ck0001540305-20210831
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RBUS |
NATIONWIDE
RISK-BASED
U.S. EQUITY
ETF |
RBIN |
NATIONWIDE
RISK-BASED
INTERNATIONAL
EQUITY
ETF |
The
Nationwide Risk-Based ETFs seek to track the performance of corresponding
indexes provided by Rothschild
& Co Risk Based Investments LLC.
The Rothschild & Co Risk-Based Index Series selects the index
constituents with the lowest risk
contribution
in their universe based on their volatility and correlation to other
constituents and weights them such that each constituent contributes the
same risk to the index. |
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MXDU |
NATIONWIDE
MAXIMUM
DIVERSIFICATION
U.S. CORE
EQUITY
ETF |
The
Nationwide Maximum Diversification®
U.S. Core Equity ETF seeks to track the performance of an index provided
by TOBAM S.A.S. The TOBAM Maximum Diversification USA Index utilizes a
quantitative model to weight companies in the index universe to maximize
its Diversification Ratio®,
a proprietary metric based on the volatility of each index constituent and
its correlation to the other index
constituents. |
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NUSI |
NATIONWIDE
NASDAQ-100®
RISK-MANAGED
INCOME
ETF
(FORMERLY,
NATIONWIDE
RISK-MANAGED
INCOME
ETF) |
NSPI |
NATIONWIDE
S&P 500® RISK-MANAGED
INCOME
ETF |
NDJI |
NATIONWIDE
DOW
JONES®
RISK-MANAGED
INCOME
ETF |
NTKI |
NATIONWIDE
RUSSELL
2000® RISK-MANAGED
INCOME
ETF |
The
Nationwide Risk-Managed Income ETFs seek current income with downside
protection. |
Listed
on NYSE Arca, Inc.
December 10,
2021
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.
TABLE
OF CONTENTS
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Nationwide
S&P 500 Risk-Managed Income ETF |
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Nationwide
Dow Jones Risk-Managed Income ETF |
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Nationwide
Russell 2000 Risk-Managed Income ETF |
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NATIONWIDE
RISK-BASED
U.S. EQUITY
ETF |
Investment Objective
The Nationwide Risk-Based U.S.
Equity ETF (the “Fund”) seeks to track the total return performance, before fees
and expenses, of the Rothschild & Co Risk-Based US 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.
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Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
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Management
Fees |
0.30% |
Distribution
and Service (Rule 12b-1) Fees |
None |
Other
Expenses |
0.00% |
Total
Annual Fund Operating Expenses |
0.30% |
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Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund’s operating expenses remain the same. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
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1
Year: |
$31 |
3
Years: |
$97 |
5
Years: |
$169 |
10
Years: |
$381 |
Portfolio Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance.
For the fiscal year ended August
31, 2021, the Fund’s portfolio turnover rate was
57% of the average value of its
portfolio.
Principal Investment
Strategies
The
Fund uses a “passive management” (or indexing) approach to track the total
return performance, before fees and expenses, of the Index.
Rothschild
& Co Risk-Based US Index
The
Index is a rules-based, equal risk-weighted index that is designed to provide
exposure to U.S.-listed large capitalization companies with lower volatility,
reduced maximum drawdown (the loss from the highest Index value to its lowest
value before achieving a new highest value), and an improved Sharpe ratio (a
risk-adjusted measure of return) as compared to traditional, market
capitalization weighted approaches. The Index was developed in 2014 and is
licensed by Rothschild & Co Risk Based Investments LLC, the Fund’s index
provider.
Construction
of the Index begins with the universe of equity securities that have their
primary listing in the United States. The universe is then screened to keep only
the top 500 equity securities by market capitalization and to eliminate
securities with insufficient liquidity (average daily traded value of less than
$1 million over the most recent three-month period) and equity securities that
have been listed for less than one year (the remaining securities are referred
to as the “Eligible Universe”).
The
securities in the Eligible Universe are then subjected to a risk contribution
calculation based on each security’s volatility and correlation to the other
Eligible Universe securities for the most recent one-year calculation period.
The securities in the Eligible Universe are then ranked based on their risk
contribution, and the 50% of securities with the lowest risk contribution are
selected to be included in the Index (the “Index Constituents”). To reduce
turnover, Index Constituents will not be removed from the Index based on their
risk contribution so long as they are within the 55% of securities with the
lowest risk in the Eligible Universe.
The
Index Constituents are then weighted by a systematic equally-weighted risk
contribution model (the “Risk-Weighting Model”). The Risk-Weighting Model
incorporates each Index Constituent’s volatility and correlation to the other
Index Constituents for the most recent one-year calculation period to produce a
portfolio where each Index Constituent contributes the same level of risk,
subject to the constraint that no individual Index Constituent will have a
weight that exceeds 5% of the Index. The intent of security selection by risk
contribution ranking and the Risk-Weighting Model is to (i) lower the
overall volatility of the Index, (ii) increase the Index’s Sharpe ratio,
and (iii) reduce the Index’s maximum drawdown without negatively impacting
the diversification and expected return of the Index.
The
list of securities in the Eligible Universe is updated quarterly on the first
Friday of each January, April, July, and October (or the previous business day
if such Friday is not a business day). The Index is reconstituted (i.e.,
Index Constituents are added or deleted, and weights are reset based on the
Risk-Weighting Model) quarterly at the close of business on the second Friday of
January, April, July, and October (or the next business day if such Friday is
not a business day).
The
Fund’s Investment Strategy
Under
normal circumstances, at least 80% of the Fund’s net assets, plus borrowings for
investment purposes, will be invested in equity securities that are principally
traded in the United States.
The
Fund will generally use a “replication” strategy to achieve its investment
objective, meaning
the Fund will generally invest in all of the component securities of the
Index in the same approximate proportions 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 Fund’s sub-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 Fund’s sub-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).
To
the extent the Index concentrates (i.e.,
holds more than 25% 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.
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
Funds.”
•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, because of an ETF’s structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as Authorized
Participants (“APs”). In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, Shares may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become
unable to process
creation
and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the
business or significantly reduce their business activities and no other entities
step forward to perform their functions.
◦Costs
of Buying or Selling Shares.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading. Although
Shares are listed for trading on 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.
•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.
•Models
and Data Risk. The
composition of the Index is heavily dependent on proprietary quantitative models
as well as information and data supplied by third parties (“Models and
Data”).
When
Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon may lead to securities being included in or excluded from the
Index that would have been excluded or included had the Models and Data been
correct and complete. If the composition of the Index reflects such errors, the
Fund’s portfolio can be expected to reflect the errors, too.
•Passive
Investment Risk.
The Fund is not actively managed, and its sub-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
or rebalancing 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.
•Sector
Risk.
To the extent the Fund invests more heavily in particular sectors of the
economy, its performance will be especially sensitive to developments that
significantly affect those sectors.
•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
The following
performance information indicates some of the risks of investing in the
Fund. The bar chart shows the Fund’s performance for calendar
years ended December 31. The table illustrates how the Fund’s average annual
returns for the 1-year and since inception periods compare with those of a broad
measure of market performance and the Index. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is available on the
Fund’s website at www.etf.nationwide.com.
Calendar Year Total
Returns
For
the year-to-date period ended
September 30, 2021, the
Fund’s total return was 9.30%.
During
the period shown in the bar chart, the Fund’s highest quarterly return
was 21.23% for the quarter ended June 30, 2020 and the
lowest quarterly return was
-20.32% for the quarter ended March 31,
2020.
Average
Annual Total Returns
For
the Period Ended December 31, 2020
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Nationwide
Risk-Based U.S. Equity ETF |
1
Year |
Since
Inception
(9/15/17) |
Return Before
Taxes |
15.45% |
12.77% |
Return After Taxes on
Distributions |
14.93% |
12.22% |
Return After Taxes on Distributions and
Sale of Shares |
9.24% |
9.90% |
Rothschild
& Co Risk-Based US Index
(reflects no deduction for
fees, expenses, or taxes) |
15.74% |
13.13% |
S&P
500 Index
(reflects no deduction for
fees, expenses, or taxes) |
18.40% |
15.35% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an
investor’s tax situation and may differ from those shown. After-tax returns shown are
not relevant to investors who hold their Shares through tax-deferred
arrangements such as an individual retirement account (“IRA”) or other
tax-advantaged accounts.
Portfolio
Management
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Adviser |
Nationwide
Fund Advisors (the “Adviser”) |
Sub-Adviser |
Vident
Investment Advisory, LLC (“VIA” or the “Sub-Adviser”) |
Portfolio
Managers |
Austin
Wen, CFA, Portfolio Manager for VIA, has managed the Fund since its
inception in September 2017, and Rafael Zayas, CFA, SVP, Head of Portfolio
Management and Trading for VIA, has managed the Fund since June
2020. |
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.etf.nationwide.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.
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NATIONWIDE
RISK-BASED
INTERNATIONAL
EQUITY
ETF |
Investment Objective
The Nationwide Risk-Based
International Equity ETF (the “Fund”) seeks to track the total return
performance, before fees and expenses, of the Rothschild & Co Risk-Based
International 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.
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Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
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Management
Fees |
0.42% |
Distribution
and Service (Rule 12b-1) Fees |
None |
Other
Expenses |
0.00% |
Total
Annual Fund Operating Expenses |
0.42% |
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Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund’s operating expenses remain the same. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
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1
Year: |
$43 |
3
Years: |
$135 |
5
Years: |
$235 |
10
Years: |
$530 |
Portfolio Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance.
For the fiscal year ended August
31, 2021, the Fund’s portfolio turnover rate was
66% of the average value of its
portfolio.
Principal Investment Strategies
The
Fund uses a “passive management” (or indexing) approach to track the total
return performance, before fees and expenses, of the Index.
Rothschild
& Co Risk-Based International Index
The
Index is a rules-based, equal risk-weighted index that is designed to provide
exposure to large capitalization companies in developed markets outside the
United States and Canada with lower volatility, reduced maximum drawdown (the
loss from the highest Index value to its lowest value before achieving a new
highest value), and an improved Sharpe ratio (a risk-adjusted measure of return)
as compared to traditional, market capitalization weighted approaches. The Index
was developed in 2017 and is licensed by Rothschild & Co Risk Based
Investments LLC, the Fund’s index provider.
Construction
of the Index begins with the universe of equity securities that have their
primary listing in the following countries: Australia, Austria, Belgium,
Denmark, Finland, France, Germany, Hong Kong, Ireland, Italy, Japan,
Netherlands, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the
United Kingdom. The universe is then screened to keep only the largest equity
securities by market capitalization listed in each country and to eliminate
securities with insufficient liquidity (average daily traded value of less than
USD $1 million over the most recent three-month period) and equity securities
that have been listed for less than one year (the remaining securities are
referred to as the “Eligible Universe”).
The
securities in the Eligible Universe are then subjected to a risk contribution
calculation based on each security’s volatility and correlation to the other
Eligible Universe securities for the most recent one-year calculation period.
The securities in the Eligible Universe are then ranked based on their risk
contribution, and the 50% of securities with the lowest risk contribution are
selected to be
included
in the Index (the “Index Constituents”). To reduce turnover, Index Constituents
will not be removed from the Index based on their risk contribution so long as
they are within the 55% of securities with the lowest risk in the Eligible
Universe.
The
Index Constituents are then weighted by a systematic equally-weighted risk
contribution model (the “Risk-Weighting Model”). The Risk-Weighting Model
incorporates each Index Constituent’s volatility and correlation to the other
Index Constituents for the most recent one-year calculation period to produce a
portfolio where each Index Constituent contributes the same level of risk,
subject to the constraint that no individual Index Constituent will have a
weight that exceeds 5% of the Index. The intent of the security selection by
marginal risk contribution ranking and Risk-Weighting Model is to (i) lower
the overall volatility of the Index, (ii) increase the Index’s Sharpe
ratio, and (iii) reduce the Index’s maximum drawdown without negatively
impacting the diversification and expected return of the Index.
The
list of securities in the Eligible Universe is updated quarterly on the first
Friday of each January, April, July, and October (or the previous business day
if such Friday is not a business day). The Index is reconstituted (i.e.,
Index Constituents are added or deleted, and weights are reset based on the
Risk-Weighting Model) quarterly at the close of business on the second Friday of
January, April, July, and October (or the next business day if such Friday is
not a business day). As of September 30, 2021, the Index included significant
exposure to companies in Europe, including the United Kingdom, and Japan.
The
Fund’s Investment Strategy
Under
normal circumstances, at least 80% of the Fund’s net assets, plus borrowings for
investment purposes, will be invested in equity securities that are principally
traded in Europe, Australasia, or the Far East.
The
Fund will generally use a “replication” strategy to achieve its investment
objective, meaning
the Fund will generally invest in all of the component securities of the
Index in the same approximate proportions 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 Fund’s sub-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 Fund’s sub-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).
To
the extent the Index concentrates (i.e., holds more than 25% 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.
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
Funds.”
•Currency
Exchange Rate Risk.
The Fund invests primarily in investments denominated in non-U.S. currencies or
in securities that provide exposure to such currencies. Changes in currency
exchange rates and the relative value of non-U.S. currencies will affect the
value of the Fund’s
investment and the value of your Shares. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the value of an
investment in the Fund may change quickly and without warning and you may lose
money.
•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.
•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, because 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 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. Investments in non-U.S. securities also
may be subject to withholding or other taxes and may be subject to additional
trading, settlement, custodial, and operational risks. These and other factors
can make investments in the Fund more volatile and potentially less liquid than
other types of investments.
•Geographic
Investment Risk.
To the extent 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.
◦Risks
Related to Investing in Europe.
The economies and markets of European countries are often closely connected and
interdependent, and events in one country in Europe can have an adverse impact
on other European countries. The Fund makes investments in securities of issuers
that are domiciled in, or have significant operations in, member countries of
the European Union (“EU”) that are subject to economic and monetary controls
that can adversely affect the Fund’s investments. The European financial markets
have experienced volatility and adverse trends in recent years and these events
have adversely affected the exchange rate of the euro and may continue to
significantly affect other European countries. Decreasing imports or exports,
changes in governmental or EU regulations on trade, changes in the exchange rate
of the euro, the default or threat of default by an EU member country on its
sovereign debt, and/or an economic recession in an EU
member
country may have a significant adverse effect on the economies of EU member
countries and their trading partners, including some or all of the European
countries in which the Fund invests.
The
UK formally exited from the EU on January 31, 2020 (known as “Brexit”), and
effective December 31, 2020, the UK ended a transition period during which it
continued to abide by the EU’s rules and the UK’s trade relationships with the
EU were generally unchanged. Following this transition period, the impact on the
UK and European economies and the broader global economy could be significant,
resulting in negative impacts, such as increased volatility and illiquidity, and
potentially lower economic growth of markets in the UK, Europe and globally,
which may adversely affect the value of the Fund’s investments.
◦Risks
Related to Investing in Japan.
The Japanese economy may be subject to considerable degrees of economic,
political and social instability, which could have a negative impact on Japanese
securities. Since the year 2000, Japan’s economic growth rate has remained
relatively low and it may remain low in the future. In addition, Japan is
subject to the risk of natural disasters, such as earthquakes, volcanoes,
typhoons and tsunamis. Additionally, decreasing U.S. imports, new trade
regulations, changes in the U.S. dollar exchange rates, a recession in the
United States or continued increases in foreclosure rates may have an adverse
impact on the economy of Japan. Japan also has few natural resources, and any
fluctuation or shortage in the commodity markets could have a negative impact on
Japanese securities.
•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.
•Models
and Data Risk. The
composition of the Index is heavily dependent on proprietary quantitative models
as well as information and data supplied by third parties (“Models and
Data”).
When
Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon may lead to securities being included in or excluded from the
Index that would have been excluded or included had the Models and Data been
correct and complete. If the composition of the Index reflects such errors, the
Fund’s portfolio can be expected to reflect the errors, too.
•Passive
Investment Risk.
The Fund is not actively managed, and its sub-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
or rebalancing 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.
•Sector
Risk.
To the extent the Fund invests more heavily in particular sectors of the
economy, its performance will be especially sensitive to developments that
significantly affect those sectors.
•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
The following
performance information indicates some of the risks of investing in the
Fund. The bar chart shows the Fund’s performance for calendar
years ended December 31. The table illustrates how the Fund’s average annual
returns for the 1-year and since inception periods compare with those of a broad
measure of market performance and the Index. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is available on the
Fund’s website at www.etf.nationwide.com.
Calendar Year Total
Returns
For the year-to-date period ended
September 30, 2021,
the Fund’s total return was 3.49%.
During the period shown in the bar chart,
the Fund’s highest quarterly return
was 11.71% for the quarter ended June 30, 2020 and the
lowest quarterly return was
-17.85% for the quarter ended March 31,
2020.
Average
Annual Total Returns
For
the Period Ended December 31, 2020
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Nationwide
Risk-Based International Equity ETF |
1
Year |
Since
Inception
(9/15/17) |
Return Before
Taxes |
6.81% |
5.01% |
Return After Taxes on
Distributions |
6.54% |
4.60% |
Return After Taxes on Distributions and
Sale of Shares |
4.53% |
3.99% |
Rothschild
& Co Risk-Based International Index
(reflects no deduction for
fees, expenses, or taxes) |
7.73% |
5.91% |
MSCI
EAFE Index
(reflects no deduction for
fees, expenses, or taxes) |
8.28% |
5.92% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an
investor’s tax situation and may differ from those shown. After-tax returns shown are
not relevant to investors who hold their Shares through tax-deferred
arrangements such as an individual retirement account (“IRA”) or other
tax-advantaged accounts.
Portfolio
Management
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Adviser |
Nationwide
Fund Advisors (the “Adviser”) |
Sub-Adviser |
Vident
Investment Advisory, LLC (“VIA” or the “Sub-Adviser”) |
Portfolio
Managers |
Rafael
Zayas, CFA, SVP, Head of Portfolio Management and Trading for VIA, has
managed the Fund since its inception in September 2017, and Austin Wen,
CFA, Portfolio Manager for VIA, has managed the Fund since June 2020.
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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.etf.nationwide.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.
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NATIONWIDE
MAXIMUM
DIVERSIFICATION
U.S. CORE
EQUITY
ETF |
Investment Objective
The Nationwide Maximum
Diversification U.S. Core Equity ETF (the “Fund”) seeks to track the total
return performance, before fees and expenses, of the TOBAM Maximum
Diversification USA 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.
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Annual
Fund Operating Expenses
(expenses
that you pay each year as a percentage of the value of your
investment) |
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Management
Fees |
0.34% |
Distribution
and Service (Rule 12b-1) Fees |
None |
Other
Expenses |
0.00% |
Total
Annual Fund Operating Expenses |
0.34% |
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Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund’s operating expenses remain the same. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
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1
Year: |
$35 |
3
Years: |
$109 |
5
Years: |
$191 |
10
Years: |
$431 |
Portfolio Turnover
The
Fund pays transaction costs, such as commissions, when it buys and sells
securities (or “turns over” its portfolio). A higher portfolio turnover rate may
indicate higher transaction costs and may result in higher taxes when Shares are
held in a taxable account. These costs, which are not reflected in annual fund
operating expenses or in the Example, affect the Fund’s performance.
For the fiscal year ended August
31, 2021, the Fund’s portfolio turnover rate was
35% of the average value of its
portfolio.
Principal Investment Strategies
The
Fund uses a “passive management” (or indexing) approach to track the total
return performance, before fees and expenses, of the Index.
TOBAM
Maximum Diversification USA Index
The
Index is a rules-based index that is designed to create a more diversified
equity portfolio of the common and preferred stock of large and
mid-capitalization U.S. companies relative to traditional market capitalization
weighted benchmarks. The Index uses a quantitative model to weight companies in
the Index universe to maximize the Diversification Ratio®
of
the Index, a proprietary metric based on the volatility of each Index
constituent and its correlation to the other Index constituents. The Index was
developed in 2011 by TOBAM S.A.S., the Fund’s index provider.
Construction
of the Index begins with the universe of large and mid-capitalization common and
preferred stocks of U.S. companies with a minimum market capitalization set by
the Index rules and adjusted quarterly based on changes to the overall U.S.
equity market capitalization. As of September 17, 2021, the minimum market
capitalization for companies eligible to be added to the Index was
USD $10.5 billion (USD $8.4 billion for companies already included in the
Index). Companies in the Index universe are then screened to eliminate
securities with insufficient liquidity and relatively new issues.
The
remaining companies are then screened against a socially responsible investment
(“SRI”) exclusion blacklist. The SRI exclusion blacklist contains those
companies whose activities do not meet the criteria for socially responsible
investing, such as the production or sale of unconventional weapons, production
of tobacco, production of coal or coal-based energy, serious or systematic human
rights violations, severe environmental damage, gross corruption, or other
particularly serious violation of ethical norms. Companies included on the SRI
exclusion blacklist are not eligible to be added to the Index, and the remaining
companies constitute the “Eligible Universe” for the Index.
Companies
in the Eligible Universe are then analyzed for their volatility and correlation
to each other and weighted to maximize the Diversification Ratio®,
a mathematical definition of diversification developed by TOBAM. The model used
to maximize the Diversification Ratio (the “MaxDiv®
Model”) seeks to lower the overall volatility of the Index while maintaining its
diversification. The maximum weight for each stock is the lower of (i) 1.5% or
(ii) 20 times the security’s weight had the Eligible Universe been market
capitalization weighted (the “Cap-Weighted Benchmark”).
Additionally,
at the time of each reconstitution of the Index, the MaxDiv Model is constrained
to ensure that the “active share” of the Index, which measures
how much the holdings of the Index differ from those of the securities in the
Cap-Weighted Benchmark, cannot
exceed 50%.
The
MaxDiv Model is also optimized to reduce turnover and to limit the Index’s
carbon emissions to 80% of the emissions of the Cap-Weighted Benchmark.
The
Index is reconstituted (i.e.,
Index Constituents are added or deleted, and weights are reset based on the
MaxDiv Model) quarterly after the close of business on the third Friday of each
March, June, September and December using data as of the close of business on
the first Friday of the relevant month.
The
Fund’s Investment Strategy
Under
normal circumstances, at least 80% of the Fund’s net assets, plus borrowings for
investment purposes, will be invested in equity securities that are principally
traded in the United States.
The
Fund will generally use a “replication” strategy to achieve its investment
objective, meaning
the Fund will generally invest in all of the component securities of the
Index in the same approximate proportions 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 Fund’s sub-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 Fund’s sub-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).
To
the extent the Index concentrates (i.e., holds more than 25% 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.
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
Funds.”
•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, because of an ETF’s structure, it is exposed to the
following risks:
◦Authorized
Participants, Market Makers, and Liquidity Providers Concentration
Risk. The
Fund has a limited number of financial institutions that may act as Authorized
Participants (“APs”). In addition, there may be a limited number of market
makers and/or liquidity providers in the marketplace. To the extent either of
the following events occur, Shares may trade at a material discount to NAV and
possibly face delisting: (i) APs exit the business or otherwise become
unable to process creation and/or redemption orders and no other APs step
forward to perform these services, or (ii) market makers and/or liquidity
providers exit the business or significantly reduce their business activities
and no other entities step forward to perform their functions.
◦Costs
of Buying or Selling Shares.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading. Although
Shares are listed for trading on 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.
•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.
•Models
and Data Risk. The
composition of the Index is heavily dependent on proprietary quantitative models
as well as information and data supplied by third parties (“Models and
Data”).
When
Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon may lead to securities being included in or excluded from the
Index that would have been excluded or included had the Models and Data been
correct and complete. If the composition of the Index reflects such errors, the
Fund’s portfolio can be expected to reflect the errors, too.
•Passive
Investment Risk.
The Fund is not actively managed, and its sub-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
or rebalancing of the Index in accordance with the Index
methodology.
•Preferred
Securities Risk. Preferred
securities may pay fixed or adjustable rates of return and are subject to many
of the risks associated with debt securities (e.g.,
interest rate risk, call risk and extension risk). In addition, preferred
securities are subject to issuer-specific and market risks applicable generally
to equity securities. Because many preferred securities allow the issuer to
convert their preferred security into common stock, preferred securities are
often sensitive to declining common stock values. A company’s preferred
securities generally pay dividends only after the company makes required
payments to holders of its bonds and other debt. For this reason, the value of
preferred securities will usually react more strongly than bonds and other debt
to actual or perceived changes in the company’s financial condition or
prospects. Preferred securities of smaller companies may be more vulnerable to
adverse developments than preferred stock of larger companies.
•Sector
Risk.
To the extent the Fund invests more heavily in particular sectors of the
economy, its performance will be especially sensitive to developments that
significantly affect those sectors.
•Socially
Responsible Investment Risk.
Because the methodology of the Index eliminates securities of certain issuers
for non-financial reasons, the Index, and consequently the Fund, may
underperform the broader equity market or other indices or funds that do not
utilize similar criteria when selecting investments.
•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
The following
performance information indicates some of the risks of investing in the
Fund. The bar chart shows the Fund’s performance for calendar
years ended December 31. The table illustrates how the Fund’s average annual
returns for the 1-year and since inception periods compare with those of a broad
measure of market performance and the Index. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is available on the
Fund’s website at www.etf.nationwide.com.
Calendar Year Total
Returns
For the year-to-date period ended
September 30, 2021,
the Fund’s total return was 8.08%.
During the period shown in the bar chart,
the Fund’s highest quarterly return
was 22.39% for the quarter ended June 30, 2020 and the
lowest quarterly return was
-19.10% for the quarter ended March 31,
2020.
Average
Annual Total Returns
For
the Period Ended December 31, 2020
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Nationwide
Maximum Diversification U.S. Core Equity ETF |
1
Year |
Since
Inception
(9/15/17) |
Return Before
Taxes |
21.65% |
14.55% |
Return After Taxes on
Distributions |
21.13% |
14.09% |
Return After Taxes on Distributions and
Sale of Shares |
13.18% |
11.40% |
TOBAM
Maximum Diversification USA Index
(reflects no deduction for
fees, expenses, or taxes) |
22.05% |
14.95% |
MSCI
USA Index Gross (USD)
(reflects no deduction for
fees, expenses, or taxes) |
21.37% |
16.18% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an
investor’s tax situation and may differ from those shown. After-tax returns shown are
not relevant to investors who hold their Shares through tax-deferred
arrangements such as an individual retirement account (“IRA”) or other
tax-advantaged accounts.
Portfolio
Management
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Adviser |
Nationwide
Fund Advisors (the “Adviser”) |
Sub-Adviser |
Vident
Investment Advisory, LLC (“VIA” or the “Sub-Adviser”) |
Portfolio
Managers |
Austin
Wen, CFA, Portfolio Manager for VIA, has managed the Fund since its
inception in September 2017, and Rafael Zayas, CFA, SVP, Head of Portfolio
Management and Trading for VIA, has managed the Fund since June
2020. |
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.etf.nationwide.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.
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NATIONWIDE
NASDAQ-100
RISK-MANAGED
INCOME
ETF |
Investment Objective
The Nationwide Nasdaq-100
Risk-Managed Income ETF (the “Fund”) seeks current income with downside
protection.
Fees and Expenses of the
Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
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Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
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Management
Fees |
0.68% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses |
0.00% |
Total
Annual Fund Operating Expenses |
0.68% |
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Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund’s operating expenses remain the same. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
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1
Year: |
$69 |
3
Years: |
$218 |
5
Years: |
$379 |
10
Years: |
$847 |
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. This rate
excludes the value of portfolio securities received or delivered as a result of
in-kind creations or redemptions of the Fund’s Shares and securities, including
options, whose maturities or expiration dates at the time of acquisition were
one year or less.
For
the fiscal year ended August
31, 2021, the Fund’s portfolio turnover rate was
10% of the average value of its
portfolio.
Principal Investment
Strategy
The
Fund is an actively-managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective principally by investing in a portfolio of the stocks
included in the Nasdaq-100® Index (the “Nasdaq-100” or the “Reference Index”)
and an options collar (i.e., a
mix of written (sold) call options and long (bought) put options) on the
Nasdaq-100. The Fund seeks to generate high current income on a monthly basis
from a combination of the dividends received from the Fund’s equity holdings and
the premiums earned from the options collar. The options collar seeks to
generate a net-credit, meaning that the premium received from the sale of the
call options will be greater than the cost of buying the protective put options.
The options collar is intended to reduce the Fund’s volatility and provide a
measure of downside protection.
The
Nasdaq-100 is a market capitalization weighted index comprised of the securities
of 100 of the largest non-financial companies listed on The Nasdaq Stock Market
LLC based on their market capitalization. Such securities may include companies
domiciled domestically or internationally (including in emerging markets), and
may include common stocks, ordinary shares, depositary receipts representing
interests in non-U.S. companies, and tracking stocks. As of September 30, 2021,
the Nasdaq-100 had significant exposure to companies in the information
technology and communication services sectors. The Fund will concentrate its
investments (i.e.,
hold more than 25% of its total assets) in a particular industry or group of
industries to approximately the same extent that the Reference Index
concentrates in an industry or group of industries.
The
Fund will generally use a “replication” strategy to invest in the Nasdaq-100,
meaning the Fund will generally invest in all of the component securities of the
Nasdaq-100 in the same approximate proportions as in the Nasdaq-100. However,
the Fund may use a “representative sampling” strategy, meaning it may invest in
a sample of the securities in the Nasdaq-100 whose risk, return, and other
characteristics closely resemble the risk, return, and other characteristics of
the Nasdaq-100 as a whole, when the Fund’s sub-adviser believes it is in the
best interests of the Fund (e.g.,
when replicating the Nasdaq-100 involves practical difficulties or substantial
costs, a Nasdaq-100 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 Nasdaq-100).
The
Fund’s sub-adviser generally utilizes a proprietary, systematic model to manage
the Fund’s options positions in an objective, rules-based manner, although the
sub-adviser may actively manage the written call options prior to expiration to
potentially capture gains and minimize losses due to the movement of the
Nasdaq-100.
The
Fund’s options collar strategy typically consists of two components: (i) selling
call options on the Nasdaq-100 or another reference asset representing U.S.
equity securities on up to 100% of the value of the equity securities held by
the Fund to generate premium from such options, while (ii) simultaneously
reinvesting a portion of such premium to buy put options on the same reference
asset(s) to “hedge” or mitigate the downside risk associated with owning equity
securities.
•Call
Options.
A written (sold) call option gives the seller the obligation to sell shares of
the reference asset at a specified price (“strike price”) until a specified date
(“expiration date”). The writer (seller) of the call option receives an amount
(premium) for writing (selling) the option. In the event the reference asset
appreciates above the strike price and the holder exercises the call option, the
Fund will have to pay the difference between the value of the reference asset
and the strike price or deliver the reference asset (which loss is offset by the
premium initially received), and in the event the reference asset declines in
value, the call option may end up worthless and the Fund retains the premium.
The call options written by the Fund will be collateralized by the Fund’s equity
holdings at the time the Fund sells the options.
•Put
Options.
When the Fund purchases a put option, the Fund pays an amount (premium) to
acquire the right to sell shares of a reference asset at a strike price until
the expiration date. In the event the reference asset declines in value below
the strike price and the Fund exercises its put option, the Fund will be
entitled to receive the difference between the value of the reference asset and
the strike price (which gain is offset by the premium originally paid by the
Fund), and in the event the reference asset closes above the strike price as of
the expiration date, the put option may end up worthless and the Fund’s loss is
limited to the amount of premium it paid.
The
options purchased or sold by the Fund will typically have an expiration date
approximately one-month from the time of purchase or sale. The Fund expects the
total value of the call options and the total value of the put options to each
be up to 100% of the Fund’s net assets. The Fund will use a portion of the
premium received from writing call options to purchase put options. Call options
written by the Fund will typically have a strike price that is at, near, or
higher than the current price of the reference asset, and put options purchased
by the Fund will typically have a strike price that is lower (in some cases,
significantly lower) than the current price of the reference asset. In addition,
both the call and put options will be traded on a national securities exchange
and be settled in cash.
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. Additionally, the Fund’s investment
strategies may involve active and frequent trading resulting in high portfolio
turnover.
Under normal circumstances, at least
80% of the Fund’s net assets, plus borrowings for investment purposes, will be
invested in securities, or derivative instruments linked to securities, of
companies that are included in the Fund’s Reference
Index.
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
Funds.”
•Collared
Options Strategy Risk. Writing
and buying options are speculative activities and entail greater than ordinary
investment risks. The Fund’s use of call and put options can lead to losses
because of adverse movements in the price or value of the reference asset, which
may be magnified by certain features of the options. When selling a call option,
the Fund will receive a premium; however, this premium may not be enough to
offset a loss incurred by the Fund if the price of the reference asset is above
the strike price by an amount equal to or greater than the premium. The value of
an option may be adversely affected if the market for the option becomes less
liquid or smaller, and will be affected by changes in the value or yield of the
option’s reference asset, an increase in interest rates, a change in the actual
or perceived volatility of the stock market or the reference asset
and
the remaining time to expiration. Additionally, the value of an option does not
increase or decrease at the same rate as the reference asset.
The
Fund’s use of options may reduce the Fund’s ability to profit from increases in
the value of the Fund’s equity holdings. If
the price of the reference asset of a written call option rises above its strike
price, the value of the option and, consequently, the Fund may decline
significantly more than if the Fund invested solely in the reference asset
instead of using options. Similarly, if the price of the reference asset of a
purchased put option remains above its strike price, the option may become
worthless, and, consequently the value of the Fund may decline significantly
more than if the Fund invested solely in the reference asset instead of using
options.
•Correlation
Risk. The
Fund expects to invest a portion of its assets to replicate the holdings of the
Nasdaq-100, and the Fund’s sub-adviser does not expect to
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 Nasdaq-100. Although the Fund expects to invest a portion of
its assets to replicate the holdings of the Nasdaq-100, the performance of such
portion of the Fund and the Nasdaq-100 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 Nasdaq-100. In addition, the Fund may not
be fully invested in the securities of the Nasdaq-100 at all times or may hold
securities not included in the Nasdaq-100.
•Currency
Exchange Rate Risk.
The Fund may invest in investments denominated in non-U.S. currencies or in
securities that provide exposure to such currencies. Changes in currency
exchange rates and the relative value of non-U.S. currencies will affect the
value of the Fund’s
investment and the value of your Shares. Currency exchange rates can be very
volatile and can change quickly and unpredictably. As a result, the value of an
investment in the Fund may change quickly and without warning and you may lose
money.
•Depositary
Receipt Risk. American
Depositary Receipts (“ADRs”) involve risks similar to those associated with
investments in foreign securities and certain additional risks. ADRs 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. When the Fund invests in ADRs as a substitute for a direct investment in
the underlying foreign shares, the Fund is exposed to the risk that the ADRs may
not provide a return that corresponds precisely with that of the underlying
foreign shares.
•Derivatives
Risk. The
Fund invests in options that derive their performance from the performance of an
underlying reference asset. Derivatives, such as the options in which the Fund
invests, can be volatile and involve various types and degrees of risks,
depending upon the characteristics of a particular derivative. Derivatives may
have investment exposures that are greater than their cost would suggest,
meaning that a small investment in a derivative could have a substantial impact
on the performance of the Fund. The Fund could experience a loss if its
derivatives do not perform as anticipated, the derivatives are not correlated
with the performance of their reference asset, or if the Fund is unable to
purchase or liquidate a position because of an illiquid secondary market. The
market for many derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid, and unpredictable changes in the
prices for derivatives.
•Emerging
Markets Risk. The
Fund may have exposure to companies domiciled or doing business in emerging
markets. Emerging markets are riskier than more developed markets because they
tend to develop unevenly and may never fully develop. Emerging markets may be
more prone to political and economic risks, civil conflicts and war, greater
volatility, expropriation and nationalization risks, sanctions or other measures
by the United States or other governments, currency fluctuations, higher
transaction costs, delayed settlement, possible foreign controls on investments,
and less stringent investor protection and disclosure standards of foreign
markets. In addition, many emerging securities markets have far lower trading
volumes and less liquidity than developed markets.
•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 Limitation 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.
◦Cash
Redemption Risk. The
Fund’s investment strategy may require it to effect redemptions, in whole or in
part, for cash. As a result, the Fund may be required to 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 than if the in-kind redemption process was used exclusively. In
addition, cash redemptions may incur higher brokerage costs than in-kind
redemptions and these added costs may be borne by the Fund and negatively impact
Fund performance.
◦Costs
of Buying or Selling Shares. Due
to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small
investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading.
Although
Shares are listed for trading on a national securities exchange, such as 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.
•Foreign
Investment Risk. Because
of the Fund’s investment in non-U.S. companies, changes in foreign economies and
political climates are more likely to affect the Fund than a fund that invests
exclusively in U.S. companies. There may be less government supervision of
foreign markets, resulting in non-uniform accounting practices and less publicly
available information. The value of foreign investments may be affected by
changes in exchange control regulations, application of foreign tax laws
(including withholding tax), changes in governmental administration or economic
or monetary policy (in this country or abroad) or changed circumstances in
dealings between nations.
•High
Portfolio Turnover Risk. The
Fund may frequently buy and sell portfolio securities and other assets to
rebalance the Fund’s exposure to various market sectors. Higher portfolio
turnover may result in the Fund paying higher levels of transaction costs and
generating greater tax liabilities for shareholders. Portfolio turnover risk may
cause the Fund’s performance to be less than you expect.
•Industry
Exposure Risk. From
time to time, the Fund may invest a significant percentage of its assets in
issuers in a single industry (or the same group of industries). To the extent
the Fund’s investments are concentrated in or have significant exposure to a
particular issuer, industry, or group of industries, the Fund may be more
vulnerable to adverse events affecting such issuer, industry, or group of
industries than if the Fund’s investments were more broadly diversified. The
Fund’s industry exposure is expected to vary over time based on the composition
of the Reference Index.
•Limited
Operating History. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Management
Risk. The
Fund is actively-managed and may or may not meet its investment objective based
on the portfolio managers’ success or failure to implement investment strategies
for the Fund.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing.
The securities of large-capitalization companies may be relatively mature
compared to smaller companies and therefore subject to slower growth during
times of economic expansion. Large-capitalization companies may also be unable
to respond quickly to new competitive challenges, such as changes in technology
and consumer tastes.
•Model
and Data Risk. The
sub-adviser will make use of quantitative models and information and data
supplied by third parties to, among other things, help determine the strike
prices of the Fund’s options positions. To the extent the models used by the
sub-adviser or the information and data supplied by third parties are incorrect
or incomplete, the decisions made by the sub-adviser in reliance thereon will
expose the Fund to potential risks and could lead to the Fund incurring losses
on its investments.
•Non-Diversification
Risk. Although the Fund intends to invest in a
variety of securities and instruments, the Fund will be 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”).
•Sector
Risk. To
the extent the Fund invests more heavily in particular sectors of the economy,
its performance will be especially sensitive to developments that significantly
affect those sectors.
◦Communications
Services Sector Risk.
Communications services companies are subject to extensive government
regulation. The costs of complying with governmental regulations, delays or
failure to receive required regulatory approvals, or the enactment of new
adverse regulatory requirements may adversely affect the business of such
companies. Companies in the communications services sector can also be
significantly affected by intense competition, including competition with
alternative technologies such as wireless communications (including with 5G and
other technologies), product compatibility, consumer preferences, rapid product
obsolescence, and research and development of new products. Technological
innovations may make the products and services of such companies obsolete.
◦Information
Technology Sector Risk.
Market or economic factors impacting information technology companies and
companies that rely heavily on technological advances could have a significant
effect on the value of the Fund’s investments. The value of stocks of
information technology companies and companies that rely heavily on technology
is particularly vulnerable to rapid changes in technology product cycles, rapid
product obsolescence, government regulation and competition, both domestically
and internationally, including competition from foreign competitors with lower
production costs. Information technology companies are heavily dependent on
patent and intellectual property rights, the loss or impairment of which may
adversely affect profitability.
•Tax
Risk.
The Fund expects to generate premiums from its sale of call options. These
options are expected to result in capital gains or losses for federal income tax
purposes and may be subject to mark-to-market rules. These gains or losses will
be wholly or partly long-term or short-term depending on the nature of the
options sold by the Fund and will take into account premiums generated. In
addition, stocks that are hedged with put options may not be eligible for
long-term capital gains tax treatment. If positions held by the Fund were
treated as “straddles” for federal income tax purposes, or the Fund’s risk of
loss with respect to a position was otherwise diminished as set forth in
Treasury Regulations, dividends on stocks that are a part of such positions
would not constitute qualified dividend income subject to such favorable income
tax treatment and would not be eligible for the dividends received deduction for
corporate shareholders. In addition, generally, straddles are subject to certain
rules that may affect the amount, character and timing of the Fund’s gains and
losses with respect to straddle positions. The Fund is not designed for
investors seeking a tax efficient investment.
•Tracking
Stock Risk. Tracking stock is a separate class of
common stock designed to “track” the performance of a specific unit or operating
division within a larger company. As a result, a tracking stock’s value may
decline even if the common stock of the larger company increases in value.
Tracking stocks share many of the same investing risks as common stocks, but the
holders of tracking stock may not share the same rights as holders of a
company’s common stock.
Performance
The following
performance information indicates some of the risks of investing in the
Fund. The bar chart shows the Fund’s performance for the
calendar year ended December 31. The table illustrates how the Fund’s average
annual returns for the 1-year and since inception periods compared with those of
a broad measure of market performance. The Fund’s past performance,
before and after taxes, does not necessarily indicate how it will perform in the
future. Updated performance information is also available on the
Fund’s website at www.etf.nationwide.com.
Calendar Year Total
Return
For the year-to-date period ended
September 30, 2021, the
Fund’s total return was 5.51%.
During the period shown in the bar chart,
the Fund’s highest quarterly return
was 16.13% for the quarter ended June 30, 2020 and the
lowest quarterly return was
-3.42% for the quarter ended September 30,
2020.
Average
Annual Total Returns
For
the Period Ended December 31, 2020
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Nationwide
Nasdaq-100®
Risk-Managed Income ETF |
1
Year |
Since
Inception
(12/19/19) |
Return Before
Taxes |
19.15% |
19.11% |
Return After Taxes on
Distributions |
19.10% |
18.88% |
Return After Taxes on Distributions and
Sale of Shares |
11.37% |
14.43% |
CBOE
S&P 500 Zero-Cost Put Spread Collar Index
(reflects no deduction for
fees, expenses, or taxes) |
9.02% |
8.75% |
After-tax returns are
calculated using the historical highest individual federal marginal income tax
rates during the period covered by the table above and do not reflect the impact
of state and local taxes. Actual after-tax returns depend on an
investor’s tax situation and may differ from those shown. After-tax returns shown are
not relevant to investors who hold their Shares through tax-deferred
arrangements such as an individual retirement account (“IRA”) or other
tax-advantaged accounts.
Portfolio
Management
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Adviser |
|
Nationwide
Fund Advisors (the “Adviser”) |
Sub-Adviser |
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Harvest
Volatility Management, LLC (“Harvest” or the
“Sub-Adviser”) |
Portfolio
Managers |
|
Curt
Brockelman, Managing Partner, Co-Founder, and Chief Risk Officer at
Harvest, has managed the Fund since December 2020, and Troy Cates,
Managing Director and Portfolio Manager at Harvest, and Garrett Paolella,
Managing Director and Portfolio Manager at Harvest, have managed the Fund
since its inception in December 2019. |
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.etf.nationwide.com
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an
individual retirement account (“IRA”) or other tax-advantaged account.
Distributions on investments made through tax-deferred arrangements may be taxed
later upon withdrawal of assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
|
|
|
NATIONWIDE
S&P 500 RISK-MANAGED
INCOME
ETF |
Investment Objective
The Nationwide S&P 500
Risk-Managed Income ETF (the “Fund”) seeks current income with downside
protection.
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 |
0.68% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses* |
0.00% |
Total
Annual Fund Operating Expenses |
0.68% |
|
|
*Estimated for the current
fiscal year.
Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund’s operating expenses remain the same. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
1
Year: |
$69 |
3
Years: |
$218 |
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 is an actively-managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective principally by investing in a portfolio of the stocks
included in the S&P 500® Index (the “S&P 500” or the “Reference Index”)
and an options collar (i.e.,
a mix of written (sold) call options and long (bought) put options) on the
S&P 500. The Fund seeks to generate high current income on a monthly basis
from a combination of the dividends received from the Fund’s equity holdings and
the premiums earned from the options collar. The options collar seeks to
generate a net-credit, meaning that the premium received from the sale of the
call options will be greater than the cost of buying the protective put options.
The options collar is intended to reduce the Fund’s volatility and provide a
measure of downside protection.
The
S&P 500 consists of approximately 500 leading U.S.-listed companies
representing approximately 80% of the U.S. equity market capitalization. As of
October 29, 2021, the S&P 500 had significant exposure to companies in the
information technology sector. The Fund will concentrate its investments
(i.e.,
hold more than 25% of its total assets) in a particular industry or group of
industries to approximately the same extent that the Reference Index
concentrates in an industry or group of industries.
The
Fund will generally use a “replication” strategy to invest in the S&P 500,
meaning the Fund will generally invest in all of the component securities of the
S&P 500 in the same approximate proportions as in the S&P 500. However,
the Fund may use a “representative sampling” strategy, meaning it may invest in
a sample of the securities in the S&P 500 whose risk, return, and other
characteristics closely resemble the risk, return, and other characteristics of
the S&P 500 as a whole, when the Fund’s sub-adviser believes it is in the
best interest of the Fund (e.g.,
when replicating the S&P 500 involves practical difficulties or substantial
costs, a S&P 500 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 S&P 500).
The
Fund’s sub-adviser generally utilizes a proprietary, systematic model to manage
the Fund’s options positions in an objective, rules-based manner, although the
sub-adviser may actively manage the written call options prior to expiration to
potentially capture gains and minimize losses due to the movement of the S&P
500.
The
Fund’s options collar strategy typically consists of two components: (i) selling
call options on the S&P 500 or another reference asset representing U.S.
equity securities on up to 100% of the value of the equity securities held by
the Fund to generate premium from such options, while (ii) simultaneously
reinvesting a portion of such premium to buy put options on the same reference
asset(s) to “hedge” or mitigate the downside risk associated with owning equity
securities.
•Call
Options.
A written (sold) call option gives the seller the obligation to sell shares of
the reference asset at a specified price (“strike price”) until a specified date
(“expiration date”). The writer (seller) of the call option receives an amount
(premium) for writing (selling) the option. In the event the reference asset
appreciates above the strike price and the holder exercises the call option, the
Fund will have to pay the difference between the value of the reference asset
and the strike price or deliver the reference asset (which loss is offset by the
premium initially received), and in the event the reference asset declines in
value, the call option may end up worthless and the Fund retains the premium.
The call options written by the Fund will be collateralized by the Fund’s equity
holdings at the time the Fund sells the options.
•Put
Options.
When the Fund purchases a put option, the Fund pays an amount (premium) to
acquire the right to sell shares of a reference asset at a strike price until
the expiration date. In the event the reference asset declines in value below
the strike price and the Fund exercises its put option, the Fund will be
entitled to receive the difference between the value of the reference asset and
the strike price (which gain is offset by the premium originally paid by the
Fund), and in the event the reference asset closes above the strike price as of
the expiration date, the put option may end up worthless and the Fund’s loss is
limited to the amount of premium it paid.
The
options purchased or sold by the Fund will typically have an expiration date
approximately one-month from the time of purchase or sale. The Fund expects the
total value of the call options and the total value of the put options to each
be up to 100% of the Fund’s net assets. The Fund will use a portion of the
premium received from writing call options to purchase put options. Call options
written by the Fund will typically have a strike price that is at, near, or
higher than the current price of the reference asset, and put options purchased
by the Fund will typically have a strike price that is lower (in some cases,
significantly lower) than the current price of the reference asset. In addition,
both the call and put options will be traded on a national securities exchange
and be settled in cash.
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. Additionally, the Fund’s investment
strategies may involve active and frequent trading resulting in high portfolio
turnover.
Under normal circumstances, at least
80% of the Fund’s net assets, plus borrowings for investment purposes, will be
invested in securities, or derivative instruments linked to securities, of
companies that are included in the Fund’s Reference
Index.
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.”
•Collared
Options Strategy Risk. Writing
and buying options are speculative activities and entail greater than ordinary
investment risks. The Fund’s use of call and put options can lead to losses
because of adverse movements in the price or value of the reference asset, which
may be magnified by certain features of the options. When selling a call option,
the Fund will receive a premium; however, this premium may not be enough to
offset a loss incurred by the Fund if the price of the reference asset is above
the strike price by an amount equal to or greater than the premium. The value of
an option may be adversely affected if the market for the option becomes less
liquid or smaller, and will be affected by changes in the value or yield of the
option’s reference asset, an increase in interest rates, a change in the actual
or perceived volatility of the stock market or the reference asset and the
remaining time to expiration. Additionally, the value of an option does not
increase or decrease at the same rate as the reference asset.
The
Fund’s use of options may reduce the Fund’s ability to profit from increases in
the value of the Fund’s equity holdings. If
the price of the reference asset of a written call option rises above its strike
price, the value of the option and, consequently, the Fund may decline
significantly more than if the Fund invested solely in the reference asset
instead of using options. Similarly, if the price of the reference asset of a
purchased put option remains above its strike price, the option may become
worthless, and, consequently the value of the Fund may decline significantly
more than if the Fund invested solely in the reference asset instead of using
options.
•Correlation
Risk. The
Fund expects to invest a portion of its assets to replicate the holdings of the
S&P 500, and the Fund’s sub-adviser does not expect to
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 S&P 500. Although the Fund expects to invest a portion of
its assets to replicate the holdings of the S&P 500, the performance of such
portion of the Fund and the S&P 500 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 S&P 500. In addition, the Fund may not
be fully invested in the securities of the S&P 500 at all times or may hold
securities not included in the S&P 500.
•Derivative
Securities Risks. The
Fund invests in options that derive their performance from the performance of an
underlying equity security. Derivatives, such as the options in which the Fund
invests, can be volatile and involve various types and degrees of risks,
depending upon the characteristics of a particular derivative. Derivatives may
entail investment exposures that are greater than their cost would suggest,
meaning that a small investment in a derivative could have a substantial impact
on the performance of the Fund. The Fund could experience a loss if its
derivatives do not perform as anticipated, the derivatives are not correlated
with the performance of their underlying security, or if the Fund is unable to
purchase or liquidate a position because of an illiquid secondary market. The
market for many derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid, and unpredictable changes in the
prices for derivatives.
•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.
◦Cash
Redemption Risk.
The Fund’s investment strategy may require it to redeem shares for cash or to
otherwise include cash as part of its redemption proceeds. The Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund to recognize a capital
gain that it might not have recognized if it had made a redemption in-kind. As a
result, the Fund may pay out higher annual capital gain distributions than if
the in-kind redemption process was used.
◦Costs
of Buying or Selling Shares.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply
and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading. Although
Shares are listed for trading on NYSE Arca, Inc. (the “Exchange”) and may be
traded on U.S. exchanges other than the Exchange, there can be no assurance that
Shares will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of Shares may begin to mirror the liquidity of
the Fund’s underlying portfolio holdings, which can be significantly less liquid
than Shares, and this could lead to differences between the market price of the
Shares and the underlying value of those Shares.
•High
Portfolio Turnover Risk.
The Fund may frequently buy and sell portfolio securities and other assets to
rebalance the Fund’s exposure to specific securities. Higher portfolio turnover
may result in the Fund paying higher levels of transaction costs and generating
greater tax liabilities for shareholders. Portfolio turnover risk may cause the
Fund’s performance to be less than you expect.
•Industry
Exposure Risk. From
time to time, the Fund may invest a significant percentage of its assets in
issuers in a single industry (or the same group of industries). To the extent
the Fund’s investments are concentrated in or have significant exposure to a
particular issuer, industry, or group of industries, the Fund may be more
vulnerable to adverse events affecting such issuer, industry, or group of
industries than if the Fund’s investments were more broadly diversified. The
Fund’s industry exposure is expected to vary over time based on the composition
of the Reference Index.
•Management
Risk. The
Fund is actively-managed and may or may not meet its investment objective based
on the portfolio managers’ success or failure to implement investment strategies
for the Fund.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing.
The securities of large-capitalization companies may be relatively mature
compared to smaller companies and therefore subject to slower growth during
times of economic expansion. Large-capitalization companies may also be unable
to respond quickly to new competitive challenges, such as changes in technology
and consumer tastes.
•Model
and Data Risk. The
sub-adviser will make use of quantitative models and information and data
supplied by third parties to, among other things, help determine the strike
prices of the Fund’s options positions. To the extent the models used by the
sub-adviser or the information and data supplied by third parties are incorrect
or incomplete, the decisions made by the sub-adviser in reliance thereon will
expose the Fund to potential risks and could lead to the Fund incurring losses
on its investments.
•New
Fund Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•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 RIC under Subchapter M of
the Internal Revenue Code of 1986, as amended (the
“Code”).
•Sector
Risk.
To the extent the Fund invests more heavily in particular sectors of the
economy, its performance will be especially sensitive to developments that
significantly affect those sectors.
◦Information
Technology Sector Risk. Market
or economic factors impacting information technology companies and companies
that rely heavily on technological advances could have a significant effect on
the value of the Fund’s investments. The value of stocks of information
technology companies and companies that rely heavily on technology is
particularly vulnerable to rapid changes in technology product cycles, rapid
product obsolescence, government regulation and competition, both domestically
and internationally, including competition from foreign competitors with lower
production costs. Stocks of information technology companies and companies that
rely heavily on technology, especially those of smaller, less-seasoned
companies, tend to be more volatile than the overall market. Information
technology companies are heavily dependent on patent and intellectual property
rights, the loss or impairment of which may adversely affect
profitability.
•Tax
Risk.
The Fund expects to generate premiums from its sale of call options. These
options are expected to result in capital gains or losses for federal income tax
purposes and may be subject to mark-to-market rules. These gains or losses will
be wholly or partly long-term or short-term depending on the nature of the
options sold by the Fund and will take into account premiums generated. In
addition, stocks that are hedged with put options may not be eligible for
long-term capital gains tax treatment. If positions held by the Fund were
treated as “straddles” for federal income tax purposes, or the Fund’s risk of
loss with respect to a position was otherwise diminished as set forth in
Treasury Regulations, dividends on stocks that are a part of such positions
would not constitute qualified dividend income subject to such favorable income
tax treatment and would not be eligible for the dividends received deduction for
corporate shareholders. In addition, generally, straddles are subject to certain
rules that may affect the amount, character and timing of the Fund’s gains and
losses with respect to straddle positions. The Fund is not designed for
investors seeking a tax efficient investment.
•Tracking
Stock Risk.
Tracking stock is a separate class of common stock designed to “track” the
performance of a specific unit or operating division within a larger company. As
a result, a tracking stock’s value may decline even if the common stock of the
larger company increases in value. Tracking stocks share many of the same
investing risks as common stocks, but the holders of tracking stock may not
share the same rights as holders of a company’s common
stock.
Performance
The Fund is new and therefore does not have a
performance history for a full calendar year. In the future,
performance information for the Fund will be presented in this section. Updated
performance information is also available on the Fund’s website at
www.etf.nationwide.com.
Portfolio
Management
|
|
|
|
|
|
|
|
|
Adviser |
|
Nationwide
Fund Advisors (the “Adviser”) |
Sub-Adviser |
|
Harvest
Volatility Management, LLC (“Harvest” or the
“Sub-Adviser”) |
Portfolio
Managers |
|
Curt
Brockelman, Managing Partner, Co-Founder, Portfolio Manager, and Chief
Risk Officer at Harvest, Troy Cates, Managing Director and Portfolio
Manager at Harvest, and Garrett Paolella, Managing Director and Portfolio
Manager at Harvest, have managed the Fund since its inception in December
2021. |
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.etf.nationwide.com
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an
individual retirement account (“IRA”) or other tax-advantaged account.
Distributions on investments made through tax-deferred arrangements may be taxed
later upon withdrawal of assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
|
|
|
NATIONWIDE
DOW
JONES
RISK-MANAGED
INCOME
ETF |
Investment Objective
The Nationwide Dow Jones
Risk-Managed Income ETF (the “Fund”) seeks current income with downside
protection.
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 |
0.68% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses* |
0.00% |
Total
Annual Fund Operating Expenses |
0.68% |
|
|
*Estimated for the current
fiscal year.
Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund’s operating expenses remain the same. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
|
|
|
|
|
|
|
|
|
|
|
|
1
Year: |
$69 |
3
Years: |
$218 |
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 is an actively-managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective principally by investing in a portfolio of the stocks
included in the Dow Jones Industrial Average® (the “Dow Jones” or the “Reference
Index”) and an options collar (i.e.,
a mix of written (sold) call options and long (bought) put options) on the Dow
Jones. The Fund seeks to generate high current income on a monthly basis from a
combination of the dividends received from the Fund’s equity holdings and the
premiums earned from the options collar. The options collar seeks to generate a
net-credit, meaning that the premium received from the sale of the call options
will be greater than the cost of buying the protective put options. The options
collar is intended to reduce the Fund’s volatility and provide a measure of
downside protection.
The
Dow Jones is a price-weighted index comprised of the stocks of 30 U.S. blue-chip
companies (i.e.,
well-known, established companies). As of October 29, 2021, the Dow Jones had
significant exposure to companies in the information technology, health care and
financial sectors. The Fund will concentrate its investments (i.e.,
hold more than 25% of its total assets) in a particular industry or group of
industries to approximately the same extent that the Reference Index
concentrates in an industry or group of industries.
The
Fund will generally use a “replication” strategy to invest in the Dow Jones,
meaning the Fund will generally invest in all of the component securities of the
Dow Jones in the same approximate proportions as in the Dow Jones. However, the
Fund may use a “representative sampling” strategy, meaning it may invest in a
sample of the securities in the Dow Jones whose risk, return, and other
characteristics closely resemble the risk, return, and other characteristics of
the Dow Jones as a whole, when the Fund’s sub-adviser believes it is in the best
interest of the Fund (e.g.,
when replicating the Dow Jones involves practical difficulties or substantial
costs, a Dow Jones 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 Dow Jones).
The
Fund’s sub-adviser generally utilizes a proprietary, systematic model to manage
the Fund’s options positions in an objective, rules-based manner, although the
sub-adviser may actively manage the written call options prior to expiration to
potentially capture gains and minimize losses due to the movement of the Dow
Jones.
The
Fund’s options collar strategy typically consists of two components: (i) selling
call options on the Dow Jones or another reference asset representing U.S.
equity securities on up to 100% of the value of the equity securities held by
the Fund to generate premium from such options, while (ii) simultaneously
reinvesting a portion of such premium to buy put options on the same reference
asset(s) to “hedge” or mitigate the downside risk associated with owning equity
securities.
•Call
Options.
A written (sold) call option gives the seller the obligation to sell shares of
the reference asset at a specified price (“strike price”) until a specified date
(“expiration date”). The writer (seller) of the call option receives an amount
(premium) for writing (selling) the option. In the event the reference asset
appreciates above the strike price and the holder exercises the call option, the
Fund will have to pay the difference between the value of the reference asset
and the strike price or deliver the reference asset (which loss is offset by the
premium initially received), and in the event the reference asset declines in
value, the call option may end up worthless and the Fund retains the premium.
The call options written by the Fund will be collateralized by the Fund’s equity
holdings at the time the Fund sells the options.
•Put
Options.
When the Fund purchases a put option, the Fund pays an amount (premium) to
acquire the right to sell shares of a reference asset at a strike price until
the expiration date. In the event the reference asset declines in value below
the strike price and the Fund exercises its put option, the Fund will be
entitled to receive the difference between the value of the reference asset and
the strike price (which gain is offset by the premium originally paid by the
Fund), and in the event the reference asset closes above the strike price as of
the expiration date, the put option may end up worthless and the Fund’s loss is
limited to the amount of premium it paid.
The
options purchased or sold by the Fund will typically have an expiration date
approximately one-month from the time of purchase or sale. The Fund expects the
total value of the call options and the total value of the put options to each
be up to 100% of the Fund’s net assets. The Fund will use a portion of the
premium received from writing call options to purchase put options. Call options
written by the Fund will typically have a strike price that is at, near, or
higher than the current price of the reference asset, and put options purchased
by the Fund will typically have a strike price that is lower (in some cases,
significantly lower) than the current price of the reference asset. In addition,
both the call and put options will be traded on a national securities exchange
and be settled in cash.
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. Additionally, the Fund’s investment
strategies may involve active and frequent trading resulting in high portfolio
turnover.
Under normal circumstances, at least
80% of the Fund’s net assets, plus borrowings for investment purposes, will be
invested in securities, or derivative instruments linked to securities, of
companies that are included in the Fund’s Reference
Index.
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.”
•Collared
Options Strategy Risk. Writing
and buying options are speculative activities and entail greater than ordinary
investment risks. The Fund’s use of call and put options can lead to losses
because of adverse movements in the price or value of the reference asset, which
may be magnified by certain features of the options. When selling a call option,
the Fund will receive a premium; however, this premium may not be enough to
offset a loss incurred by the Fund if the price of the reference asset is above
the strike price by an amount equal to or greater than the premium. The value of
an option may be adversely affected if the market for the option becomes less
liquid or smaller, and will be affected by changes in the value or yield of the
option’s reference asset, an increase in interest rates, a change in the actual
or perceived volatility of the stock market or the reference asset and the
remaining time to expiration. Additionally, the value of an option does not
increase or decrease at the same rate as the reference asset.
The
Fund’s use of options may reduce the Fund’s ability to profit from increases in
the value of the Fund’s equity holdings. If
the price of the reference asset of a written call option rises above its strike
price, the value of the option and, consequently, the Fund may decline
significantly more than if the Fund invested solely in the reference asset
instead of using options. Similarly, if the price of the reference asset of a
purchased put option remains above its strike price, the option may
become
worthless, and, consequently the value of the Fund may decline significantly
more than if the Fund invested solely in the reference asset instead of using
options.
•Correlation
Risk. The
Fund expects to invest a portion of its assets to replicate the holdings of the
Dow Jones, and the Fund’s sub-adviser does not expect to
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 Dow Jones. Although the Fund expects to invest a portion of its
assets to replicate the holdings of the Dow Jones, the performance of such
portion of the Fund and the Dow Jones 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 Dow Jones. In addition, the Fund may not
be fully invested in the securities of the Dow Jones at all times or may hold
securities not included in the Dow Jones.
•Derivative
Securities Risks. The
Fund invests in options that derive their performance from the performance of an
underlying equity security. Derivatives, such as the options in which the Fund
invests, can be volatile and involve various types and degrees of risks,
depending upon the characteristics of a particular derivative. Derivatives may
entail investment exposures that are greater than their cost would suggest,
meaning that a small investment in a derivative could have a substantial impact
on the performance of the Fund. The Fund could experience a loss if its
derivatives do not perform as anticipated, the derivatives are not correlated
with the performance of their underlying security, or if the Fund is unable to
purchase or liquidate a position because of an illiquid secondary market. The
market for many derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid, and unpredictable changes in the
prices for derivatives.
•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.
◦Cash
Redemption Risk.
The Fund’s investment strategy may require it to redeem shares for cash or to
otherwise include cash as part of its redemption proceeds. The Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund to recognize a capital
gain that it might not have recognized if it had made a redemption in-kind. As a
result, the Fund may pay out higher annual capital gain distributions than if
the in-kind redemption process was used.
◦Costs
of Buying or Selling Shares.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading. Although
Shares are listed for trading on NYSE Arca, Inc. (the “Exchange”) and may be
traded on U.S. exchanges other than the Exchange, there can be no assurance that
Shares will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of Shares may begin to mirror the liquidity of
the Fund’s underlying portfolio holdings, which can be significantly less liquid
than Shares, and this could lead to differences between the market price of the
Shares and the underlying value of those Shares.
•High
Portfolio Turnover Risk.
The Fund may frequently buy and sell portfolio securities and other assets to
rebalance the Fund’s exposure to specific securities. Higher portfolio turnover
may result in the Fund paying higher levels of transaction costs and generating
greater tax liabilities for shareholders. Portfolio turnover risk may cause the
Fund’s performance to be less than you expect.
•Industry
Exposure Risk. From
time to time, the Fund may invest a significant percentage of its assets in
issuers in a single industry (or the same group of industries). To the extent
the Fund’s investments are concentrated in or have significant exposure to a
particular issuer, industry, or group of industries, the Fund may be more
vulnerable to adverse events affecting such issuer, industry, or group of
industries than if the Fund’s investments were more broadly diversified. The
Fund’s industry exposure is expected to vary over time based on the composition
of the Reference Index.
•Management
Risk. The
Fund is actively-managed and may or may not meet its investment objective based
on the portfolio managers’ success or failure to implement investment strategies
for the Fund.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing.
The securities of large-capitalization companies may be relatively mature
compared to smaller companies and therefore subject to slower growth during
times of economic expansion. Large-capitalization companies may also be unable
to respond quickly to new competitive challenges, such as changes in technology
and consumer tastes.
•Model
and Data Risk. The
sub-adviser will make use of quantitative models and information and data
supplied by third parties to, among other things, help determine the strike
prices of the Fund’s options positions. To the extent the models used by the
sub-adviser or the information and data supplied by third parties are incorrect
or incomplete, the decisions made by the sub-adviser in reliance thereon will
expose the Fund to potential risks and could lead to the Fund incurring losses
on its investments.
•New
Fund Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•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 RIC under Subchapter M of
the Internal Revenue Code of 1986, as amended (the
“Code”).
•Sector
Risk.
To the extent the Fund invests more heavily in particular sectors of the
economy, its performance will be especially sensitive to developments that
significantly affect those sectors.
◦Financial
Sector Risk. This
sector can be significantly affected by changes in interest rates, government
regulation, the rate of defaults on corporate, consumer and government debt, the
availability and cost of capital, and fallout from the housing and sub-prime
mortgage crisis. Insurance companies, in particular, may be significantly
affected by changes in interest rates, catastrophic events, price and market
competition, the imposition of premium rate caps, or other changes in government
regulation or tax law and/or rate regulation, which may have an adverse impact
on their profitability. This sector has experienced significant losses in the
recent past, and the impact of more stringent capital requirements and of recent
or future regulation on any individual financial company or on the sector as a
whole cannot be predicted. In recent years, cyber attacks and technology
malfunctions and failures have become increasingly frequent in this sector and
have caused significant losses.
◦Health
Care Sector Risk. Companies
in the health care sector are subject to extensive government regulation and
their profitability can be significantly affected by restrictions on government
reimbursement for medical expenses, rising costs of medical products and
services, pricing pressure (including price discounting), limited product lines,
an increased emphasis on the delivery of healthcare through outpatient services,
loss or impairment of intellectual property rights and litigation regarding
product or service liability.
◦Information
Technology Sector Risk. Market
or economic factors impacting information technology companies and companies
that rely heavily on technological advances could have a significant effect on
the value of the Fund’s
investments.
The value of stocks of information technology companies and companies that rely
heavily on technology is particularly vulnerable to rapid changes in technology
product cycles, rapid product obsolescence, government regulation and
competition, both domestically and internationally, including competition from
foreign competitors with lower production costs. Stocks of information
technology companies and companies that rely heavily on technology, especially
those of smaller, less-seasoned companies, tend to be more volatile than the
overall market. Information technology companies are heavily dependent on patent
and intellectual property rights, the loss or impairment of which may adversely
affect profitability.
•Tax
Risk.
The Fund expects to generate premiums from its sale of call options. These
options are expected to result in capital gains or losses for federal income tax
purposes and may be subject to mark-to-market rules. These gains or losses will
be wholly or partly long-term or short-term depending on the nature of the
options sold by the Fund and will take into account premiums generated. In
addition, stocks that are hedged with put options may not be eligible for
long-term capital gains tax treatment. If positions held by the Fund were
treated as “straddles” for federal income tax purposes, or the Fund’s risk of
loss with respect to a position was otherwise diminished as set forth in
Treasury Regulations, dividends on stocks that are a part of such positions
would not constitute qualified dividend income subject to such favorable income
tax treatment and would not be eligible for the dividends received deduction for
corporate shareholders. In addition, generally, straddles are subject to certain
rules that may affect the amount, character and timing of the Fund’s gains and
losses with respect to straddle positions. The Fund is not designed for
investors seeking a tax efficient investment.
•Tracking
Stock Risk.
Tracking stock is a separate class of common stock designed to “track” the
performance of a specific unit or operating division within a larger company. As
a result, a tracking stock’s value may decline even if the common stock of the
larger company increases in value. Tracking stocks share many of the same
investing risks as common stocks, but the holders of tracking stock may not
share the same rights as holders of a company’s common
stock.
Performance
The Fund is new and therefore does not have a
performance history for a full calendar year. In the future,
performance information for the Fund will be presented in this section. Updated
performance information is also available on the Fund’s website at
www.etf.nationwide.com.
Portfolio
Management
|
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Adviser |
|
Nationwide
Fund Advisors (the “Adviser”) |
Sub-Adviser |
|
Harvest
Volatility Management, LLC (“Harvest” or the
“Sub-Adviser”) |
Portfolio
Managers |
|
Curt
Brockelman, Managing Partner, Co-Founder, Portfolio Manager, and Chief
Risk Officer at Harvest, Troy Cates, Managing Director and Portfolio
Manager at Harvest, and Garrett Paolella, Managing Director and Portfolio
Manager at Harvest, have managed the Fund since its inception in December
2021. |
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.etf.nationwide.com
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an
individual retirement account (“IRA”) or other tax-advantaged account.
Distributions on investments made through tax-deferred arrangements may be taxed
later upon withdrawal of assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
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NATIONWIDE
RUSSELL
2000 RISK-MANAGED
INCOME
ETF |
Investment Objective
The Nationwide Russell 2000
Risk-Managed Income ETF (the “Fund”) seeks current income with downside
protection.
Fees and Expenses of the Fund
The
following table describes the fees and expenses you may pay if you buy, hold,
and sell shares of the Fund (“Shares”). You
may pay other fees, such as brokerage commissions and other fees to financial
intermediaries, which are not reflected in the table and Example
below.
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Annual
Fund Operating Expenses (expenses
that you pay each year as a percentage of the value of your
investment) |
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Management
Fees |
0.68% |
Distribution
and/or Service (12b-1) Fees |
0.00% |
Other
Expenses* |
0.00% |
Total
Annual Fund Operating Expenses |
0.68% |
|
|
*Estimated for the current
fiscal year.
Expense Example
This Example is
intended to help you compare the cost of investing in the Fund with the cost of
investing in other funds. The Example assumes that you invest $10,000 in the
Fund for the time periods indicated and then redeem all of your Shares at the
end of those periods. The Example also assumes that your investment has a 5%
return each year and that the Fund’s operating expenses remain the same. The
Example does not take into account brokerage commissions that you may pay on
your purchases and sales of Shares. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
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1
Year: |
$69 |
3
Years: |
$218 |
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 is an actively-managed exchange-traded fund (“ETF”) that seeks to achieve
its investment objective principally by investing in a portfolio of the stocks
included in the Russell 2000® Index (the “Russell 2000” or the “Reference
Index") and an options collar (i.e.,
a mix of written (sold) call options and long (bought) put options) on the
Russell 2000. The Fund seeks to generate high current income on a monthly basis
from a combination of the dividends received from the Fund’s equity holdings and
the premiums earned from the options collar. The options collar seeks to
generate a net-credit, meaning that the premium received from the sale of the
call options will be greater than the cost of buying the protective put options.
The options collar is intended to reduce the Fund’s volatility and provide a
measure of downside protection.
The
Russell 2000 measures the performance of approximately 2,000 U.S. small
capitalization companies. As of September 30, 2021, the Russell 2000 had
significant exposure to companies in the health care sector. The Fund will
concentrate its investments (i.e.,
hold more than 25% of its total assets) in a particular industry or group of
industries to approximately the same extent that the Reference Index
concentrates in an industry or group of industries.
The
Fund will generally use a “replication” strategy to invest in the Russell 2000,
meaning the Fund will generally invest in all of the component securities of the
Russell 2000 in the same approximate proportions as in the Russell 2000.
However, the Fund may use a “representative sampling” strategy, meaning it may
invest in a sample of the securities in the Russell 2000 whose risk, return, and
other characteristics closely resemble the risk, return, and other
characteristics of the Russell 2000 as a whole, when the Fund’s sub-adviser
believes it is in the best interest of the Fund (e.g.,
when replicating the Russell 2000 involves practical difficulties or substantial
costs, a Russell 2000 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 Russell 2000).
The
Fund’s sub-adviser generally utilizes a proprietary, systematic model to manage
the Fund’s options positions in an objective, rules-based manner, although the
sub-adviser may actively manage the written call options prior to expiration to
potentially capture gains and minimize losses due to the movement of the Russell
2000.
The
Fund’s options collar strategy typically consists of two components: (i) selling
call options on the Russell 2000 or another reference asset representing U.S.
equity securities on up to 100% of the value of the equity securities held by
the Fund to generate premium from such options, while (ii) simultaneously
reinvesting a portion of such premium to buy put options on the same reference
asset(s) to “hedge” or mitigate the downside risk associated with owning equity
securities.
•Call
Options.
A written (sold) call option gives the seller the obligation to sell shares of
the reference asset at a specified price (“strike price”) until a specified date
(“expiration date”). The writer (seller) of the call option receives an amount
(premium) for writing (selling) the option. In the event the reference asset
appreciates above the strike price and the holder exercises the call option, the
Fund will have to pay the difference between the value of the reference asset
and the strike price or deliver the reference asset (which loss is offset by the
premium initially received), and in the event the reference asset declines in
value, the call option may end up worthless and the Fund retains the premium.
The call options written by the Fund will be collateralized by the Fund’s equity
holdings at the time the Fund sells the options.
•Put
Options.
When the Fund purchases a put option, the Fund pays an amount (premium) to
acquire the right to sell shares of a reference asset at a strike price until
the expiration date. In the event the reference asset declines in value below
the strike price and the Fund exercises its put option, the Fund will be
entitled to receive the difference between the value of the reference asset and
the strike price (which gain is offset by the premium originally paid by the
Fund), and in the event the reference asset closes above the strike price as of
the expiration date, the put option may end up worthless and the Fund’s loss is
limited to the amount of premium it paid.
The
options purchased or sold by the Fund will typically have an expiration date
approximately one-month from the time of purchase or sale. The Fund expects the
total value of the call options and the total value of the put options to each
be up to 100% of the Fund’s net assets. The Fund will use a portion of the
premium received from writing call options to purchase put options. Call options
written by the Fund will typically have a strike price that is at, near, or
higher than the current price of the reference asset, and put options purchased
by the Fund will typically have a strike price that is lower (in some cases,
significantly lower) than the current price of the reference asset. In addition,
both the call and put options will be traded on a national securities exchange
and be settled in cash.
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. Additionally, the Fund’s investment
strategies may involve active and frequent trading resulting in high portfolio
turnover.
Under normal circumstances, at least
80% of the Fund’s net assets, plus borrowings for investment purposes, will be
invested in securities, or derivative instruments linked to securities, of
companies that are included in the Fund’s Reference
Index.
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.”
•Collared
Options Strategy Risk. Writing
and buying options are speculative activities and entail greater than ordinary
investment risks. The Fund’s use of call and put options can lead to losses
because of adverse movements in the price or value of the reference asset, which
may be magnified by certain features of the options. When selling a call option,
the Fund will receive a premium; however, this premium may not be enough to
offset a loss incurred by the Fund if the price of the reference asset is above
the strike price by an amount equal to or greater than the premium. The value of
an option may be adversely affected if the market for the option becomes less
liquid or smaller, and will be affected by changes in the value or yield of the
option’s reference asset, an increase in interest rates, a change in the actual
or perceived volatility of the stock market or the reference asset and the
remaining time to expiration. Additionally, the value of an option does not
increase or decrease at the same rate as the reference asset.
The
Fund’s use of options may reduce the Fund’s ability to profit from increases in
the value of the Fund’s equity holdings. If
the price of the reference asset of a written call option rises above its strike
price, the value of the option and, consequently, the Fund may decline
significantly more than if the Fund invested solely in the reference asset
instead of using options. Similarly, if the price of the reference asset of a
purchased put option remains above its strike price, the option may
become
worthless, and, consequently the value of the Fund may decline significantly
more than if the Fund invested solely in the reference asset instead of using
options.
•Correlation
Risk. The
Fund expects to invest a portion of its assets to replicate the holdings of the
Russell 2000, and the Fund’s sub-adviser does not expect to
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 Russell 2000. Although the Fund expects to invest a portion of
its assets to replicate the holdings of the Russell 2000, the performance of
such portion of the Fund and the Russell 2000 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 Russell 2000. In addition, the
Fund may not be fully invested in the securities of the Russell 2000 at all
times or may hold securities not included in the Russell 2000.
•Derivative
Securities Risks. The
Fund invests in options that derive their performance from the performance of an
underlying equity security. Derivatives, such as the options in which the Fund
invests, can be volatile and involve various types and degrees of risks,
depending upon the characteristics of a particular derivative. Derivatives may
entail investment exposures that are greater than their cost would suggest,
meaning that a small investment in a derivative could have a substantial impact
on the performance of the Fund. The Fund could experience a loss if its
derivatives do not perform as anticipated, the derivatives are not correlated
with the performance of their underlying security, or if the Fund is unable to
purchase or liquidate a position because of an illiquid secondary market. The
market for many derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid, and unpredictable changes in the
prices for derivatives.
•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.
◦Cash
Redemption Risk.
The Fund’s investment strategy may require it to redeem shares for cash or to
otherwise include cash as part of its redemption proceeds. The Fund may be
required to sell or unwind portfolio investments to obtain the cash needed to
distribute redemption proceeds. This may cause the Fund to recognize a capital
gain that it might not have recognized if it had made a redemption in-kind. As a
result, the Fund may pay out higher annual capital gain distributions than if
the in-kind redemption process was used.
◦Costs
of Buying or Selling Shares.
Due to the costs of buying or selling Shares, including brokerage commissions
imposed by brokers and bid-ask spreads, frequent trading of Shares may
significantly reduce investment results and an investment in Shares may not be
advisable for investors who anticipate regularly making small investments.
◦Shares
May Trade at Prices Other Than NAV. As
with all ETFs, Shares may be bought and sold in the secondary market at market
prices. Although it is expected that the market price of Shares will approximate
the Fund’s NAV, there may be times when the market price of Shares is more than
the NAV intra-day (premium) or less than the NAV intra-day (discount) due to
supply and demand of Shares or during periods of market volatility. This risk is
heightened in times of market volatility, periods of steep market declines, and
periods when there is limited trading activity for Shares in the secondary
market, in which case such premiums or discounts may be significant.
◦Trading. Although
Shares are listed for trading on NYSE Arca, Inc. (the “Exchange”) and may be
traded on U.S. exchanges other than the Exchange, there can be no assurance that
Shares will trade with any volume, or at all, on any stock exchange. In stressed
market conditions, the liquidity of Shares may begin to mirror the liquidity of
the Fund’s underlying portfolio holdings, which can be significantly less liquid
than Shares, and this could lead to differences between the market price of the
Shares and the underlying value of those Shares.
•High
Portfolio Turnover Risk.
The Fund may frequently buy and sell portfolio securities and other assets to
rebalance the Fund’s exposure to specific securities. Higher portfolio turnover
may result in the Fund paying higher levels of transaction costs and generating
greater tax liabilities for shareholders. Portfolio turnover risk may cause the
Fund’s performance to be less than you expect.
•Industry
Exposure Risk. From
time to time, the Fund may invest a significant percentage of its assets in
issuers in a single industry (or the same group of industries). To the extent
the Fund’s investments are concentrated in or have significant exposure to a
particular issuer, industry, or group of industries, the Fund may be more
vulnerable to adverse events affecting such issuer, industry, or group of
industries than if the Fund’s investments were more broadly diversified. The
Fund’s industry exposure is expected to vary over time based on the composition
of the Reference Index.
•Management
Risk. The
Fund is actively-managed and may or may not meet its investment objective based
on the portfolio managers’ success or failure to implement investment strategies
for the Fund.
•Market
Capitalization Risk.
◦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.
•Model
and Data Risk. The
sub-adviser will make use of quantitative models and information and data
supplied by third parties to, among other things, help determine the strike
prices of the Fund’s options positions. To the extent the models used by the
sub-adviser or the information and data supplied by third parties are incorrect
or incomplete, the decisions made by the sub-adviser in reliance thereon will
expose the Fund to potential risks and could lead to the Fund incurring losses
on its investments.
•New
Fund Risk. The
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•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 RIC under Subchapter M of
the Internal Revenue Code of 1986, as amended (the
“Code”).
•Sector
Risk.
To the extent the Fund invests more heavily in particular sectors of the
economy, its performance will be especially sensitive to developments that
significantly affect those sectors.
◦Health
Care Sector Risk. Companies
in the health care sector are subject to extensive government regulation and
their profitability can be significantly affected by restrictions on government
reimbursement for medical expenses, rising costs of medical products and
services, pricing pressure (including price discounting), limited product lines,
an increased emphasis on the delivery of healthcare through outpatient services,
loss or impairment of intellectual property rights and litigation regarding
product or service liability.
•Tax
Risk.
The Fund expects to generate premiums from its sale of call options. These
options are expected to result in capital gains or losses for federal income tax
purposes and may be subject to mark-to-market rules. These gains or losses will
be wholly or partly long-term or short-term depending on the nature of the
options sold by the Fund and will take into account premiums generated. In
addition, stocks that are hedged with put options may not be eligible for
long-term capital gains tax treatment. If positions held by the Fund were
treated as “straddles” for federal income tax purposes, or the Fund’s risk of
loss with respect to a position was otherwise diminished as set forth in
Treasury Regulations, dividends on stocks that are a part of such positions
would not constitute qualified dividend income subject to such favorable income
tax treatment and would not be eligible for the dividends received deduction for
corporate shareholders. In addition, generally, straddles are subject to certain
rules that may
affect
the amount, character and timing of the Fund’s gains and losses with respect to
straddle positions. The Fund is not designed for investors seeking a tax
efficient investment.
•Tracking
Stock Risk.
Tracking stock is a separate class of common stock designed to “track” the
performance of a specific unit or operating division within a larger company. As
a result, a tracking stock’s value may decline even if the common stock of the
larger company increases in value. Tracking stocks share many of the same
investing risks as common stocks, but the holders of tracking stock may not
share the same rights as holders of a company’s common
stock.
Performance
The Fund is new and therefore does not have a
performance history for a full calendar year. In the future,
performance information for the Fund will be presented in this section. Updated
performance information is also available on the Fund’s website at
www.etf.nationwide.com.
Portfolio
Management
|
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Adviser |
|
Nationwide
Fund Advisors (the “Adviser”) |
Sub-Adviser |
|
Harvest
Volatility Management, LLC (“Harvest” or the
“Sub-Adviser”) |
Portfolio
Managers |
|
Curt
Brockelman, Managing Partner, Co-Founder, Portfolio Manager, and Chief
Risk Officer at Harvest, Troy Cates, Managing Director and Portfolio
Manager at Harvest, and Garrett Paolella, Managing Director and Portfolio
Manager at Harvest, have managed the Fund since its inception in December
2021. |
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.etf.nationwide.com
Tax
Information
Fund
distributions are generally taxable as ordinary income, qualified dividend
income, or capital gains (or a combination), unless your investment is in an
individual retirement account (“IRA”) or other tax-advantaged account.
Distributions on investments made through tax-deferred arrangements may be taxed
later upon withdrawal of assets from those accounts.
Financial
Intermediary Compensation
If
you purchase Shares through a broker-dealer or other financial intermediary
(such as a bank) (an “Intermediary”), the Adviser or its affiliates may pay
Intermediaries for certain activities related to the Fund, including
participation in activities that are designed to make Intermediaries more
knowledgeable about exchange traded products, including the Fund, or for other
activities, such as marketing, educational training or other initiatives related
to the sale or promotion of Shares. These payments may create a conflict of
interest by influencing the Intermediary and your salesperson to recommend the
Fund over another investment. Any such arrangements do not result in increased
Fund expenses. Ask your salesperson or visit the Intermediary’s website for more
information.
ADDITIONAL
INFORMATION
ABOUT
THE
INDEXES
Each
Index is calculated by an independent third-party calculation agent that is not
affiliated with the applicable Fund, its adviser, its sub-adviser, its
distributor, or any of their affiliates. An Index Provider may delay or change a
scheduled rebalancing or reconstitution of an Index at its sole
discretion.
Rothschild
& Co Risk Based Investments LLC (“RRBI”)
RRBI,
the index provider for the Nationwide Risk‐Based U.S. Equity ETF (the
“Risk-Based U.S. Fund”) and the Nationwide Risk‐Based International Equity ETF
(the “Risk-Based International Fund” and, together with the Risk-Based U.S.
Fund, the “Risk-Based
Funds”),
is a wholly-owned subsidiary of Rothschild Co. RRBI is not affiliated with the
Risk-Based Funds or their investment adviser, sub-adviser, or distributor.
Risk
contribution is a quantitative measure that communicates how total portfolio
risk decomposes into various portfolio constituents, (i.e.,
securities, and is based on marginal risk contribution).
Marginal
risk contribution calculations seek to identify the increase in variability of a
portfolio’s returns from the addition of a security to such portfolio. For
purposes of the Indexes underlying the Risk-Based Funds, such calculations are
based on the volatility and correlation of the relevant securities for the most
recent one-year calculation period.
Rothschild
& Co Risk-Based US Index (the “Risk-Based US Index”)
The
Risk-Based US Index universe consists of common stocks with a primary listing on
the New York Stock Exchange (“NYSE”) (including NYSE Arca and NYSE MKT), the
NASDAQ Global Select Market, the NASDAQ Select Market, and the NASDAQ Capital
Market. The free-float market capitalization (i.e.,
market capitalization based on the number of shares available to the public) of
each security is used to determine the eligible company size to be included in
the Index’s Eligible Universe.
Rothschild
& Co Risk-Based International Index (the “Risk-Based International
Index”)
The
Risk-Based International Index universe consists of common stocks with a primary
listing on developed market exchanges outside of North America. The largest
equity securities in each country, based on each security’s free-float market
capitalization, and the specific listing exchanges eligible to be included in
the Index’s Eligible Universe are as listed in the table below.
|
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Primary
Listing Country |
Listing
Exchange(s) |
Maximum
Number of Securities in the Eligible Universe |
Australia |
Australian
Securities Exchange (ASE) |
25 |
Austria |
Vienna
Stock Exchange |
5 |
Belgium |
NYSE
EURONEXT Brussels |
10 |
Denmark |
NASDAQ
OMX Copenhagen |
15 |
Finland |
NASDAQ
OMX Helsinki |
5 |
France |
NYSE
EURONEXT Paris |
40 |
Germany |
Frankfurt
Stock Exchange, Xetra |
45 |
Hong
Kong |
Stock
Exchange of Hong Kong |
10 |
Ireland |
Irish
Stock Exchange (Dublin) |
5 |
Italy |
Borsa
Italiana |
15 |
Japan |
Tokyo
Stock Exchange, Nagoya Stock Exchange |
120 |
Netherlands |
NYSE
EURONEXT Amsterdam |
15 |
Norway |
Oslo
Bors |
5 |
Portugal |
NYSE
EURONEXT Lisbon |
5 |
Singapore |
Singapore
Exchange |
10 |
Spain |
Bolsa
De Madrid (Madrid), Sociedad de Bolsas (SIBE) |
15 |
Sweden |
NASDAQ
OMX Stockholm |
15 |
Switzerland |
SIX
Swiss Exchange (SIX-SW) |
20 |
United
Kingdom |
London
Stock Exchange |
70 |
TOBAM
S.A.S.
TOBAM
S.A.S. is the index provider for the Nationwide Maximum Diversification U.S.
Core Equity ETF (the “MaxDiv U.S. Fund”). TOBAM S.A.S. is not affiliated with
the MaxDiv U.S. Fund or its investment adviser, sub-adviser, or
distributor.
TOBAM
Maximum Diversification USA Index (the “MaxDiv USA Index”)
The
Initial Universe of the MaxDiv USA Index is based on TOBAM’s country
classification rules, which deem stocks with a primary listing on a U.S. market
as companies assigned to the United States.
The
free-float adjusted market capitalization of each security as of the last
business day of the previous month is used for determining the securities
included in the Eligible Universe.
To
be included in the Eligible Universe, an equity security must have a median
daily traded value greater than $10 million over the most recent three-month
period and have been listed for at least three months.
ADDITIONAL
INFORMATION
ABOUT
THE
FUNDS
Investment
Objectives
Each
Fund’s investment objective has been adopted as a non-fundamental investment
policy and may be changed without shareholder approval upon written notice to
shareholders.
Temporary
Defensive Positions
(Nationwide Nasdaq-100
Risk-Managed Income ETF, Nationwide S&P 500 Risk-Managed Income ETF,
Nationwide Dow Jones Risk-Managed Income ETF and Nationwide Russell 2000
Risk-Managed Income ETF (the “Risk-Managed Income Funds”))
To
respond to adverse market, economic, political, or other conditions, a Fund may
invest up to 100% of its assets in a temporary defensive manner by holding all
or a substantial portion of its assets in cash, cash equivalents, or other high
quality short-term investments. Examples of temporary defensive investments
include short-term U.S. government securities, commercial paper, bank
obligations, repurchase agreements, money market fund shares, and other money
market instruments. A Fund also may invest in these types of defensive
investments or hold cash while looking for suitable investment opportunities or
to maintain liquidity. In these circumstances, the Fund may be unable to achieve
its investment objective.
Manager
of Managers Structure
The
Funds and the Adviser have received exemptive relief from the SEC permitting the
Adviser (subject to certain conditions and the approval of the Funds’ Board of
Trustees (the “Board”)) to change or select 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 applicable 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.
Principal
Investment Strategies
Each
Fund has adopted a policy, as described below, to comply with Rule 35d-1 under
the Investment Company Act of 1940 (the “1940 Act”). Such policy has been
adopted as a non-fundamental investment policy and may be changed without
shareholder approval upon 60 days’ written notice to shareholders. With respect
to the policies below, the Funds define “equity securities” to mean common and
preferred stocks, rights, warrants, depositary receipts, equity interests in
real estate investment trusts (“REITs”), and master limited
partnerships.
Under
normal circumstances, at least 80% of the net assets, plus borrowings for
investment purposes, of each of the Risk-Based U.S. Fund and MaxDiv U.S. Fund
will be invested in equity securities that are principally traded in the United
States.
Under
normal circumstances, at least 80% of the net assets, plus borrowings for
investment purposes, of the Risk-Based International Fund will be invested in
equity securities that are principally traded in Europe, Australasia, or the Far
East.
Under
normal circumstances, at least 80% of the net assets, plus borrowings for
investment purposes, of each Risk-Managed Income Fund will be invested in
securities, or derivative instruments linked to securities, of companies that
are included in such Fund’s Reference Index.
Principal
Investment Risks
This
section provides additional information regarding the principal risks described
in each Fund Summary. As in each Fund Summary, the principal risks below are
presented in alphabetical order to facilitate finding particular risks and
comparing them with other funds. Each risk described below is considered a
“principal risk” of investing in the applicable Fund, regardless of the order in
which it appears. Each of the factors below could have a negative impact on the
applicable Fund’s performance and trading prices. Each risk applies to each Fund
unless otherwise specified.
•Collared
Options Strategy Risk
(Risk-Managed
Income Funds only).
Writing and buying options are speculative activities and entail greater than
ordinary investment risks. Each Fund’s use of call and put options can lead to
losses because of adverse movements in the price or value of the reference
asset, which may be magnified by certain features of the options. When selling a
call option, a Fund will receive a premium; however, this premium may not be
enough to offset a loss incurred by the Fund if the price of the reference asset
is above the strike price by an amount equal to or greater than the premium. The
value of an option may be adversely affected if the market for the option
becomes less liquid or smaller, and will be affected by changes in the value or
yield of the option’s reference asset, an increase in interest rates, a change
in the actual or perceived volatility of the stock market or the reference asset
and the remaining time to expiration. Additionally, the value of an option does
not increase or decrease at the same rate as the reference asset.
Each
Fund’s use of options may reduce the Fund’s ability to profit from increases in
the value of the Fund’s equity holdings. If
the price of the reference asset of a written call option rises above its strike
price, the value of the option and, consequently, a Fund, may decline
significantly more than if the Fund invested solely in the reference asset
instead of using options. Similarly, if the price of the reference asset of a
purchased put option remains above its strike price, the option may become
worthless, and, consequently the value of a Fund may decline significantly more
than if the Fund invested solely in the reference asset instead of using
options.
•Correlation
Risk
(Risk-Managed
Income Funds only). Each
Fund expects to invest a portion of its assets to replicate the holdings of the
applicable Reference Index, and the Fund’s sub-adviser does not expect to
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 applicable Reference Index. Although each Fund expects to
invest a portion of its assets to replicate the holdings of the applicable
Reference Index, the performance of such portion of the Fund and the applicable
Reference Index may differ from each other for a variety of reasons. For
example, a Fund incurs operating expenses and portfolio transaction costs not
incurred by the applicable Reference Index. In addition, a Fund may not be fully
invested in the securities of the applicable Reference Index at all times or may
hold securities not included in the applicable Reference Index. The use of
sampling techniques may affect the Fund’s ability to achieve close correlation
between the portion of the Fund invested in the applicable Reference Index
constituents and the applicable Reference Index itself.
•Currency
Exchange Rate Risk (Risk-Based
International Fund and Nasdaq-100
Risk-Managed
Income Fund only).
Changes
in currency exchange rates and the relative value of non-U.S. currencies will
affect the value of each Fund’s investments and the value of your Shares.
Because each Fund’s NAV is determined based on U.S. dollars, the U.S. dollar
value of your investment in a 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
a Fund’s holdings goes up. Conversely, the dollar value of your investment in a
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 a Fund may change quickly and without warning, and you
may lose money.
•Depositary
Receipt Risk
(Risk-Based
International Fund and Nasdaq-100 Risk-Managed Income Fund only).
Each Fund may hold the securities of non-U.S. companies in the form of American
Depositary Receipts (“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. 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 a 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 a 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 Shares.
•Derivatives
Risk
(Risk-Managed
Income Funds only).
Each Fund may invest in derivatives, which are financial instruments that derive
their performance from the performance of an underlying security or index.
Derivatives can be volatile and involve various types and degrees of risks,
depending upon the characteristics of a particular derivative. Derivatives may
entail investment exposures that are greater than their cost would suggest,
meaning that a small investment in a derivative could have a substantial impact
on the performance of a Fund. Each Fund could experience a loss if derivatives
do not perform as anticipated, the derivatives are not correlated with the
performance of other investments which are used to hedge, or if the Fund is
unable to liquidate a position because of an illiquid secondary market. The
market for many derivatives is, or suddenly can become, illiquid. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for derivatives.
•Emerging
Markets Risk
(Nasdaq-100
Risk-Managed Income Fund only).
The Fund may have exposure to emerging markets. Investing in companies doing
business in emerging markets will, among other things, expose the Fund to all
the risks described below in the “Foreign Securities Risk” section. However,
there are greater risks involved in investing in emerging market countries
and/or their securities markets than there are in more developed countries
and/or markets. Generally, economic structures in these countries are less
diverse and mature than those in developed countries, and their political
systems are less stable. Investments in emerging market countries may be
affected by national policies that restrict foreign investment in certain
issuers or industries. Sanctions and other intergovernmental actions may be
undertaken against an emerging market country, which may result in the
devaluation of the country’s currency, a downgrade in the country’s credit
rating, and a decline in the value and liquidity of the country’s securities.
Sanctions could result in the immediate freeze of securities issued by an
emerging market company or government, impairing the ability of a Fund to buy,
sell, receive or deliver these securities.
•Equity
Market Risk. Equity
securities are susceptible to general stock market fluctuations and to volatile
increases and decreases in value as market confidence in and perceptions of
their issuers change. These investor perceptions are based on various and
unpredictable factors including: expectations regarding government, economic,
monetary and fiscal policies; inflation and interest rates; economic expansion
or contraction; and global or regional political, economic and banking crises.
If you held common stock, or common stock equivalents, of any given issuer, you
would generally be exposed to greater risk than if you held preferred stocks and
debt obligations of the issuer because common stockholders, or holders of
equivalent interests, generally have inferior rights to receive payments from
issuers in comparison with the rights of preferred stockholders, bondholders,
and other creditors of such issuers.
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, supply chain disruptions, and so-called “stay-at-home”
orders throughout much of the United States and many other countries. The
fall-out from these disruptions has included the rapid closure of businesses
deemed “non-essential” by federal, state, or local governments and rapidly
increasing unemployment, as well as greatly reduced liquidity for certain
instruments at times. Some sectors of the economy and individual issuers have
experienced particularly large losses. Such disruptions may continue for an
extended period of time or reoccur in the future to a similar or greater extent.
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 result in disruptions in the trading markets,
increased premiums or discounts to the Fund’s NAV, and adverse effects on Fund
performance.
•ETF
Risks. Each
Fund is an ETF, and, because of an ETF’s structure, is exposed to the following
risks:
◦APs,
Market Makers, and Liquidity Providers Concentration Risk.
The Fund has a limited number of financial institutions that may act as APs. In
addition, there may be a limited number of market makers and/or liquidity
providers in the marketplace. To the extent either of the following events
occur, Shares may trade at a material discount to NAV and possibly face
delisting: (i) APs exit the business or otherwise become unable to process
creation and/or redemption orders and no other APs step forward to perform these
services, or (ii) market makers and/or liquidity providers exit the business or
significantly reduce their business activities and no other entities step
forward to perform their functions.
◦Cash
Redemption Risk (Risk-Managed Income Funds only).
Each
Fund’s investment strategy may require it to effect redemptions, in whole or in
part, for cash. As a result, a Fund may be required to 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, a Fund may be less tax efficient if it includes such a cash payment than
if the in-kind redemption process was used exclusively. In addition, cash
redemptions may incur higher brokerage costs than in-kind redemptions and these
added costs may be borne by a Fund and negatively impact Fund
performance.
◦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 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 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 Risk-Based International Fund and
Nasdaq-100 Risk-Managed Income Fund (the “Foreign Funds”) may trade on foreign
exchanges that are closed when the Fund’s primary listing exchange is open, the
Foreign Funds are 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
(Risk-Based
International Fund and Nasdaq-100 Risk-Managed Income Fund only).
Investments in non-U.S. securities involve certain risks that may not be present
with investments in U.S. securities. For example, investments in non-U.S.
securities may be subject to risk of loss due to foreign currency fluctuations
or to political or economic instability. There may be less information publicly
available about a non-U.S. issuer than a U.S. issuer. Non-U.S. issuers may be
subject to different accounting, auditing, financial reporting and investor
protection standards than U.S. issuers. Investments in non-U.S. securities may
be subject to withholding or other taxes and may be subject to additional
trading, settlement, custodial, and operational risks. With respect to certain
countries, there is the possibility of government intervention and expropriation
or nationalization of assets. Because legal systems differ, there is also the
possibility that it will be difficult to obtain or enforce legal judgments in
certain countries. Each of these factors can make investments in the Fund more
volatile and potentially less liquid than other types of investments. Since
foreign exchanges may be open on days when a Fund does not price its Shares, the
value of the securities in a Fund’s portfolio may change on days when
shareholders will not be able to purchase or sell the Fund’s Shares. Conversely,
Shares may trade on days when foreign exchanges are closed. Each of these
factors can make investments in a Fund more volatile and potentially less liquid
than other types of investments.
•Geographic
Investment Risk
(Risk-Based
International Fund
only).
To
the extent that the Fund’s Index 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
Related to Investing in Europe. The
economies and markets of European countries are often closely connected and
interdependent, and events in one country in Europe can have an adverse impact
on other European countries. The Fund makes investments in securities of issuers
that are domiciled in, or have significant operations in, member countries of
the European Union (“EU”) that are subject to economic and monetary controls
that can adversely affect the Fund’s investments. The European financial markets
have experienced volatility and adverse trends in recent years and these events
have adversely affected the exchange rate of the euro and may continue to
significantly affect other European countries. Decreasing imports or exports,
changes in governmental or EU regulations on trade, changes in the exchange rate
of the euro, the default or threat of default by an EU member country on its
sovereign debt, and/or an economic recession in an EU member country may have a
significant adverse effect on the economies of EU member countries and their
trading partners, including some or all of the European countries in which the
Fund invests.
The
UK formally exited from the EU on January 31, 2020 (known as “Brexit”), and
effective December 31, 2020, the UK ended a transition period during which it
continued to abide by the EU’s rules and the UK’s trade relationships with the
EU were generally unchanged. Following this transition period, the impact on the
UK and European economies and the broader global economy could be significant,
resulting in negative impacts, such as increased volatility and illiquidity, and
potentially lower economic growth of markets in the UK, Europe and globally,
which may adversely affect the value of the Fund’s investments.
◦Risks
Related to Investing in Japan. The
Japanese economy may be subject to considerable degrees of economic, political
and social instability, which could have a negative impact on Japanese
securities. Since the year 2000, Japan’s economic growth rate has remained
relatively low and it may remain low in the future. In addition, Japan is
subject to the risk of natural disasters, such as earthquakes, volcanoes,
typhoons and tsunamis. Additionally, decreasing U.S. imports, new trade
regulations, changes in the U.S. dollar exchange rates, a recession in the
United States or continued increases in foreclosure rates may have an adverse
impact on the economy of Japan. Japan also has few natural resources, and any
fluctuation or shortage in the commodity markets could have a negative impact on
Japanese securities.
•High
Portfolio Turnover (Risk-Managed
Income Funds only).
Each Fund may frequently buy and sell portfolio securities and other assets to
rebalance the Fund’s exposure to various market sectors. Higher portfolio
turnover may result in a Fund paying higher levels of transaction costs and
generating greater tax liabilities for shareholders. Portfolio turnover risk may
cause a Fund’s performance to be less than you expect.
•Industry
Exposure Risk (Risk-Managed
Income Funds only).
From time to time, a Fund may invest a significant percentage of its assets in
issuers in a single industry (or the same group of industries). To the extent a
Fund’s investments are concentrated in or have significant exposure to a
particular issuer, industry, or group of industries, the Fund may be more
vulnerable to adverse events affecting such issuer, industry, or group of
industries than if the Fund’s investments were more broadly diversified. A
Fund’s industry exposure is expected to vary over time based on the composition
of the Reference Index.
•Management
Risk (Risk-Managed
Income Funds only).
Each
Fund is actively-managed and may or may not meet its investment objective based
on the portfolio managers’ success or failure to implement investment strategies
for the Fund.
•Market
Capitalization Risk.
◦Large-Capitalization
Investing (All Funds, except Russell 2000 Risk-Managed Income Fund).
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.
◦Small-Capitalization
Investing (Russell 2000 Risk-Managed Income Fund only). 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.
•Model
and Data Risk - Active Funds (Risk-Managed
Income Funds only).
The
sub-adviser will make use of quantitative models and information and data
supplied by third parties to, among other things, help determine the strike
prices of each Fund’s options positions. To the extent the models used by the
sub-adviser or the information and data supplied by third parties are incorrect
or incomplete, the decisions made by the sub-adviser in reliance thereon will
expose a Fund to potential risks and could lead to the Fund incurring losses on
its investments.
•Models
and Data Risk - Index Funds (Risk-Based
Funds and MaxDiv U.S. Fund (collectively, the “Index Funds”)
only).
When Models and Data prove to be incorrect or incomplete, any decisions made in
reliance thereon expose the Indexes and the Funds to potential risks. Some of
the models used to construct each Index are predictive in nature. The use of
predictive models has inherent risks. For example, such models may incorrectly
forecast future behavior, leading to potential losses. In addition, in
unforeseen or certain low-probability scenarios (often involving a market
disruption of some kind), such models may produce unexpected results, which can
result in losses for a Fund. Furthermore, because predictive models are usually
constructed based on historical data supplied by third parties, the success of
relying on such models may depend heavily on the accuracy and reliability of the
supplied historical data.
•New
Fund Risk (S&P
500
Risk-Managed
Income Fund, Dow Jones Risk-Managed Income Fund and Russell 2000 Risk-Managed
Income Fund only).
Each
Fund is a recently organized investment company with a limited operating
history. As a result, prospective investors have a limited track record or
history on which to base their investment decision.
•Non-Diversification
Risk (Risk-Managed
Income Funds only).
Although
each Fund intends to invest in a variety of securities and instruments, each
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, a 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 a 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,
each Fund intends to satisfy the diversification requirements for qualifying as
a RIC under Subchapter M of the Internal Revenue Code of 1986, as amended (the
“Code”).
•Passive
Investment Risk (Index
Funds only).
Each Fund invests in the securities included in, or representative of, its Index
regardless of their investment merit. Each Fund does not attempt to outperform
its Index or take defensive positions in declining markets. As a result, a
Fund’s performance may be adversely affected by a general decline in the market
segments relating to its Index. The returns from the types of securities in
which a Fund invests may underperform returns from the various general
securities markets or different asset classes. This may cause a 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 (Risk-Based
Funds only). Each
Fund may trade all or a significant portion of the securities in its portfolio
in connection with each rebalance and reconstitution of the Index. A high
portfolio turnover rate increases transaction costs, which may increase a Fund’s
expenses.
Frequent
trading may also cause adverse tax consequences for investors in a Fund due to
an increase in short-term capital gains.
•Preferred
Securities Risk
(MaxDiv
U.S. Fund only).
Preferred securities are subject to risks associated with both equity and debt
instruments. Because many preferred securities allow the issuer to convert its
preferred stock into common stock, preferred securities are often sensitive to
declining common stock values. In addition, certain preferred securities contain
provisions that allow an issuer to skip or defer distributions, which may be
more likely when the issuer is less able to make dividend payments because of
financial difficulties. Preferred securities can also be affected by changes in
interest rates, especially if dividends are paid at a fixed rate, and may also
include call features in favor of the issuer. In the event of redemptions by the
issuer, a Fund may not be able to reinvest the proceeds at comparable or
favorable rates of return. Preferred securities are generally subordinated to
bonds and other debt securities in an issuer’s capital structure in terms of
priority for corporate income and liquidation payments and may trade less
frequently and in a more limited volume and may be subject to more abrupt or
erratic price movements than many other securities.
•Sector
Risk.
Each Fund’s investing approach may result in an emphasis on certain sectors or
sub-sectors of the market at any given time. To the extent a Fund invests more
heavily in one sector or sub-sector of the market, it thereby presents a more
concentrated risk and its performance will be especially sensitive to
developments that significantly affect those sectors or sub-sectors. In
addition, the value of a Fund’s shares may change at different rates compared to
the value of shares of a fund with investments in a more diversified mix of
sectors and industries. An individual sector or sub-sector of the market may
have above-average performance during particular periods but may also move up
and down more than the broader market. The several industries that constitute a
sector may all react in the same way to economic, political or regulatory
events. A Fund’s performance could also be affected if the sectors or
sub-sectors do not perform as expected. Alternatively, the lack of exposure to
one or more sectors or sub-sectors may adversely affect
performance.
◦Communications Services
Sector Risk (Nasdaq-100 Risk-Managed Income Fund only). Communications
services companies are subject to extensive government regulation. The costs of
complying with governmental regulations, delays or failure to receive required
regulatory approvals, or the enactment of new adverse regulatory requirements
may adversely affect the business of such companies. Companies in the
communications services sector can also be significantly affected by intense
competition, including competition with alternative technologies such as
wireless communications (including with 5G and other technologies), product
compatibility, consumer preferences, rapid product obsolescence, and research
and development of new products. Technological innovations may make the products
and services of such companies obsolete.
◦Financial
Sector Risk (Dow Jones Risk-Managed Income Fund only).
Companies in the financial sector of an economy are often subject to extensive
governmental regulation and intervention, which may adversely affect the scope
of their activities, the prices they can charge and the amount of capital they
must maintain. Governmental regulation may change frequently and may have
significant adverse consequences for companies in the financial sector,
including effects not intended by such
regulation.
The impact of recent or future regulation in various countries on any individual
financial company or on the sector as a whole cannot be predicted.
Certain
risks may impact the value of investments in the financial sector more severely
than those of investments outside this sector, including the risks associated
with companies that operate with substantial financial leverage. Companies in
the financial sector may also be adversely affected by increases in interest
rates and loan losses, decreases in the availability of money or asset
valuations, credit rating downgrades and adverse conditions in other related
markets.
Insurance
companies, in particular, may be subject to severe price competition and/or rate
regulation, which may have an adverse impact on their profitability. Insurance
companies are subject to extensive government regulation in some countries and
can be significantly affected by changes in interest rates, general economic
conditions, price and marketing competition, the imposition of premium rate
caps, or other changes in government regulation or tax law. Different segments
of the insurance industry can be significantly affected by mortality and
morbidity rates, environmental clean-up costs and catastrophic events such as
earthquakes, hurricanes and terrorist acts.
The
financial sector is also a target for cyber attacks and may experience
technology malfunctions and disruptions. In recent years, cyber attacks and
technology failures have become increasingly frequent and have caused
significant losses.
◦Health
Care Sector Risk (Dow Jones Risk-Managed Income Fund and Russell 2000
Risk-Managed Income Fund only). Companies
in the health care sector are subject to extensive government regulation and
their profitability can be significantly affected by restrictions on government
reimbursement for medical expenses, rising costs of medical products and
services, pricing pressure (including price discounting), limited product lines
and an increased emphasis on the delivery of healthcare through outpatient
services. Companies in the health care sector are heavily dependent on obtaining
and defending patents, which may be time consuming and costly, and the
expiration of patents may also adversely affect the profitability of these
companies. Health care companies are also subject to extensive litigation based
on product liability and similar claims. In addition, their products can become
obsolete due to industry innovation, changes in technologies or other market
developments. Many new products in the health care sector require significant
research and development and may be subject to regulatory approvals, all of
which may be time consuming and costly with no guarantee that any product will
come to market.
◦Information
Technology Sector Risk (Nasdaq-100 Risk-Managed Income Fund, S&P
500
Risk-Managed
Income Fund and Dow Jones Risk-Managed Income Fund only).
Market or economic factors impacting information technology companies and
companies that rely heavily on technological advances could have a significant
effect on the value of the Fund’s investments. The value of stocks of
information technology companies and companies that rely heavily on technology
is particularly vulnerable to rapid changes in technology product cycles, rapid
product obsolescence, government regulation and competition, both domestically
and internationally, including competition from foreign competitors with lower
production costs. Information technology companies are heavily dependent on
patent and intellectual property rights, the loss or impairment of which may
adversely affect profitability.
•Socially
Responsible Investment Risk
(MaxDiv
U.S. Fund only).
Because the methodology of the Index eliminates securities of certain issuers
for non-financial reasons, an Index, and consequently a Fund, may underperform
the broader equity market or other indices or funds that do not utilize similar
criteria when selecting investments.
•Tax
Risk (Risk-Managed
Income Funds only).
Each Fund expects to generate premiums from its sale of call options. These
options are expected to result in capital gains or losses for federal income tax
purposes and may be subject to mark-to-market rules. These gains or losses will
be wholly or partly long-term or short-term depending on the nature of the
options sold by a Fund and will take into account premiums generated. In
addition, stocks that are hedged with put options may not be eligible for
long-term capital gains. If positions held by a Fund were treated as “straddles”
for federal income tax purposes, or the Fund’s risk of loss with respect to a
position was otherwise diminished as set forth in Treasury Regulations,
dividends on stocks that are a part of such positions would not constitute
qualified dividend income subject to such favorable income tax treatment and
would not be eligible for the dividends received deduction for corporate
shareholders. In addition, generally, straddles are subject to certain rules
that may affect the amount, character and timing of a Fund’s gains and losses
with respect to straddle positions by requiring, among other things, that: (1)
any loss realized on disposition of one position of a straddle may not be
recognized to the extent that the Fund has unrealized gains with respect to the
other position in such straddle; (2) the Fund’s holding period in straddle
positions be suspended while the straddle exists (possibly resulting in a gain
being treated as short-term capital gain rather than long-term capital gain);
(3) the losses recognized with respect to certain straddle positions that are
part of a mixed straddle and that are not subject to Code Section 1256 be
treated as 60% long-term and 40% short-term capital loss; (4) losses recognized
with respect to certain straddle positions that would otherwise constitute
short-term capital losses be treated as long-term capital losses; and (5) the
deduction of interest and carrying charges attributable to certain straddle
positions may be deferred. Each Fund is not designed for investors seeking a tax
efficient investment.
•Tracking
Error Risk (Index
Funds only).
As
with all index funds, the performance of each Fund and its respective Index may
differ from each other for a variety of reasons. For example, the Funds incur
operating expenses and portfolio transaction costs not incurred by an Index. In
addition, the Funds may not be fully invested in the securities of their
respective Index at all times or may hold securities not included in the Index.
A Fund may use a representative sampling strategy to achieve its investment
objective, if the Fund’s sub-adviser believes it is in the best interest of the
Fund, which generally can be expected to produce a greater non-correlation
risk.
•Tracking
Stock Risk (Risk-Managed
Income Funds only).
Tracking stock is a separate class of common stock designed to “track” the
performance of a specific unit or operating division within a larger company. As
a result, a tracking stock’s value may decline even if the common stock of the
larger company increases in value. Tracking stocks share many of the same
investing risks as common stocks, but the holders of tracking stock may not
share the same rights as holders of a company’s common stock.
PORTFOLIO
HOLDINGS
INFORMATION
Information
about the Funds’ daily portfolio holdings is available at
www.etf.nationwide.com. A description of the Funds’ policies and procedures with
respect to the disclosure of the Funds’ portfolio holdings is available in the
Funds’ Statement of Additional Information (“SAI”).
MANAGEMENT
Investment
Adviser
Nationwide
Fund Advisors serves as the investment adviser and has overall responsibility
for the general management and administration of the Fund. Organized in 1999,
the Adviser is a wholly-owned subsidiary of Nationwide Financial Services, Inc.
and an indirect subsidiary of Nationwide Mutual Insurance Company. The Adviser
is located at One Nationwide Plaza, Columbus, Ohio 43215 and is an SEC
registered investment adviser.
The
Adviser also arranges for sub-advisory, transfer agency, custody, fund
administration, distribution, and all other services necessary for the Funds to
operate. The Adviser provides oversight of the Funds’ sub-advisers, monitoring
of each sub-adviser’s buying and selling of securities for the Funds, and review
of the sub-advisers’ performance. For the services it provides to the Funds,
each Fund pays the Adviser a unified management fee, which is calculated daily
and paid monthly, at an annual rate based on the applicable Fund’s average daily
net assets as set forth in the table below.
|
|
|
|
|
|
Name
of Fund |
Management
Fee |
Risk-Based
U.S. Fund |
0.30% |
Risk-Based
International Fund |
0.42% |
MaxDiv
U.S. Fund |
0.34% |
Nasdaq-100
Risk-Managed Income ETF |
0.68% |
S&P
500 Risk-Managed Income ETF |
0.68% |
Dow
Jones Risk-Managed Income ETF |
0.68% |
Russell
2000 Risk-Managed Income ETF |
0.68% |
Under
the Investment Advisory Agreement (the “Advisory Agreement”), the Adviser has
agreed to pay all expenses of the Funds, except for: the fee paid to the Adviser
pursuant to the Advisory Agreement, interest charges on any borrowings,
dividends, and other expenses on securities sold short, taxes, brokerage
commissions and other expenses incurred in placing orders for the purchase and
sale of securities and other investment instruments, acquired fund fees and
expenses, accrued deferred tax liability, extraordinary expenses, and
distribution (12b‑1) fees and expenses. The Adviser, in turn, compensates each
sub-adviser from the management fee it receives.
The
Adviser shall not be liable to the Trust or any shareholder for any losses that
may be sustained in the purchase, holding, or sale of any security or for
anything done or omitted by it, except acts or omissions arising out of the
Adviser’s willful misfeasance, bad faith, or gross negligence in the performance
of its duties under the Advisory Agreement or its reckless disregard of its
obligations and duties under the Advisory Agreement.
The
basis for the Board’s approval of the Advisory Agreement with respect to the
Index Funds and the Nasdaq-100 Risk-Managed Income ETF, is available in the
Funds’ Annual
Report
to Shareholders dated August 31, 2021.
The
basis for the Board’s approval of the Advisory Agreement with respect to the
S&P 500 Risk-Managed Income ETF, Dow Jones Risk-Managed Income ETF and
Russell 2000 Risk-Managed Income ETF will be available in the Funds’ Semi-Annual
Report to Shareholders for the period ending February 28, 2022.
Sub-Advisers
Vident
Investment Advisory, LLC
(Index
Funds only)
The
Trust and Adviser have retained Vident Investment Advisory, LLC to serve as
sub-adviser for the Index Funds. VIA is responsible for the day-to-day
management of the Index Funds. VIA, a registered investment adviser, is a
wholly-owned subsidiary of Vident Financial, LLC. Its principal office is
located at 1125 Sanctuary Parkway, Suite 515, Alpharetta, Georgia 30009. VIA was
formed in 2014 and provides investment advisory services to ETFs, including the
Index Funds. VIA is responsible for trading portfolio securities for the Index
Funds, including selecting broker-dealers to execute purchase and sale
transactions or in connection with any rebalancing or reconstitution of the
Indexes, subject to the supervision of the Adviser and the Board.
For
its services, VIA is paid a fee by the Adviser, which fee is calculated daily
and paid monthly, at an annual rate based on the average daily net assets of
each Index Fund as follows:
|
|
|
|
|
|
Name
of Fund |
Sub-Advisory
Fee |
Risk-Based
U.S. Fund |
0.030%
on the first $250 million; 0.025% on the next $250 million;
and 0.020% on net assets in excess of $500 million |
Risk-Based
International Fund |
0.035%
on the first $500 million; and 0.030% on net assets in excess of $500
million |
MaxDiv
U.S. Fund |
0.030%
on the first $250 million; 0.025% on the next $250 million;
and 0.020% on net assets in excess of $500
million |
The
basis for the Board’s approval of the investment sub-advisory agreement between
the Adviser and VIA with respect to the Index Funds is available in the Funds’
Annual
Report to
Shareholders dated August 31, 2021.
Harvest
Volatility Management, LLC
(Risk-Managed
Income Funds only)
The
Trust and Adviser have retained Harvest Volatility Management, LLC to serve as
sub-adviser for the Risk-Managed Income Funds. Harvest is responsible for the
day-to-day management of the Funds, including the general management of the
investment and reinvestment of the assets of the Funds and selecting
broker-dealers to execute purchase and sale transactions, subject to the
supervision of the Adviser and the Board. Harvest is a registered investment
adviser with its principal office located at 420 Lexington Avenue, Suite 2620,
New York, New York 10170.
Harvest
is a derivative asset management firm founded in 2008 and provides investment
advisory services to individuals and large institutions.
For
its services, Harvest is paid a fee by the Adviser, which fee is calculated
daily and paid monthly, at an annual rate based on the average daily net assets
of each Risk-Managed Income Fund as follows:
|
|
|
|
|
|
Name
of Fund |
Sub-Advisory
Fee |
Nasdaq-100
Risk-Managed Income ETF |
0.170%
on the Fund’s assets to and including $150 million, 0.224% on the
Fund’s assets from $150,000,001 to $300 million, and 0.340% on the
Fund’s assets from $300,000,001 and above |
S&P
500 Risk-Managed Income Fund Dow Jones Risk-Managed Income
Fund Russell 2000 Risk-Managed Income Fund |
0.340%
on the Fund’s assets to and including $150 million,
0.224%
on the Fund’s assets from $150,000,001 to $300 million, and
0.170%
on the Fund’s assets from $300,000,001 and
above |
The
basis for the Board’s approval of the investment sub-advisory agreement between
the Adviser and Harvest with respect to the Nasdaq-100 Risk-Managed Income ETF
is available in the Fund’s Annual
Report
to Shareholders dated August 31, 2021.
The
basis for the Board’s approval of the investment sub-advisory agreement between
the Adviser and Harvest with respect to the S&P 500 Risk-Managed Income ETF,
Dow Jones Risk-Managed Income ETF and Russell 2000 Risk-Managed Income ETF will
be available in the Funds’ Semi-Annual Report to Shareholders for the period
ending February 28, 2022.
Portfolio
Managers
The
Index Funds are jointly and primarily managed by Rafael Zayas, CFA, SVP, Head of
Portfolio Management and Trading for VIA, and Austin Wen, CFA, Portfolio Manager
for VIA.
Rafael
Zayas, CFA, is a portfolio manager for the Index
Funds.
Mr. Zayas became SVP, Head of Portfolio Management and Trading at VIA in June
2020. From 2017 to 2020, he was Senior Portfolio Manager – International Equity
at VIA and has over 15 years of experience that includes managing international
equity portfolios, including in emerging and frontier markets. Prior to joining
VIA, he was a Portfolio Manager – Direct Investments for seven years at Russell
Investments, a global asset manager, where he co-managed more than $4 billion in
quantitative strategies across global markets, including the Russell Strategic
Call Overwriting Fund, a mutual fund. Mr. Zayas also helped Russell Investments
launch its sponsored ETF initiative and advised on index methodologies. Prior to
joining Russell Investments, Mr. Zayas was a Portfolio Manager – Equity Indexing
at Mellon Capital Management, where he managed assets for internationally listed
global equity ETFs. Mr. Zayas graduated with a B.S. in Electrical Engineering
from Cornell University and obtained a Certificate in Computational Finance and
Risk Management from the University of Washington. He also attained the
Chartered Financial Analyst designation in 2010.
Austin
Wen, CFA, is a portfolio manager for the Index Funds. Mr. Wen has been a
Portfolio Manager of VIA since 2016 and has eight years of investment management
experience. His focus at VIA is on portfolio management and trading, risk
monitoring and investment analysis. Previously, he was an analyst for Vident
Financial beginning in 2014, working on the development and review of investment
solutions. He began his career in 2011 as a State Examiner for the Georgia
Department of Banking and Finance. Mr. Wen obtained a BA in Finance from the
University of Georgia and holds the Chartered Financial Analyst designation.
The
Risk-Managed Income Funds are managed by Curt Brockelman, Troy Cates, and
Garrett Paolella (collectively, the “Harvest Portfolio Managers”), who are
jointly and primarily responsible for the management of the Funds.
Curt
Brockelman has over 24 years of research, trading and portfolio management
experience. He is the Managing Partner, Co-Founder, Portfolio Manager, and Chief
Risk Officer of Harvest, overseeing the firm’s portfolio and operational risk
management, and is responsible for the daily management of the firm’s investment
and human capital. At Harvest, Curt chairs the board of partners, the risk
committee and compensation committee, and is a member of the firm’s investment
and audit committees. Prior to founding Harvest in 2008, he was Chief Investment
Officer and Portfolio Manager of Perch Bay Partners, LLC a global volatility
arbitrage hedge fund, trading index options on global markets. From 1996 to
2003, Curt was a Senior Vice President of Investments at Citigroup. He holds an
A.B. in Economics from Duke University.
Troy
Cates brings over 20 years of trading and portfolio management experience to his
role as Managing Director and Portfolio Manager for Harvest, where he guides
development of the firm’s ETF product strategies and industry relationships.
Prior to joining Harvest in 2018, Troy served as Managing Director, Head of
Trading and Portfolio Manager at Horizons ETF Management U.S. and has enjoyed
roles as Partner and Head of Trading at Recon Capital where he oversaw portfolio
management and trading for the firm’s ETFs, closed end funds, and separately
managed accounts from 2014 to 2017. Previously, he was an Executive Director at
MKM Partners, a research, sales, and trading firm, where he was an institutional
execution trader and helped launch the firm’s equity derivatives desk. Troy
started his career in 1998 working as a market maker at Spencer Trask, a New
York City-based venture capital firm. He holds a B.S. in Business Administration
from SUNY Albany.
Garrett
Paolella is a Managing Director and Portfolio Manager at Harvest Volatility
Management, focused on the management and product development within the firm’s
ETF business. Prior to joining Harvest, Mr. Paolella served as a Managing
Director and the Head of ETFs at Horizons ETFs Management U.S., where he ran all
aspects of the U.S. Exchange-Traded Fund business. Mr. Paolella previously held
executive roles as Managing Partner and Chief Executive Officer at Recon Capital
Partners and as an Executive Director at MKM Partners, a Research and Sales
& Trading Firm based in Stamford, CT. Mr. Paolella holds a Bachelor of
Science degree in Finance, Magna Cum Laude, from the Gabelli School of Business
at Roger Williams University and serves as Chairman of the Center for Advanced
Financial Education (CAFÉ) Advisory Board at the Mario J. Gabelli School of
Business.
The
Funds’ SAI provides additional information about each portfolio manager’s
compensation structure, other accounts managed by the portfolio manager, and the
portfolio manager’s ownership of Shares of each Fund.
HOW
TO
BUY
AND
SELL
SHARES
Each
Fund issues and redeems Shares at NAV only in Creation Units. Only APs may
acquire Shares directly from a Fund, and only APs may tender their Shares for
redemption directly to a Fund, at NAV. APs must be a member or participant of a
clearing agency registered with the SEC and must execute a Participant Agreement
that has been agreed to by the Distributor (defined below), and that has been
accepted by a Fund’s transfer agent, with respect to purchases and redemptions
of Creation Units. Once created, Shares trade in the secondary market in
quantities less than a Creation Unit.
Most
investors buy and sell Shares in secondary market transactions through brokers.
Shares are listed for trading on the secondary market on the Exchange and can be
bought and sold throughout the trading day like other publicly traded
securities.
When
buying or selling Shares through a broker, you will incur customary brokerage
commissions and charges, and you may pay some or all of the spread between the
bid and the offer price in the secondary market on each leg of a round trip
(purchase and sale) transaction. In addition, because secondary market
transactions occur at market prices, you may pay more than NAV when you buy
Shares and receive less than NAV when you sell those Shares.
Book
Entry
Shares
are held in book-entry form, which means that no stock certificates are issued.
The Depository Trust Company (“DTC”) or its nominee is the record owner of all
outstanding Shares.
Investors
owning Shares are beneficial owners as shown on the records of DTC or its
participants. DTC serves as the securities depository for all Shares. DTC’s
participants include securities brokers and dealers, banks, trust companies,
clearing corporations and other institutions that directly or indirectly
maintain a custodial relationship with DTC. As a beneficial owner of Shares, you
are not entitled to receive physical delivery of stock certificates or to have
Shares registered in your name, and you are not considered a registered owner of
Shares. Therefore, to exercise any right as an owner of Shares, you must rely
upon the procedures of DTC and its participants. These procedures are the same
as those that apply to any other securities that you hold in book entry or
“street name” through your brokerage account.
Frequent
Purchases and Redemptions of Shares
The
Funds impose no restrictions on the frequency of purchases and redemptions of
Shares. In determining not to approve a written, established policy, the Board
evaluated the risks of market timing activities by Fund shareholders. Purchases
and redemptions by APs, who are the only parties that may purchase or redeem
Shares directly with a Fund, are an essential part of the ETF process and help
keep Share trading prices in line with NAV. As such, the Funds accommodate
frequent purchases and redemptions by APs. However, the Board has also
determined that frequent purchases and redemptions for cash may increase
tracking error and portfolio transaction costs and may lead to the realization
of capital gains. To minimize these potential consequences of frequent purchases
and redemptions, the Funds employ fair value pricing and may impose transaction
fees on purchases and redemptions of Creation Units to cover the custodial and
other costs incurred by a Fund in effecting trades. In addition, the Funds and
the Adviser reserve the right to reject any purchase order at any
time.
Determination
of Net Asset Value
Each
Fund’s NAV is calculated as of the scheduled close of regular trading on the New
York Stock Exchange (“NYSE”), generally 4:00 p.m. Eastern time, each day
the NYSE is open for business. Each NAV for a Fund is calculated by dividing the
applicable Fund’s net assets by its Shares outstanding.
In
calculating its NAV, each Fund generally values its assets on the basis of
market quotations, last sale prices, or estimates of value furnished by a
pricing service or brokers who make markets in such instruments. If such
information is not available for a security held by a Fund or is determined to
be unreliable, the security will be valued at fair value estimates under
guidelines established by the Board (as described below).
Fair
Value Pricing
The
Board has adopted procedures and methodologies to fair value Fund securities
whose market prices are not “readily available” or are deemed to be unreliable.
For example, such circumstances may arise when: (i) a security has been
de-listed or has had its trading halted or suspended; (ii) a security’s primary
pricing source is unable or unwilling to provide a price; (iii) a security’s
primary trading market is closed during regular market hours; or (iv) a
security’s value is materially affected by events occurring after the close of
the security’s primary trading market. Generally, when fair valuing a security,
the Funds will take into account all reasonably available information that may
be relevant to a particular valuation including, but not limited to, fundamental
analytical data regarding the issuer, information relating to the issuer’s
business, recent trades or offers of the security, general and/or specific
market conditions and the specific facts giving rise to the need to fair value
the security. Fair value determinations are made in good faith and in accordance
with the fair value methodologies included in the Board-adopted valuation
procedures. Due to the subjective and variable nature of fair value pricing,
there can be no assurance that the Adviser or Sub-Adviser will be able to obtain
the fair value assigned to the security upon the sale of such
security.
Delivery
of Shareholder Documents – Householding
Householding
is an option available to certain investors of the Funds. Householding is a
method of delivery, based on the preference of the individual investor, in which
a single copy of certain shareholder documents can be delivered to investors who
share the same address, even if their accounts are registered under different
names. Householding for the Funds is available through certain
broker-
dealers.
If you are interested in enrolling in householding and receiving a single copy
of prospectuses and other shareholder documents, please contact your
broker-dealer. If you are currently enrolled in householding and wish to change
your householding status, please contact your broker-dealer.
Investments
by Registered Investment Companies
Section 12(d)(1)
of the 1940 Act restricts investments by registered investment companies in the
securities of other investment companies, including Shares. Registered
investment companies are permitted to invest in a Fund beyond the limits set
forth in section 12(d)(1) subject to certain terms and conditions set forth in
an SEC exemptive order issued to the Adviser or rule under the 1940 Act,
including that such investment companies enter into an agreement with a
Fund.
DIVIDENDS,
DISTRIBUTIONS,
AND
TAXES
Dividends
and Distributions
Each
Risk-Managed Income Fund intends to distribute substantially all of its net
investment income and net capital gains to its shareholders at least annually.
Each Risk-Managed Income Fund seeks to maintain relatively stable monthly
distributions, although the amount of income earned by a Fund varies from
period-to-period. Each month, each Risk-Managed Income Fund determines the
amount of distribution to pay based on a combination of the amount of options
premium generated from the Fund’s options collar strategy implemented for the
applicable month, the dividends generated by the Fund’s underlying equity
portfolio, and the appreciation of the Fund’s equity holdings. As a result of
such distribution strategy, each Risk-Managed Income Fund’s distributions are
expected to exceed its earnings and profits in some or all tax years, and
consequently, all or a portion of the distributions made for a taxable year may
be characterized 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 the applicable Fund and result in a higher capital gain or lower
capital loss when the Shares on which the distribution was received are sold.
After a shareholder’s basis in the Shares has been reduced to zero,
distributions in excess of earnings and profits will be treated as gain from the
sale of the shareholder’s Shares.
Each
Index Fund intends to distribute, at least annually, substantially all of its
net investment income and net capital gains.
Each
Fund will declare and pay capital gain distributions in cash. Distributions in
cash may be reinvested automatically in additional whole Shares only if the
broker through whom you purchased Shares makes such option available. Your
broker is responsible for distributing the income and capital gain distributions
to you.
Taxes
The
following discussion is a summary of some important U.S. federal income tax
considerations generally applicable to investments in a Fund. Your investment in
a Fund may have other tax implications. Please consult your tax advisor about
the tax consequences of an investment in Shares, including the possible
application of foreign, state, and local tax laws.
Each
Fund has elected or intends to elect and intends to qualify each year for
treatment as a RIC. If a Fund meets certain minimum distribution requirements, a
RIC is not subject to tax at the fund level on income and gains from investments
that are timely distributed to shareholders. However, a Fund’s failure to
qualify as a RIC or to meet minimum distribution requirements would result (if
certain relief provisions were not available) in fund-level taxation and,
consequently, a reduction in income available for distribution to shareholders.
Unless
your investment in Shares is made through a tax-exempt entity or tax-advantaged
account, such as an IRA plan, you need to be aware of the possible tax
consequences when a Fund makes distributions, when you sell your Shares listed
on the Exchange, and when you purchase or redeem Creation Units (APs
only).
Taxes
on Distributions
Each
Fund intends to distribute, at least annually, substantially all of its net
investment income and net capital gains. For federal income tax purposes,
distributions of investment income are generally taxable as ordinary income or
qualified dividend income. Taxes on distributions of capital gains (if any) are
determined by how long a Fund owned the investments that generated them, rather
than how long a shareholder has owned his or her Shares. Sales of assets held by
a Fund for more than one year generally result in long-term capital gains and
losses, and sales of assets held by a Fund for one year or less generally result
in short-term capital gains and losses. Distributions of a Fund’s net capital
gain (the excess of net long-term capital gains over net short-term capital
losses) that are reported by such Fund as capital gain dividends (“Capital Gain
Dividends”) will be taxable as long-term capital gains, which for non-corporate
shareholders are subject to tax at reduced rates of up to 20% (lower rates apply
to individuals in lower tax brackets). Distributions of short-term capital gain
will generally be taxable as ordinary income. Dividends and distributions are
generally taxable to you whether you receive them in cash or reinvest them in
additional Shares.
Distributions
reported by a Fund as “qualified dividend income” are generally taxed to
non-corporate shareholders at rates applicable to long-term capital gains,
provided holding period and other requirements are met. “Qualified dividend
income” generally is income
derived
from dividends paid by U.S. corporations or certain foreign corporations that
are either incorporated in a U.S. possession or eligible for tax benefits under
certain U.S. income tax treaties. In addition, dividends that the Fund receives
in respect of stock of certain foreign corporations may be qualified dividend
income if that stock is readily tradable on an established U.S. securities
market. Certain of the Funds’ investment strategies may limit their ability to
make distributions eligible to be treated as qualified dividend income.
Corporate shareholders may be entitled to a dividends received deduction for the
portion of dividends they receive from a Fund that are attributable to dividends
received by the Fund from U.S. corporations, subject to certain limitations.
Certain of the Funds’ investment strategies may limit their ability to make
distributions eligible for the dividends-received deduction for corporate
shareholders.
If
a Fund’s distributions exceed its earnings and profits, all or a portion of the
distributions made for a taxable year may be recharacterized as a return of
capital to shareholders. A return of capital distribution will generally not be
taxable, but will reduce each shareholder’s cost basis in a Fund and result in a
higher capital gain or lower capital loss when the Shares on which the
distribution was received are sold. After a shareholder’s basis in the Shares
has been reduced to zero, distributions in excess of earnings and profits will
be treated as gain from the sale of the shareholder’s Shares.
Shortly
after the close of each calendar year, you will be informed of the amount and
character of any distributions received from a Fund.
In
general, your distributions are subject to federal income tax for the year in
which they are paid. Certain distributions paid in January, however, may be
treated as paid on December 31 of the prior year. Distributions are generally
taxable even if they are paid from income or gains earned by a Fund before your
investment (and thus were included in the Shares’ NAV when you purchased your
Shares).
You
may wish to avoid investing in a Fund shortly before a dividend or other
distribution, because such a distribution will generally be taxable even though
it may economically represent a return of a portion of your investment.
If
you are neither a resident nor a citizen of the United States or if you are a
foreign entity, distributions (other than Capital Gain Dividends) paid to you by
a Fund will generally be subject to a U.S. withholding tax at the rate of 30%,
unless a lower treaty rate applies. Gains from the sale or other disposition of
your Shares generally are not subject to U.S. taxation, unless you are a
nonresident alien individual who is physically present in the U.S. for 183 days
or more per year. A Fund may, under certain circumstances, report all or a
portion of a dividend as an “interest-related dividend” or a “short-term capital
gain dividend,” which would generally be exempt from this 30% U.S. withholding
tax, provided certain other requirements are met. Different tax consequences may
result if you are a foreign shareholder engaged in a trade or business within
the United States or if a tax treaty applies.
Under
legislation generally known as “FATCA” (the Foreign Account Tax Compliance Act),
a 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.
Each
Fund (or a financial intermediary, such as a broker, through which a shareholder
owns Shares) generally is required to withhold and remit to the U.S. Treasury a
percentage 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.
Taxes
When Shares are Sold on the Exchange
Any
capital gain or loss realized upon a sale of Shares generally is treated as a
long-term capital gain or loss if Shares have been held for more than one year
and as a short-term capital gain or loss if Shares have been held for one year
or less. However, any capital loss on a sale of Shares held for six months or
less is treated as long-term capital loss to the extent of Capital Gain
Dividends paid with respect to such Shares. Any loss realized on a sale will be
disallowed to the extent Shares of a Fund are acquired, including through
reinvestment of dividends, within a 61-day period beginning 30 days before and
ending 30 days after the disposition of Shares. The ability to deduct capital
losses may be limited.
The
cost basis of Shares of a Fund acquired by purchase will generally be based on
the amount paid for the Shares and then may be subsequently adjusted for other
applicable transactions as required by the Code. The difference between the
selling price and the cost basis of Shares generally determines the amount of
the capital gain or loss realized on the sale or exchange of Shares. Contact the
broker through whom you purchased your Shares to obtain information with respect
to the available cost basis reporting methods and elections for your account.
Taxes
on Purchases and Redemptions of Creation Units
An
AP having the U.S. dollar as its functional currency for U.S. federal income tax
purposes who exchanges securities for Creation Units generally recognizes a gain
or a loss. The gain or loss will be equal to the difference between the value of
the Creation Units at the time of the exchange and the exchanging AP’s aggregate
basis in the securities delivered, plus the amount of any cash paid for the
Creation
Units. An AP who exchanges Creation Units for securities will generally
recognize a gain or loss equal to the difference between the exchanging AP’s
basis in the Creation Units and the aggregate U.S. dollar market value of the
securities received, plus any cash received for such Creation Units. The
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.
Each
Fund may include a payment of cash in addition to, or in place of, the delivery
of a basket of securities upon the redemption of Creation Units. Such Fund may
sell portfolio securities to obtain the cash needed to distribute redemption
proceeds. This may cause such Fund to recognize investment income and/or capital
gains or losses that it might not have recognized if it had completely satisfied
the redemption in-kind. As a result, such Fund may be less tax efficient if it
includes such a cash payment in the proceeds paid upon the redemption of
Creation Units.
Taxation
of Options Collar Strategy (Risk-Managed
Income Funds only)
If
positions held by a Fund were treated as “straddles” for federal income tax
purposes, or the Fund’s risk of loss with respect to a position was otherwise
diminished as set forth in Treasury Regulations, dividends on stocks that are a
part of such positions would not constitute qualified dividend income subject to
such favorable income tax treatment and would not be eligible for the dividends
received deduction for corporate shareholders. In addition, generally, straddles
are subject to certain rules that may affect the amount, character and timing of
a Fund’s gains and losses with respect to straddle positions by requiring, among
other things, that: (1) any loss realized on disposition of one position of a
straddle may not be recognized to the extent that the Fund has unrealized gains
with respect to the other position in such straddle; (2) the Fund’s holding
period in straddle positions be suspended while the straddle exists (possibly
resulting in a gain being treated as short-term capital gain rather than
long-term capital gain); (3) the losses recognized with respect to certain
straddle positions that are part of a mixed straddle and that are not subject to
Code Section 1256 be treated as 60% long-term and 40% short-term capital loss;
(4) losses recognized with respect to certain straddle positions that would
otherwise constitute short-term capital losses be treated as long-term capital
losses; and (5) the deduction of interest and carrying charges attributable to
certain straddle positions may be deferred.
Net
Investment Income Tax
U.S.
individuals with income exceeding specified thresholds are subject to a 3.8% tax
on all or a portion of their “net investment income,” which includes interest,
dividends, and certain capital gains (generally including capital gains
distributions and capital gains realized on the sale of Shares). This 3.8% tax
also applies to all or a portion of the undistributed net investment income of
certain shareholders that are estates and trusts.
Foreign
Investments by a Fund (Foreign
Funds only)
Interest
and other income received by a Fund with respect to foreign securities may give
rise to withholding and other taxes imposed by foreign countries. Tax
conventions between certain countries and the United States may reduce or
eliminate such taxes. If as of the close of a taxable year more than 50% of the
value of a Fund’s assets consists of certain foreign stock or securities, each
such Fund will be eligible to elect to “pass through” to investors the amount of
foreign income and similar taxes (including withholding taxes) paid by such Fund
during that taxable year. This means that investors would be considered to have
received as additional income their respective Shares of such foreign taxes, but
may be entitled to either a corresponding tax deduction in calculating taxable
income, or, subject to certain limitations, a credit in calculating federal
income tax. If a Fund does not so elect, each such Fund will be entitled to
claim a deduction for certain foreign taxes incurred by such Fund. A Fund (or
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 each Fund. It is not a substitute for
personal tax advice. You also may be subject to state and local tax on Fund
distributions and sales of Shares. Consult your personal tax advisor about the
potential tax consequences of an investment in Shares
under
all applicable tax laws. For more information, please see the section entitled
“Federal Income Taxes” in the SAI.
DISTRIBUTION
The
Distributor, Quasar Distributors, LLC, is a broker-dealer registered with the
SEC. The Distributor distributes Creation Units for the Funds on an agency basis
and does not maintain a secondary market in Shares. The Distributor has no role
in determining the policies of the Funds or the securities that are purchased or
sold by the Funds. The Distributor’s principal address is 111 East Kilbourn
Avenue, Suite 2200, Milwaukee, Wisconsin 53202.
The
Board has adopted a Distribution and Service Plan (the “Plan”) pursuant to Rule
12b-1 under the 1940 Act. In accordance with the Plan, each Fund is authorized
to pay an amount up to 0.25% of its average daily net assets each year for
certain distribution-related activities and shareholder services.
No
Rule 12b-1 fees are currently paid by the Funds, and there are no plans to
impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because the fees are paid out of Fund assets, over time these fees will
increase the cost of your investment and may cost you more than certain other
types of sales charges.
PREMIUM/DISCOUNT
INFORMATION
Information
regarding how often Shares traded on the Exchange at a price above (i.e.,
at a premium) or below (i.e.,
at a discount) the NAV of the applicable Fund will be available on the Funds’
website at www.etf.nationwide.com.
ADDITIONAL
NOTICES
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 an Index Fund to track the total
return performance of its Index or the ability of an 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 each Index, nor in the determination of the
timing of, prices of, or quantities of Shares to be issued, nor in the
determination or calculation of the equation by which the Shares are redeemable.
The Exchange has no obligation or liability to owners of Shares in connection
with the administration, marketing, or trading of Shares.
Additional
Notices for the Index Funds only
Regarding
the Index Funds, the Exchange does not guarantee the accuracy and/or the
completeness of each Index or the data included therein. The Exchange makes no
warranty, express or implied, as to results to be obtained by a Fund, owners of
Shares, or any other person or entity from the use of an 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 each 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, VIA, the Exchange, and each Index 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 an
Index Fund particularly or the ability of an Index to track general stock market
performance. The Index Funds, the Adviser, and VIA do not guarantee the
accuracy, completeness, or performance of an 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 each
Index Fund. The Index Calculation Agent shall have no liability for any errors
or omissions in calculating an Index.
The
Rothschild & Co Risk-Based US IndexSM
and Rothschild & Co Risk-Based International IndexSM
(together, the “Indexes”) are products of, the marketing name for, and a
licensed trademark of Rothschild & Co Risk Based Investments LLC
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Co®”, the Indexes, and “Rothschild & Co Indexes” are trade and service marks
of Rothschild & Co and have been licensed for use for certain purposes by
Nationwide Fund Advisors. The Risk-Based Funds are not sponsored or sold by
Rothschild & Co, and Rothschild & Co makes no representation or
warranty, express or implied, regarding the Risk-Based Funds to the owners of
the Risk-Based Funds or any member of the public.
TOBAM
and Maximum Diversification are registered trademarks and service marks of TOBAM
S.A.S. or its affiliates (“TOBAM”) and are used under license for certain
purposes by the Adviser. Reproduction of the TOBAM data and information in any
form is prohibited except with the prior written permission of TOBAM
S.A.S.1
The
MaxDiv U.S. Fund is not sponsored, endorsed, sold or promoted by TOBAM. TOBAM
makes no representation or warranty, express or implied, to the owners or
prospective owners of securities of the MaxDiv U.S. Fund or any member of the
public regarding the advisability of investing in securities generally or in the
MaxDiv U.S. Fund in particular, the ability of the MaxDiv U.S. Fund to track the
price and yield performance of the TOBAM Index or the ability of the TOBAM Index
to track its applicable market
1
The
TOBAM Maximum Diversification USA Index
data
copyright ©2011 (the “TOBAM Index”), TOBAM S.A.S. All rights
reserved.
performance.
TOBAM’s only relationship to the Adviser (“Licensee”) is the licensing of
certain indices, information, data, trademarks and trade names of TOBAM. The
TOBAM Index is determined, composed and calculated by or on behalf of TOBAM
without regard to Licensee or the MaxDiv U.S. Fund. TOBAM has no obligation to
take the needs of Licensee or the owners or prospective owners of the securities
of the MaxDiv U.S. Fund into consideration in determining, composing or
calculating the TOBAM Index. TOBAM is not responsible for, and has not
participated in, the determination of the prices and amount of the securities to
be issued by the MaxDiv U.S. Fund or the timing of the issuance or sale of the
securities to be issued by the MaxDiv U.S. Fund. TOBAM has no obligation or
liability in connection with the administration, marketing or trading of
securities of the MaxDiv U.S. Fund.
TOBAM
DOES NOT GUARANTEE THE ACCURACY OR COMPLETENESS OF THE TOBAM MAXIMUM
DIVERSIFICATION USA INDEX OR ANY DATA INCLUDED THEREIN AND TOBAM HAS NO
LIABILITY FOR ANY ERRORS OR OMISSIONS THEREIN. TOBAM MAKES NO WARRANTY, EXPRESS
OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OR PROSPECTIVE
OWNERS OF SECURITIES OF THE MAXDIV U.S. FUND OR ANY OTHER PERSON OR ENTITY FROM
THE USE OF THE TOBAM INDEX OR ANY DATA INCLUDED THEREIN. TOBAM MAKES NO EXPRESS
OR IMPLIED WARRANTY, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE TOBAM INDEX AND ANY DATA
INCLUDED THEREIN.
Solactive
AG is the third-party calculation agent of the TOBAM Maximum Diversification
Index Series. Solactive AG does not sponsor, endorse, sell, or promote any
investment vehicle that is offered by any third party that seeks to provide an
investment return based on the performance of any index. It is not possible to
invest directly in an index.
Additional
Notices for the Nasdaq-100 Risk-Managed Income Fund only
The
Nasdaq-100 Risk-Managed Income Fund is not sponsored, endorsed, sold or promoted
by Nasdaq, Inc. or its affiliates (Nasdaq, with its affiliates, are referred to
as the “Corporations”). The Corporations have not passed on the legality or
suitability of, or the accuracy or adequacy of descriptions and disclosures
relating to, the Nasdaq-100 Risk-Managed Income Fund. The Corporations make no
representation or warranty, express or implied to the owners of the Nasdaq-100
Risk-Managed Income Fund or any member of the public regarding the advisability
of investing in securities generally or in the Nasdaq-100 Risk-Managed Income
Fund particularly, or the ability of the Nasdaq-100® Index to track general
stock market performance. The Corporations’ only relationship to Nationwide Fund
Advisors (“Licensee”) is in the licensing of the Nasdaq® and certain trade names
of the Corporations and the use of the Nasdaq-100® Index which is determined,
composed and calculated by Nasdaq without regard to Licensee or the Nasdaq-100
Risk-Managed Income Fund. Nasdaq has no obligation to take the needs of the
Licensee or the owners of the Nasdaq-100 Risk-Managed Income Fund into
consideration in determining, composing or calculating the Nasdaq-100® Index.
The Corporations are not responsible for and have not participated in the
determination of the timing of, prices at, or quantities of the Nasdaq-100
Risk-Managed Income Fund to be issued or in the determination or calculation of
the equation by which the Nasdaq-100 Risk-Managed Income Fund is to be converted
into cash. The Corporations have no liability in connection with the
administration, marketing or trading of the Nasdaq-100 Risk-Managed Income
Fund.
The
Corporations do not guarantee the accuracy and/or uninterrupted calculation of
the Nasdaq-100 Index or any data included therein. The Corporations make no
warranty, express or implied, as to results to be obtained by the Adviser,
owners of the Fund, or any other person or entity from the use of the Nasdaq-100
Index or any data included therein. The Corporations make no express or implied
warranties, and expressly disclaim all warranties of merchantability or fitness
for a particular purpose or use, with respect to the Nasdaq-100 Index® or any
data included therein. Without limiting any of the foregoing, in no event shall
the Corporations have any liability for any lost profits or special, incidental,
punitive, indirect, or consequential damages, even if notified of the
possibility of such damages.
Additional
Notices for the Russell 2000 Risk-Managed Income Fund only
FTSE
Russell (“Russell”) is the Reference Index Provider for the Reference Index. The
Reference Index Provider is not affiliated with the Fund, the Adviser, the
Distributor or any of their respective affiliates. The Adviser or its affiliates
have entered into a license agreement with the Reference Index Provider to use
the Reference Index.
The
Fund has been developed solely by the Adviser. The Fund is not in any way
connected to or sponsored, endorsed, sold or promoted by the London Stock
Exchange Group plc and its group undertakings (collectively, the “LSE Group”).
FTSE Russell is a trading name of certain of the LSE Group companies. All rights
in the Russell 2000 Index (the “Index”) vest in the relevant LSE Group company
which owns the Index. “Russell®” is a trademark of the relevant LSE Group
company and is used by any other LSE Group company under license. The Index is
calculated by or on behalf of FTSE International Limited or its affiliate, agent
or partner. The LSE Group does not accept any liability whatsoever to any person
arising out of (a) the use of, reliance on or any error in the Index or (b)
investment in or operation of the Fund. The LSE Group makes no claim,
prediction, warranty or representation either as to the results to be obtained
from the Fund or the suitability of the Index for the purpose to which it is
being put by the Adviser.
Additional
Notices for the S&P 500 Risk-Managed Income Fund and the Dow Jones
Risk-Managed Income Fund only
Each
Reference Index is a product of S&P Dow Jones Indices LLC, a division of
S&P Global, or its affiliates (“SPDJI”), and has been licensed for use by
the Adviser. Standard & Poor’s®, S&P®, and S&P 500® are registered
trademarks of Standard & Poor’s Financial Services LLC (“S&P”); Dow
Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow
Jones”); and these trademarks have been licensed for use by SPDJI and
sublicensed for certain purposes by the Adviser. It is not possible to invest
directly in an index. The Funds are not sponsored, endorsed, sold or promoted by
SPDJI, Dow Jones, S&P, any of their respective affiliates (collectively,
“S&P Dow Jones Indices”). S&P Dow Jones Indices makes no representation
or warranty, express or implied, to the owners of the Funds or any member of the
public regarding the advisability of investing in securities generally or in the
Funds particularly. Past performance of an index is not an indication or
guarantee of future results. S&P Dow Jones Indices’ only relationship to the
Adviser with respect to each Reference Index is the licensing of each Reference
Index and certain trademarks, service marks and/or trade names of S&P Dow
Jones Indices and/or its licensors. Each Reference Index is determined, composed
and calculated by S&P Dow Jones Indices without regard to the Adviser or the
Funds. S&P Dow Jones Indices has no obligation to take the needs of the
Adviser or the owners of the Funds into consideration in determining, composing
or calculating each Reference Index. S&P Dow Jones Indices is not
responsible for and has not participated in the determination of the prices, and
amount of shares of the Funds or the timing of the issuance or sale of shares of
the Funds or in the determination or calculation of the equation by which shares
of the Funds are to be converted into cash, surrendered or redeemed, as the case
may be. S&P Dow Jones Indices has no obligation or liability in connection
with the administration, marketing or trading of the Funds. There is no
assurance that investment products based on each Reference Index will accurately
track index performance or provide positive investment returns. S&P Dow
Jones Indices LLC is not an investment or tax advisor. A tax advisor should be
consulted to evaluate the impact of any tax-exempt securities on portfolios and
the tax consequences of making any particular investment decision. Inclusion of
a security within an index is not a recommendation by S&P Dow Jones Indices
to buy, sell, or hold such security, nor is it considered to be investment
advice.
S&P
DOW JONES INDICES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR
THE COMPLETENESS OF EACH REFERENCE INDEX OR ANY DATA RELATED THERETO OR ANY
COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION
(INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES
INDICES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS,
OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES MAKES NO EXPRESS OR
IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY
OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY
THE ADVISER, OWNERS OF THE FUNDS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF
EACH REFERENCE INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT
LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES
INDICES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR
CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING
LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY
OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE.
THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN
S&P DOW JONES INDICES AND THE ADVISER, OTHER THAN THE LICENSORS OF S&P
DOW JONES INDICES.
Additional
Notices for the Risk-Managed Income Funds only
The
Adviser, Harvest, and the Risk-Managed Income Funds make no representation or
warranty, express or implied, to the owners of Shares or any member of the
public regarding the advisability of investing in securities generally or in the
Risk-Managed Income Funds particularly.
FINANCIAL
HIGHLIGHTS
The
S&P 500 Risk-Managed Income ETF, Dow Jones Risk-Managed Income ETF and
Russell 2000 Risk-Managed Income ETF had not commenced operations prior to the
date of this Prospectus and therefore do not have financial information.
The
financial highlights tables are intended to help you understand each Fund’s
financial performance for each Fund’s five most recent fiscal years (or the life
of the Fund, if shorter). Certain information reflects financial results for a
single Share. The total returns in the tables represent the rate that an
investor would have earned or lost on an investment in a Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by Cohen & Company, Ltd., the Funds’ independent registered public
accounting firm, whose report, along with the Funds’ financial statements, is
included in the Funds’ annual report, which is available upon request.
Nationwide
Risk-Based U.S. Equity ETF
For
a capital share outstanding throughout the year/period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended August 31, 2021 |
Year
Ended August 31, 2020 |
Year
Ended August 31, 2019 |
Period
Ended August 31,
2018(1) |
Net
asset value, beginning of year/period |
$ |
32.41 |
|
$ |
29.21 |
|
$ |
27.79 |
|
$ |
25.00 |
|
|
|
|
|
|
|
|
INCOME
(LOSS) FROM INVESTMENT OPERATIONS: |
|
|
|
|
|
Net
investment income (loss)(2) |
0.42 |
|
0.48 |
|
0.53 |
|
0.51 |
|
|
Net
realized and unrealized gain (loss) on investments and foreign
currency |
7.82 |
|
3.28 |
|
1.49 |
|
2.41 |
|
|
Total
from investment operations |
8.24 |
|
3.76 |
|
2.02 |
|
2.92 |
|
|
|
|
|
|
|
|
DISTRIBUTIONS
TO SHAREHOLDERS: |
|
|
|
|
|
From
net investment income |
(0.47) |
|
(0.56) |
|
(0.60) |
|
(0.11) |
|
|
From
realized gains |
— |
|
— |
|
— |
|
(0.02) |
|
|
Total
distributions to shareholders |
(0.47) |
|
(0.56) |
|
(0.60) |
|
(0.13) |
|
|
|
|
|
|
|
|
Net
asset value, end of year/period |
$ |
40.18 |
|
$ |
32.41 |
|
$ |
29.21 |
|
$ |
27.79 |
|
|
|
|
|
|
|
|
Total
return |
25.66 |
% |
13.00 |
% |
7.70 |
% |
11.70 |
% |
(3) |
|
|
|
|
|
|
SUPPLEMENTAL
DATA: |
|
|
|
|
|
Net
assets at end of year/period (000’s) |
$ |
129,587 |
|
$ |
107,748 |
|
$ |
114,637 |
|
$ |
118,101 |
|
|
|
|
|
|
|
|
RATIOS
TO AVERAGE NET ASSETS: |
|
|
|
|
|
Expenses
to average net assets |
0.30 |
% |
0.30 |
% |
0.30 |
% |
0.30 |
% |
(4) |
Net
investment income to average net assets |
1.16 |
% |
1.64 |
% |
1.95 |
% |
2.03 |
% |
(4) |
|
|
|
|
|
|
Portfolio
turnover rate(5) |
57 |
% |
73 |
% |
76 |
% |
87 |
% |
(3) |
(1)Inception
date of September 15, 2017.
(2)Calculated
based on average shares outstanding during the year/period.
(3)Not
annualized.
(4)Annualized.
(5)Excludes
the impact of in-kind transactions.
Nationwide
Risk-Based International Equity ETF
For
a capital share outstanding throughout the year/period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended August 31, 2021 |
|
Year
Ended August 31, 2020 |
Year
Ended August 31, 2019 |
Period
Ended
August
31,
2018(1) |
Net
asset value, beginning of year/period |
$ |
25.21 |
|
|
$ |
24.70 |
|
|
$ |
25.99 |
|
$ |
25.00 |
|
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) FROM INVESTMENT OPERATIONS: |
|
|
|
|
|
|
|
Net
investment income (loss)(2) |
0.57 |
|
|
0.46 |
|
|
0.68 |
|
0.59 |
|
|
Net
realized and unrealized gain (loss) on investments and foreign
currency |
3.86 |
|
|
0.73 |
|
|
(1.30) |
|
0.53 |
|
|
Total
from investment operations |
4.43 |
|
|
1.19 |
|
|
(0.62) |
|
1.12 |
|
|
|
|
|
|
|
|
|
|
DISTRIBUTIONS
TO SHAREHOLDERS: |
|
|
|
|
|
|
|
From
net investment income |
(0.49) |
|
|
(0.68) |
|
|
(0.67) |
|
(0.11) |
|
|
From
realized gains |
— |
|
|
— |
|
|
— |
|
(0.02) |
|
|
Total
distributions to shareholders |
(0.49) |
|
|
(0.68) |
|
|
(0.67) |
|
(0.13) |
|
|
|
|
|
|
|
|
|
|
CAPITAL
SHARE TRANSACTIONS |
|
|
|
|
|
|
|
Transaction
fees |
0.00 |
|
(3) |
0.00 |
|
(3) |
— |
|
0.00 |
|
(3) |
|
|
|
|
|
|
|
|
Net
asset value, end of year/period |
$ |
29.15 |
|
|
$ |
25.21 |
|
|
$ |
24.70 |
|
$ |
25.99 |
|
|
|
|
|
|
|
|
|
|
Total
return |
17.70 |
% |
|
4.77 |
% |
|
-2.14 |
% |
4.48 |
% |
(4) |
|
|
|
|
|
|
|
|
SUPPLEMENTAL
DATA: |
|
|
|
|
|
|
|
Net
assets at end of year/period (000’s) |
$ |
134,811 |
|
|
$ |
112,178 |
|
|
$ |
116,709 |
|
$ |
119,550 |
|
|
|
|
|
|
|
|
|
|
RATIOS
TO AVERAGE NET ASSETS: |
|
|
|
|
|
|
|
Expenses
to average net assets |
0.42 |
% |
|
0.42 |
% |
|
0.42 |
% |
0.42 |
% |
(5) |
Net
investment income to average net assets |
2.09 |
% |
|
1.89 |
% |
|
2.74 |
% |
2.36 |
% |
(5) |
|
|
|
|
|
|
|
|
Portfolio
turnover rate(6) |
66 |
% |
|
78 |
% |
|
98 |
% |
145 |
% |
(4) |
(1)Inception
date of September 15, 2017.
(2)Calculated
based on average shares outstanding during the year/period.
(3)Represents
less than $0.005.
(4)Not
annualized.
(5)Annualized.
(6)Excludes
the impact of in-kind transactions.
Nationwide
Maximum Diversification U.S. Core Equity ETF
For
a capital share outstanding throughout the year/period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended August 31, 2021 |
Year
Ended August 31, 2020 |
Year
Ended August 31, 2019 |
Period
Ended
August
31,
2018(1) |
Net
asset value, beginning of year/period |
$ |
33.82 |
|
$ |
29.16 |
|
$ |
29.69 |
|
|
$ |
25.00 |
|
|
|
|
|
|
|
|
|
INCOME
(LOSS) FROM INVESTMENT OPERATIONS: |
|
|
|
|
|
|
Net
investment income (loss)(2) |
0.39 |
|
0.64 |
|
0.49 |
|
|
0.35 |
|
|
Net
realized and unrealized gain (loss) on investments and foreign
currency |
8.49 |
|
4.54 |
|
(0.60) |
|
|
4.46 |
|
|
Total
from investment operations |
8.88 |
|
5.18 |
|
(0.11) |
|
|
4.81 |
|
|
|
|
|
|
|
|
|
DISTRIBUTIONS
TO SHAREHOLDERS: |
|
|
|
|
|
|
From
net investment income |
(0.66) |
|
(0.52) |
|
(0.42) |
|
|
(0.12) |
|
|
From
realized gains |
— |
|
— |
|
— |
|
|
(0.00) |
(3) |
Total
distributions to shareholders |
(0.66) |
|
(0.52) |
|
(0.42) |
|
|
(0.12) |
|
|
|
|
|
|
|
|
|
CAPITAL
SHARE TRANSACTIONS |
|
|
|
|
|
|
Transaction
fees |
— |
|
— |
|
0.00 |
|
(3) |
— |
|
|
|
|
|
|
|
|
|
Net
asset value, end of year/period |
$ |
42.04 |
|
$ |
33.82 |
|
$ |
29.16 |
|
|
$ |
29.69 |
|
|
|
|
|
|
|
|
|
Total
return |
26.54 |
% |
17.96 |
% |
-0.11 |
% |
|
19.27 |
% |
(4) |
|
|
|
|
|
|
|
SUPPLEMENTAL
DATA: |
|
|
|
|
|
|
Net
assets at end of year/period (000’s) |
$ |
120,868 |
|
$ |
100,618 |
|
$ |
105,699 |
|
|
$ |
114,298 |
|
|
|
|
|
|
|
|
|
RATIOS
TO AVERAGE NET ASSETS: |
|
|
|
|
|
|
Expenses
to average net assets |
0.34 |
% |
0.34 |
% |
0.34 |
% |
|
0.34 |
% |
(5) |
Net
investment income to average net assets |
1.04 |
% |
2.11 |
% |
1.75 |
% |
|
1.35 |
% |
(5) |
|
|
|
|
|
|
|
Portfolio
turnover rate(6) |
35 |
% |
40 |
% |
37 |
% |
|
26 |
% |
(4) |
(1)Inception
date of September 15, 2017.
(2)Calculated
based on average shares outstanding during the year/period.
(3)Represents
less than $0.005.
(4)Not
annualized.
(5)Annualized.
(6)Excludes
the impact of in-kind transactions.
Nationwide
Nasdaq-100 Risk-Managed Income ETF
For
a capital share outstanding throughout the year/period
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year
Ended August 31, 2021 |
|
Period
Ended
August
31,
2020(1) |
Net
asset value, beginning of year/period |
$ |
28.13 |
|
|
$ |
25.00 |
|
|
|
|
|
|
|
INCOME
(LOSS) FROM INVESTMENT OPERATIONS: |
|
|
|
|
Net
investment income (loss)(2) |
0.02 |
|
|
0.05 |
|
|
Net
realized and unrealized gain (loss) on investments |
2.59 |
|
|
4.61 |
|
|
Total
from investment operations |
2.61 |
|
|
4.66 |
|
|
|
|
|
|
|
DISTRIBUTIONS
TO SHAREHOLDERS: |
|
|
|
|
From
net investment income |
(0.02) |
|
|
(0.04) |
|
|
Tax
return of capital to shareholders |
(2.11) |
|
|
(1.49) |
|
|
Total
distributions to shareholders |
(2.13) |
|
|
(1.53) |
|
|
|
|
|
|
|
Net
asset value, end of year/period |
$ |
28.61 |
|
|
$ |
28.13 |
|
|
|
|
|
|
|
Total
return |
9.61 |
% |
(4) |
19.72 |
% |
(3)(4) |
|
|
|
|
|
SUPPLEMENTAL
DATA: |
|
|
|
|
Net
assets at end of year/period (000’s) |
$ |
582,300 |
|
|
$ |
128,008 |
|
|
|
|
|
|
|
RATIOS
TO AVERAGE NET ASSETS: |
|
|
|
|
Expenses
to average net assets |
0.68 |
% |
|
0.68 |
% |
(5) |
Net
investment income to average net assets |
0.07 |
% |
|
0.25 |
% |
(5) |
|
|
|
|
|
Portfolio
turnover rate(6) |
10 |
% |
|
11 |
% |
(3) |
(1)Inception
date of December 19, 2019.
(2)Calculated
based on average shares outstanding during the year/period.
(3)Not
annualized.
(4)The
return reflects the actual performance for the period and does not include the
impact of adjustments made in accordance with generally accepted accounting
principles in the United States of America (“U.S. GAAP”). Had the adjustments
been included, the total return for the periods ended August 31, 2021 and 2020
would have been 9.96% and 19.33%, respectively.
(5)Annualized.
(6)Excludes
the impact of in-kind transactions.
|
|
|
|
|
|
|
|
|
|
|
|
Adviser |
Nationwide
Fund Advisors
One
Nationwide Plaza
Columbus,
Ohio 43215 |
Transfer
Agent, Index Receipt Agent, and Administrator |
U.S.
Bancorp Fund Services, LLC
d/b/a
U.S. Bank Global Fund Services
615
East Michigan Street
Milwaukee,
Wisconsin 53202 |
Index
Providers |
Rothschild
& Co Risk Based Investments LLC
1251
Avenue of the Americas
New
York, New York 10020
TOBAM
S.A.S.
49/53
Avenue Des Champs Elysées
Paris,
France 75008 |
Sub-Advisers |
Vident
Investment Advisory, LLC
1125
Sanctuary Parkway, Suite 515
Alpharetta,
Georgia 30009
Harvest
Volatility Management, LLC
420
Lexington Avenue, Suite 2620
New
York, New York 10170 |
Custodian |
U.S.
Bank National Association
1555
North Rivercenter Drive, Suite 302
Milwaukee,
Wisconsin 53212 |
Distributor |
Quasar
Distributors, LLC
111
East Kilbourn Avenue, Suite 2200
Milwaukee,
Wisconsin 53202 |
Independent
Registered Public Accounting Firm |
Cohen
& Company, Ltd.
342
North Water Street, Suite 830
Milwaukee,
Wisconsin 53202 |
Legal
Counsel |
Morgan,
Lewis & Bockius LLP
1111
Pennsylvania Avenue, NW
Washington,
DC 20004-2541 |
Investors
may find more information about the Funds in the following documents:
Statement
of Additional Information:
The Funds’ SAI provides additional details about the investments of the Funds
and certain other additional information. A current SAI dated December 10,
2021, 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 each Fund’s investments will be available in the Funds’ annual
and semi-annual reports to shareholders. In the annual
report
you will find a discussion of the market conditions and investment strategies
that significantly affected each Fund’s performance.
You
can obtain free copies of these documents, request other information or make
general inquiries about the Funds by contacting the Funds at c/o Nationwide
ETFs, 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 Funds 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 Funds’ Internet web site at www.etf.nationwide.com; or
(SEC
Investment Company Act File No. 811-22668)
PR
ESS 12/21