel |
Morgan,
Lewis & Bockius LLP
1111
Pennsylvania Avenue NW
Washington,
DC 20004-2541 |
Independent
Registered Public Accounting Firm |
Cohen
& Company, Ltd.
342
North Water Street, Suite 830
Milwaukee,
Wisconsin 53202 |
Investors
may find more information about the Fund in the following documents:
Statement
of Additional Information: The
Fund’s SAI provides additional details about the investments and techniques of
the Fund and certain other additional information. A current SAI dated January
14, 2022, as supplemented from time to time, is on file with the SEC and is
herein incorporated by reference into this Prospectus. It is legally considered
a part of this Prospectus.
Annual/Semi-Annual
Reports: Additional
information about the investments for the Fund will be available in the first
annual and semi-annual reports for the Fund. In the annual report you will find
a discussion of the market conditions and investment strategies that
significantly affected the Fund’s performance.
You
can obtain free copies of these documents, request other information or make
general inquiries about the Fund by contacting the Fund at c/o U.S. Bank Global
Fund Services, P.O. Box 701, Milwaukee, Wisconsin 53201-0701 or calling
1-800-617-0004.
Shareholder
reports and other information about the Fund are available:
•Free
of charge from the SEC’s EDGAR database on the SEC’s website at
http://www.sec.gov; or
•Free
of charge from the Fund’s Internet website at www.usglobaletfs.com;
or
(SEC
Investment Company Act File No. 811-22668)