ck0001432353-20211130
497Nov.
30, 2021Global X Funds0001432353FALSEN-1A0001432353ck0001432353:GlobalXFundsMemberck0001432353:S000076384Member2022-06-222022-06-220001432353ck0001432353:GlobalXFundsMemberck0001432353:C000236195Memberck0001432353:S000076384Member2022-06-222022-06-2200014323532022-06-222022-06-22xbrli:pureiso4217:USD
Global X Interest Rate Hedge ETF
NYSE
Arca: IRHG
Prospectus
May 20,
2022, as revised on June 22,
2022
The
Securities and Exchange Commission (“SEC”) has not approved or disapproved these
securities or passed upon the adequacy of this Prospectus. Any representation to
the contrary is a criminal offense.
Shares
in the Fund (defined below) are not guaranteed or insured by the Federal Deposit
Insurance Corporation or any other agency of the U.S. Government, nor are shares
deposits or obligations of any bank. Such shares in the Fund involve investment
risks, including the loss of principal.
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As
permitted by regulations adopted by the SEC, paper copies of the Fund's
shareholder reports will no longer be sent by mail, unless you
specifically request paper copies of the reports from your financial
intermediary (such as a broker-dealer or bank). Instead, shareholder
reports will be available on the Fund’s website
(www.globalxetfs.com/explore), and you will be notified by mail each time
a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you
will not be affected by this change and you need not take any action. You
may elect to receive shareholder reports and other communications from the
Fund electronically anytime by contacting your financial intermediary. You
may elect to receive all future Fund shareholder reports in paper free of
charge. Please contact your financial intermediary to inform them that you
wish to continue receiving paper copies of Fund shareholder reports and
for details about whether your election to receive reports in paper will
apply to all funds held with your financial
intermediary. |
TABLE
OF CONTENTS
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FUND
SUMMARY |
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ADDITIONAL
INFORMATION ABOUT THE FUND |
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A
FURTHER DISCUSSION OF PRINCIPAL RISKS |
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A
FURTHER DISCUSSION OF OTHER RISKS |
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PORTFOLIO
HOLDINGS INFORMATION |
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FUND
MANAGEMENT |
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DISTRIBUTOR |
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BUYING
AND SELLING FUND SHARES |
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FREQUENT
TRADING |
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DISTRIBUTION
AND SERVICE PLAN |
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DIVIDENDS
AND DISTRIBUTIONS |
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TAXES |
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DETERMINATION
OF NET ASSET VALUE |
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PREMIUM/DISCOUNT
AND SHARE INFORMATION |
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OTHER
SERVICE PROVIDERS |
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ADDITIONAL
INFORMATION |
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FINANCIAL
HIGHLIGHTS |
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OTHER
INFORMATION |
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Global
X Interest Rate Hedge ETF
Ticker:
IRHG Exchange: NYSE Arca
INVESTMENT OBJECTIVE
The
Global X Interest Rate Hedge ETF (the “Fund”) seeks to provide a hedge against
sharp increases in
long-term
U.S. interest rates and is expected to benefit during periods of market stress
when interest rate volatility is elevated.
FEES AND EXPENSES
This table describes the fees
and expenses that you may pay if you buy, hold, and sell shares (“Shares”) of
the Fund. You may pay other fees, such as brokerage commissions and other fees
to financial intermediaries, which are not reflected in the tables and examples
below.
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: |
0.45% |
Distribution
and Service (12b-1) Fees: |
None |
Other
Expenses:1 |
0.00% |
Total
Annual Fund Operating Expenses: |
0.45% |
1 Other Expenses are based
on estimated amounts for the current fiscal
year.
Example:
The following example
is intended to help you compare the cost of investing in the Fund with the cost
of investing in other funds. This example does not take into account customary
brokerage commissions that you pay when purchasing or selling Shares of the Fund
in the secondary market. The example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
Shares at the end of those periods. The example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions, your costs would be:
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One
Year |
Three
Years |
$46 |
$144 |
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 is a new fund and does not yet have
a portfolio turnover rate to disclose.
PRINCIPAL INVESTMENT
STRATEGIES
The
Fund is an actively managed exchange traded fund (“ETF”) that seeks to achieve
its investment objective primarily by investing in (1) long put options
position(s) on exchange traded funds (“ETFs”) that primarily invest in U.S.
Treasuries and/or long put options position(s) on U.S. Treasury futures, and/or
(2) long interest rate payer swap options (“swaptions”). The Fund will also
invest in long positions in U.S. Treasury bills for cash management purposes.
The Fund invests in U.S. Treasury bills directly or through other
ETFs.
The
Fund may invest in put options on exchange traded funds that primarily invest in
U.S. Treasuries and/or in put options on U.S. Treasury futures. When an investor
purchases a put option, the investor pays an amount (premium) to acquire the
right (but not the obligation) to sell shares of a reference asset at a
specified exercise (“strike”) price on the expiration date. If the reference
asset closes below the strike price as of the expiration date and the investor
exercises the put option, the investor will be entitled to receive the
difference between the value of the reference asset and the strike price. If the
reference asset closes above the strike price as of the expiration date, the put
option may end up worthless and the investor’s loss is limited to the amount of
premium paid.
The
Fund may invest in interest rate payer swaptions. A swaption is an option that
gives a counterparty the right (but not the obligation) to enter into a new swap
agreement or to shorten, extend, cancel or otherwise modify an existing swap
agreement, at some designated future time on specified terms. An interest rate
payer swaption is a swaption where the Fund has the right but
not
the obligation to enter into a new swap agreement where the Fund pays a fixed
interest rate and receives a floating interest rate. The Fund may take long
positions in interest rate payer swaptions that benefit from rising long-term
interest rates and interest rate volatility. Interest rate volatility is
generally associated with periods of greater uncertainty on the direction of
future interest rates.
Options
have contractual expiration dates; therefore, to maintain consistent exposure to
options, the Fund must periodically migrate out of options nearing expiration
and into options with later expiration dates— a process referred to as
“rolling.” Under normal circumstances, the Fund generally expects to invest less
than 25% of the Fund’s assets in options, and to actively manage the Fund’s
options investments to reduce the weight of such options in the Fund’s portfolio
if their value increases above 25% of the Fund’s assets. The Fund’s options
exposure will be actively managed to ensure a consistent exposure for the Fund’s
sensitivity to changes in interest rates, which may result in the Fund
periodically increasing or decreasing the option exposure, up to 25% of the
Fund’s assets. The Fund’s remaining assets will be invested in cash or U.S.
Treasury bills.
Investments
in derivative instruments, such as options, have the economic effect of creating
financial leverage in the Fund’s portfolio because such investments may give
rise to gains or losses that are disproportionate to the amount the Fund has
invested in those instruments. Because the Fund only invests in long put options
and/or interest rate payer swaptions as part of its principal investment
strategy, the maximum loss for the Fund’s put options and/or interest rate payer
swaptions positions is the “options premium,” which is defined as the premium
paid for the put options and/or interest rate payer swaptions and any
post-purchase appreciation in value. Thus, any disproportionate returns are
generally expected to exist only when the value of such options appreciates.
However, following such appreciation, even small changes in the shape of the
U.S. interest rate curve or interest rate volatility may result in a significant
decline in the value of such options with a maximum loss equal to the options
premium. The Fund is likely to be significantly more volatile than a fund
holding only long positions in the same U.S. Treasury bills as the Fund because
the options component of the Fund could result in significant gains for the Fund
or in a complete loss of the premium for the Fund’s options, which could result
in the Fund losing a significant portion of its value. The Fund is
non-diversified and therefore may invest a larger percentage of its assets in
the securities of a single issuer or smaller number of issuers than diversified
funds.
SUMMARY OF PRINCIPAL RISKS
As with any investment, you could lose all or part of
your investment in the Fund, and the Fund’s performance could trail that of
other investments. There is no guarantee that the Fund will
achieve its investment objective. An investment in the Fund is not a
bank deposit and it is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency, the Adviser or any of its
affiliates. The Fund is subject to the principal risks noted
below, any of which may adversely affect the Fund’s net asset value (“NAV”),
trading price, yield, total return and ability to meet its investment objective,
as well as other risks that are described in greater detail in the Additional
Information About the Fund
section of this Prospectus and in the Statement of Additional Information
(“SAI”). The order of the below risk factors does not indicate the significance
of any particular risk factor.
Active
Management Risk:
The Fund is actively managed using proprietary investment strategies and
processes. There can be no guarantee that these strategies and processes will be
successful or that the Fund will achieve its investment objective.
Asset
Class Risk:
Securities and other assets held in the Fund's portfolio may underperform in
comparison to the general securities markets, a particular securities market or
other asset classes.
Associated
Risks Related to Investing in Rate-Linked Derivatives: The
Fund’s exposure to derivatives tied to interest rates subjects the Fund to
greater volatility than investments in traditional securities, such as stocks
and bonds. Investing in derivatives tied to interest rates, including through
options tied to the shape of the U.S. interest rate curve, can be extremely
volatile. The value of such investments may fluctuate rapidly based on a variety
of factors, including overall market movements; economic events and policies;
changes in interest rates or inflation rates; changes in monetary and exchange
control programs; war; acts of terrorism; natural disasters; and technological
developments. The Fund is expected to benefit from the options it holds if
long-term
U.S. interest rates rise during the time period in which the Fund holds the
options. However, if long-term
U.S. interest rates decrease, the Fund will lose money on the options, up to the
amount invested in option premiums, and underperform an otherwise identical bond
fund that had not used such options. Rate-linked derivatives may lose money if
interest rates change in a manner not anticipated by the Adviser. An increase in
interest rates may cause the value of securities held directly or indirectly by
the Fund to decline to the extent that the Fund’s hedging strategy is not
effectively implemented. Even if the Fund is hedged against losses due to
long-term interest rate increases linked to U.S. interest rates, outright
interest rate increases may also lead to heightened volatility in the
fixed-income markets and may positively affect the value of the Fund’s options
while negatively impacting the Fund’s investments in U.S. Treasuries. The Fund
could lose money on the options held
by
the Fund, and the present value of the Fund’s portfolio investments could
decrease if inflation increases. These interest rate-linked options may also
cause the Fund’s net asset value and returns to be more volatile and expose the
Fund to increased counterparty risk. Fluctuations in the U.S. interest rate
curve or the price of the options owned by the Fund could materially adversely
affect an investment in the Fund. The Fund’s investments in options are not
intended to mitigate duration and credit risk or other factors influencing the
price of U.S. government bonds, which may have a greater impact on the bonds’
returns than interest rate risk. Moreover, to the extent that interest rate risk
has been priced into the government bonds owned directly or indirectly by the
Fund, the Fund could underperform other investments even during periods of
rising long-term U.S. interest rates. There is no guarantee that the Fund will
have positive performance even in environments of sharply rising U.S. interest
rates. There is no guarantee that the Fund will be able to successfully mitigate
interest rate risk.
Derivatives
Risk:
The Fund may gain exposure to different asset classes by investing in different
types of derivative instruments. Derivatives can be more sensitive to changes in
interest rates or to sudden fluctuations in market prices than conventional
securities, which can result in greater losses for the Fund. In addition, the
prices of the derivative instruments and the prices of underlying securities,
interest rates or currencies they are designed to reflect may not move together
as expected. A risk of the Fund’s use of derivatives is that the fluctuations in
their values may not correlate perfectly with the relevant underlying asset,
rate, index or other indicator to which it relates. Derivatives are usually
traded on margin, which may subject the Fund to margin calls. Margin calls may
force the Fund to liquidate assets. On October 28, 2020, the SEC adopted Rule
18f-4 under the 1940 Act (‘Rule 18f-4”), which governs the use of derivatives by
registered investment companies. Rule 18f-4 imposes limits on the amount of
derivatives the Fund can enter into and replaces the asset segregation framework
previously used by the Fund to comply with Section 18 of the 1940 Act, among
other requirements. The Fund will be required to comply with Rule 18f-4 by
August 19, 2022.
ETF
Investment Risk: While
the risks of owning shares of an underlying ETF generally reflect the risks of
owning the underlying securities of the index the ETF is designed to track, lack
of liquidity in the underlying ETF can result in its value being more volatile
than the underlying portfolio securities. Because the value of an underlying
ETF's shares depends on the demand in the market, the Adviser may not be able to
liquidate the Fund’s holdings in those shares at the most optimal time, thereby
adversely affecting the Fund’s performance. An underlying ETF may experience
tracking error in relation to the index tracked by the underlying ETF, which
could contribute to tracking error for the Fund. In addition, an underlying
ETF's shares may trade at a premium or discount to NAV. In addition, investments
in the securities of underlying ETFs may involve duplication of advisory fees
and certain other expenses. The Fund will pay brokerage commissions in
connection with the purchase and sale of shares of the underlying ETFs, which
could result in greater expenses to the Fund. By investing in an underlying ETF,
the Fund becomes a shareholder thereof. As a result, Fund shareholders
indirectly bear the Fund’s proportionate share of the fees and expenses
indirectly paid by shareholders of the underlying ETF, in addition to the fees
and expenses Fund shareholders indirectly bear in connection with the Fund’s own
operations. If the underlying ETF fails to achieve its investment objective, the
value of the Fund’s investment may decline, adversely affecting the Fund’s
performance. Additionally, some exchange traded products (“ETPs”) are not
registered under the Investment Company Act of 1940 (“1940 Act”) and therefore,
are not subject to the regulatory scheme and investor protections of the 1940
Act.
Fixed
Income Securities Risk: A
rise in interest rates typically causes bond prices to fall. The longer the
average maturity or duration of the bonds held by the Fund, the more sensitive
it will likely be to interest-rate fluctuations. An unexpected event could
interfere with an issuer’s ability to make timely interest or principal payments
or that causes market speculation about the issuer’s ability to make such
payments, which could cause the credit quality and market value of an issuer’s
bonds and/or other debt securities to decline significantly.
Leverage
Risk:
The Fund’s investments in put options and/or interest rate payer swaptions have
the economic effect of creating financial leverage in the Fund’s portfolio
because such investments may give rise to gains or losses that are
disproportionate to the amount the Fund has invested in those instruments.
Because the Fund only takes long positions in put options and/or interest rate
payer swaptions as part of its principal investment strategy, the maximum loss
for the Fund’s put options and/or interest rate payer swaptions positions is the
“options premium,” which is defined as the premium paid for the put options
and/or interest rate payer swaptions and any post-purchase appreciation in
value. Thus, any disproportionate returns are generally expected to exist only
when the value of such options appreciates. However, following such
appreciation, even small changes in the shape of the U.S. interest rate curve or
interest rate volatility may result in a significant decline in the value of
such options with a maximum loss equal to the yield curve spread options
premium.
Swaptions
Risk: A
swaption is a contract that gives a counterparty the right (but not the
obligation) to enter into a new swap agreement or to shorten, extend, cancel or
otherwise modify an existing swap agreement, at some designated
future
time on specified terms. The Fund may purchase interest rate payer swaptions.
When the Fund purchases a swaption, it risks losing only the amount of the
premium it has paid should it decide to let the option expire unexercised.
U.S.
Treasury Obligations Risk:
U.S. Treasury obligations may differ in their interest rates, maturities, times
of issuance and other characteristics. Similar to other issuers, changes to the
financial condition or credit rating of the U.S. government may cause the value
of the Fund's investments in U.S. Treasury obligations to decline.
Counterparty
Risk:
Counterparty risk is the risk that a counterparty to a swap contract or other
similar investment instrument may default on its payment obligation to the Fund.
Such a default may cause the value of an investment in the Fund to decrease.
Geographic
Risk: A
natural, biological or other disaster could occur in a geographic region in
which the Fund invests, which could affect the economy or particular business
operations of companies in the specific geographic region, causing an adverse
impact on the Fund’s investments in the affected region or in a region
economically tied to the affected region. The securities in which the Fund
invests and, consequently, the Fund are also subject to specific risks as a
result of their business operations, including, but not limited to:
Risk
of Investing in the United States:
A decrease in imports or exports, changes in trade regulations and/or an
economic recession in the U.S. may have a material adverse effect on the U.S.
economy.
Investment
in Investment Companies Risk:
When the Fund invests in other investment companies (or funds), it will
indirectly be exposed to the risks of such funds’ investments. Moreover, the
Fund will incur its pro rata share of such funds’ expenses. Additionally,
investments in ETFs are subject to ETF Risk.
Market
Risk:
Turbulence in the financial markets and reduced liquidity may negatively affect
issuers, which could have an adverse effect on the Fund. If the securities held
by the Fund experience poor liquidity, the Fund may be unable to transact at
advantageous times or prices, which may decrease the Fund’s returns. In
addition, there is a risk that policy changes by central governments and
governmental agencies, including the U.S. Federal Reserve or the European
Central Bank, which could include increasing interest rates, could cause
increased volatility in financial markets and lead to higher levels of Fund
redemptions from Authorized Participants, which could have a negative impact on
the Fund. Furthermore, local, regional or global events such as war, acts of
terrorism, the spread of infectious illness or other public health issues,
recessions, or other events could have a significant impact on the Fund and its
investments and trading of its Shares. For example, at the start of 2022,
expectations for higher policy interest rates and the removal of monetary policy
support resulted in elevated market volatility and a weak start to January as
markets rotated away from companies with weaker fundamentals and/or higher
valuations. Sustained elevated inflation, global supply chain bottlenecks and
labor shortages encouraged a U.S. Federal Reserve policy shift to increase
interest rates. With central bankers needing to reflect that they remain ahead
of the curve on inflation, there are concerns that monetary policy may provide
less support should economic growth slow. The slowing growth of gross domestic
product in China may weigh on global economic growth, while the COVID-19
pandemic remains a risk to both global economic growth and supply chain
normalization. Market risk factors may result in increased volatility and/or
decreased liquidity in the securities markets. The Fund’s NAV could decline over
short periods due to short-term market movements and over longer periods during
market downturns.
New
Fund Risk: The
Fund is a new fund, with no operating history, which may result in additional
risks for investors in the Fund. There can be no assurance that the Fund will
grow to or maintain an economically viable size, in which case the Board of
Trustees may determine to liquidate the Fund. While shareholder interests will
be the paramount consideration, the timing of any liquidation may not be
favorable to certain individual shareholders. New funds are also subject to
Large Shareholder Risk.
Non-Diversification
Risk: The Fund is classified as a
“non-diversified” investment company under the Investment Company Act of 1940
("1940 Act"). As a result, the Fund is subject to the risk that it may be more
volatile than a diversified fund because the Fund may invest its assets in a
smaller number of issuers or may invest a larger proportion of its assets in a
single issuer. As a result, the gains and losses on a single investment may have
a greater impact on the Fund’s NAV and may make the Fund more volatile than more
diversified funds.
Operational
Risk:
The Fund is exposed to operational risk arising from a number of factors,
including but not limited to human error, processing and communication errors,
errors of the Fund's service providers, counterparties or other third-parties,
failed or inadequate processes and technology or systems failures. Additionally,
cyber security failures or breaches of the electronic systems of the Fund, the
Adviser, and the Fund's other service providers, market makers, Authorized
Participants or the issuers of securities in which the Fund invests have the
ability to cause disruptions and negatively impact the Fund's business
operations, potentially resulting in financial losses to the Fund and its
shareholders. The Fund and the Adviser seek to
reduce
these operational risks through controls and procedures. However, these measures
do not address every possible risk and may be inadequate for those risks that
they are intended to address.
Over-the-Counter
Market Risk: Securities
and options traded in over-the-counter markets may trade less frequently and in
limited volumes and thus exhibit more volatility and liquidity risk, and the
prices paid by the Fund in over-the-counter transactions may include an
undisclosed dealer markup. The Fund is also exposed to default by the
over-the-counter option writer who may be unwilling or unable to perform its
contractual obligations to the Fund.
Risks
Associated with Exchange-Traded Funds:
As an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk:
The Fund has a limited number of financial institutions that may act as
Authorized Participants and engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, Shares may be more likely to trade at a premium or
discount to NAV, and possibly face trading halts and/or delisting from an
exchange.
Large
Shareholder Risk: Redemptions
by large shareholders could have a significant negative impact on the Fund. If a
large shareholder were to redeem all, or a large portion, of its Shares, there
is no guarantee that the Fund will be able to maintain sufficient assets to
continue operations in which case the Board of Trustees may determine to
liquidate the Fund. In addition, transactions by large shareholders may account
for a large percentage of the trading volume on a national securities exchange
and may, therefore, have a material upward or downward effect on the market
price of the Shares.
Listing
Standards Risk: The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks:
Shares of the Fund are publicly traded on a national securities exchange, which
may subject shareholders to numerous market trading risks. Disruptions to
creations and redemptions, the existence of extreme market volatility or
potential lack of assets in the Fund or an active trading market for Shares may
result in Shares trading at a significant premium or discount to NAV. If a
shareholder purchases Shares at a time when the market price is at a premium to
the NAV or sells Shares at a time when the market price is at a discount to the
NAV, the shareholder may sustain losses. The NAV of the Fund is calculated at
the end of each business day and fluctuates with changes in the market value of
the Fund’s holdings. The trading price of the Fund’s shares fluctuates, in some
cases materially, throughout trading hours in response to changes in the Fund’s
NAV.
Trading
Halt Risk:
An exchange or market may close or issue trading halts on specific securities,
or the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Turnover
Risk: The
Fund may engage in frequent and active trading, which may significantly increase
the Fund’s portfolio turnover rate. At
times, the Fund may have a portfolio turnover rate substantially greater than
100%. For example, a portfolio turnover rate of 300%
is equivalent to the Fund buying and selling all of its securities three times
during the course of a year. A
high portfolio turnover rate would result in
high brokerage costs for the Fund, may result in higher taxes when shares are
held in a taxable account and lower Fund performance.
Valuation
Risk:
The sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security, particularly for securities that trade in low value
or volatile markets or that are valued using a fair value methodology (such as
during trading halts). The value of the securities in the Fund's portfolio
may change on days when shareholders will not be able to purchase or sell the
Fund's Shares.
PERFORMANCE
INFORMATION
The Fund does not have a full calendar year
of performance. Once the Fund has completed a
full calendar year of operations, a bar chart and table will be included that
will provide some indication of the risks of investing in the Fund by showing
the
variability of the Fund’s returns and
comparing the Fund’s performance to a benchmark index.
The Fund’s performance is not
necessarily indicative of how the Fund will perform in the
future.
FUND
MANAGEMENT
Investment
Adviser:
Global X Management Company LLC (the “Adviser”).
Portfolio
Managers:
The professionals primarily responsible for the day-to-day management of the
Fund are Nam To, CFA; Wayne Xie; Kimberly Chan; Vanessa Yang; William Helm, CFA;
and Sandy Lu, CFA (“Portfolio Managers”). Messrs. To, Xie, Helm and Lu and Ms.
Chan and Ms. Yang have been Portfolio Managers of the Fund since the Fund's
inception.
PURCHASE
AND SALE OF FUND SHARES
Shares
of the Fund are or will be listed and traded at market prices on a national
securities exchange. Shares may only be purchased and sold on the exchange
through a broker-dealer. The price of Shares is based on market price, and
because ETF shares trade at market prices rather than at NAV, Shares may trade
at a price greater than NAV (a premium) or less than NAV (a discount). Only
“Authorized Participants” (as defined in the SAI) who have entered into
agreements with the Fund’s distributor, SEI Investments Distribution Co.
(“Distributor”), may engage in creation or redemption transactions directly with
the Fund. The Fund will only issue or redeem Shares that have been aggregated
into blocks called “Creation Units”. The Fund will issue or redeem Creation
Units in return for a basket of cash and/or securities that the Fund specifies
any day that the national securities exchanges are open for business (“Business
Day”). An investor may incur costs attributable to the difference between the
highest price a buyer is willing to pay to purchase shares of the Fund (bid) and
the lowest price a seller is willing to accept for shares of the Fund (ask) when
buying or selling shares in the secondary market (the “bid-ask spread”). To
access information regarding the Fund’s net asset value, market price, premiums
and discounts, and bid-ask spreads, please go to
https://www.globalxetfs.com.
TAX
INFORMATION
The
Fund intends to make distributions that may be taxable to you as ordinary income
or capital gains, unless you are investing through a tax-advantaged arrangement
such as a 401(k) plan or an individual retirement account (“IRA”), in which case
distributions from such tax-advantaged arrangement may be taxable to you.
PAYMENTS
TO BROKER-DEALERS AND OTHER FINANCIAL INTERMEDIARIES
The
Adviser and its related companies may pay broker-dealers or other financial
intermediaries (such as a bank) for the sale of Fund Shares and related
services. These payments may create a conflict of interest by influencing your
broker-dealer, sales persons or other intermediary or its employees or
associated persons to recommend the Fund over another investment. Ask your
financial adviser or visit your financial intermediary’s website for more
information.
ADDITIONAL
INFORMATION ABOUT THE FUND
This
Prospectus contains information about investing in the Fund. Please read this
Prospectus carefully before you make any investment decisions. Shares of the
Fund are listed for trading on a national securities exchange. The market price
for a Share of the Fund may be different from the Fund’s most recent NAV. ETFs
are funds that trade like other publicly-traded securities. Each Share of the
Fund represents an ownership interest in an underlying portfolio of securities.
Unlike shares of a mutual fund, which can be bought and redeemed from the
issuing fund by all shareholders at a price based on NAV, Shares of the Fund may
be purchased or redeemed directly from the Fund at NAV solely by Authorized
Participants and only in Creation Unit increments. Also unlike shares of a
mutual fund, Shares of the Fund are listed on a national securities exchange and
trade in the secondary market at market prices that change throughout the day.
The Fund is designed to be used as part of broader asset allocation strategies.
Accordingly, an investment in the Fund should not constitute a complete
investment program.
The
Fund seeks to provide a hedge against sharp increases in long-term U.S. interest
rates and is expected to benefit during periods of market stress when interest
rate volatility is elevated. The Fund is an actively managed exchange traded
fund (“ETF”) that seeks to achieve its investment objective primarily by
investing in (1) long put options position(s) on exchange traded funds (“ETFs”)
that primarily invest in U.S. Treasuries and/or long put options position(s) on
U.S. Treasury futures, and/or (2) long interest rate payer swap options
(“swaptions”). The Fund will also invest in long positions in U.S. Treasury
bills for cash management purposes. The Fund invests in U.S. Treasury bills
directly or through other ETFs. The Fund’s investment objective may be changed
without shareholder approval upon at least 60 days prior written notice to
shareholders.
A
FURTHER DISCUSSION OF PRINCIPAL RISKS
The
Fund is subject to various risks, including the principal risks noted below, any
of which may adversely affect the Fund’s NAV, trading price, yield, total return
and ability to meet its investment objective. You could lose all or part of your
investment in the Fund, and the Fund could underperform other
investments.
Active
Management Risk
The
Fund is actively managed using proprietary investment strategies and processes.
There can be no guarantee that these strategies and processes will be successful
or that the Fund will achieve its investment objective.
The
performance of the Fund will reflect, in part, the ability of the Adviser to
select investments and to make investment decisions that are suited to achieving
the Fund’s investment objective. The Adviser’s assessment of a particular
investment, company, sector or country and/or assessment of broader economic,
financial or other macro views, may prove incorrect, including because of
factors that were not adequately foreseen, and the selection of investments may
not perform as well as expected when those investments were purchased or as well
as the markets generally, resulting in Fund losses or underperformance. There
can be no guarantee that these strategies and processes will produce the
intended results and no guarantee that the Fund will achieve its investment
objective or outperform other investment strategies over the short- or long-term
market cycles. This risk is exacerbated when an investment or multiple
investments made as a result of such decisions are significant relative to the
Fund’s net assets.
Asset
Class Risk
The
returns from the types of securities and/or assets in which the Fund invests may
under-perform returns from the various general securities markets or different
asset classes. The assets may under-perform investments that track other
markets, segments, sectors or assets. Different types of assets tend to go
through cycles of out-performance and under-performance in comparison to the
general securities markets.
Associated
Risks Related to Investing in Rate-Linked Derivatives
The
Fund’s exposure to derivatives tied to interest rates subjects the Fund to
greater volatility than investments in traditional securities, such as stocks
and bonds. Investing in derivatives tied to interest rates, including through
options tied to the shape of the U.S. interest rate curve, can be extremely
volatile. The value of such investments may fluctuate rapidly based on a variety
of factors, including overall market movements; economic events and policies;
changes in interest rates or inflation rates; changes in monetary and exchange
control programs; war; acts of terrorism; natural disasters; and technological
developments. The Fund is expected to benefit from the options it holds if
long-term
U.S. interest rates rise during the time period in which the Fund holds the
options. However, if long-term
U.S. interest rates decrease, the Fund will lose money on the options, up to the
amount invested in option premiums, and underperform
an
otherwise identical bond fund that had not used such options. Rate-linked
derivatives may lose money if interest rates change in a manner not anticipated
by the Adviser. An increase in interest rates may cause the value of securities
held directly or indirectly by the Fund to decline to the extent that the Fund’s
hedging strategy is not effectively implemented. Even if the Fund is hedged
against losses due to long-term interest rate increases linked to U.S. interest
rates, outright interest rate increases may also lead to heightened volatility
in the fixed-income markets and may positively affect the value of the Fund’s
options while negatively impacting the Fund’s investments in U.S. Treasuries.
The Fund could lose money on the options held by the Fund, and the present value
of the Fund’s portfolio investments could decrease if inflation increases. These
interest rate-linked options may also cause the Fund’s net asset value and
returns to be more volatile and expose the Fund to increased counterparty risk.
Fluctuations in the U.S. interest rate curve or the price of the options owned
by the Fund could materially adversely affect an investment in the Fund. The
Fund’s investments in options are not intended to mitigate duration and credit
risk or other factors influencing the price of U.S. government bonds, which may
have a greater impact on the bonds’ returns than interest rate risk. Moreover,
to the extent that interest rate risk has been priced into the government bonds
owned directly or indirectly by the Fund, the Fund could underperform other
investments even during periods of rising long-term U.S. interest rates. There
is no guarantee that the Fund will have positive performance even in
environments of sharply rising U.S. interest rates. There is no guarantee that
the Fund will be able to successfully mitigate interest rate risk.
Derivatives
Risk
Derivatives
risk is the risk that loss may result from the Fund’s investments in options,
futures and swap contracts, which may be leveraged and are types of derivatives.
Investments in leveraged instruments may result in losses exceeding the amounts
invested. Compared to conventional securities, derivatives can be more sensitive
to changes in interest rates or to sudden fluctuations in market prices and thus
the Fund’s losses may be greater if it invests in derivatives than if it invests
only in conventional securities.
Derivative
instruments may be leveraged, which may result in losses exceeding the amounts
invested. Risks of these instruments include:
•That
prices of the instruments and the prices of underlying securities, interest
rates or currencies they are designed to reflect do not move together as
expected;
•The
possible absence of a liquid secondary market for any particular instrument and,
for exchange traded instruments, possible exchange-imposed price fluctuation
limits, either of which may make it difficult or impossible to close out a
position when desired;
•That
adverse price movements in an instrument can result in a loss substantially
greater than the Fund’s initial investment in that instrument (in some cases,
the potential loss is unlimited);
•Particularly
in the case of privately-negotiated instruments, that the counterparty will not
perform its obligations, which could leave the Fund worse off than if it had not
entered into the position;
•The
inability to close out certain hedged positions to avoid adverse tax
consequences, and the fact that some of these instruments may have uncertain tax
implications for the Fund;
•The
fact that “speculative position limits” imposed by the CFTC and certain futures
exchanges on net long and short positions may require the Fund to limit or
unravel positions in certain types of instruments; and
•The
high levels of volatility some of these instruments may exhibit, in some cases
due to the high levels of leverage an investor may achieve with them. On October
28, 2020, the SEC adopted new regulations governing the use of derivatives by
registered investment companies. The Fund will be required to implement and
comply with Rule 18f-4 by August 19, 2022. Rule 18f-4 will impose limits on the
amount of derivatives a fund can enter into, eliminate the asset segregation
framework currently used by funds to comply with Section 18 of the 1940 Act, as
amended, treat derivatives as senior securities so that a failure to comply with
the limits would result in a statutory violation and require funds whose use of
derivatives is more than a limited specified exposure amount to establish and
maintain a comprehensive derivatives risk management program and appoint a
derivatives risk manager.
ETF
Investment Risk
The
Fund may hold ETFs to gain exposure to certain asset classes. As a result, the
Fund may be subject to the same risks as the underlying ETFs. While the risks of
owning shares of an underlying ETF generally reflect the risks of owning the
underlying securities the ETF is designed to track, lack of liquidity in an
underlying ETF can result in its value being more volatile than the underlying
portfolio securities. Because the value of an underlying ETF's shares depends on
the demand in the market, the Adviser may not be able to liquidate the Fund’s
holdings in those shares at the most optimal time, thereby adversely affecting
the Fund’s performance. An underlying ETF may experience tracking error in
relation to the index tracked by the underlying ETF, which could contribute to
tracking error for the Fund. In addition, an underlying ETF's shares may trade
at a premium or discount to NAV.
In
addition, investments in the securities of underlying ETFs may involve
duplication of advisory fees and certain other expenses. The Fund will pay
brokerage commissions in connection with the purchase and sale of shares of
underlying ETFs, which could result in greater expenses to the Fund. By
investing in an underlying ETF, the Fund becomes a shareholder thereof. As a
result, Fund shareholders indirectly bear the Fund’s proportionate share of the
fees and expenses indirectly paid by shareholders of the underlying ETF, in
addition to the fees and expenses Fund shareholders indirectly bear in
connection with the Fund’s own operations. In addition, certain of the
underlying ETFs may hold common portfolio positions, thereby reducing the
diversification benefits of an asset allocation style.
If
an underlying ETF fails to achieve its investment objective, the value of the
Fund’s investment may decline, adversely affecting the Fund’s performance.
Additionally, some exchange traded products (“ETPs”) are not registered under
the Investment Company Act of 1940 (“1940 Act”) and therefore, are not subject
to the regulatory scheme and investor protections of the 1940 Act.
A
complete list of each underlying ETF held by the Fund can be found daily on the
Trust’s website. Each investor should review the complete description of the
principal risks of each underlying ETF prior to investing in the Fund.
Fixed
Income Securities Risk
A
rise in interest rates typically causes bond prices to fall. The longer the
average maturity or duration of the bonds held by the Fund, the more sensitive
it will likely be to interest-rate fluctuations. An unexpected event could
interfere with an issuer’s ability to make timely interest or principal payments
or that causes market speculation about the issuer’s ability to make such
payments, which could cause the credit quality and market value of an issuer’s
bonds and/or other debt securities to decline significantly.
Leverage
Risk
Using
derivatives can create leverage, which may amplify the effects of market
volatility on the Fund’s share price and make the Fund’s returns more volatile.
The use of leverage may cause the Fund to liquidate portfolio positions when it
would not be advantageous to do so in order to satisfy its obligations. The use
of leverage may also cause the Fund to have higher expenses than those of other
funds that do not use such techniques.
Swaptions
Risk
A
swaption is a contract that gives a counterparty the right (but not the
obligation) to enter into a new swap agreement or to shorten, extend, cancel or
otherwise modify an existing swap agreement, at some designated future time on
specified terms. The Fund may purchase interest rate payer swaptions. When the
Fund purchases a swaption, it risks losing only the amount of the premium it has
paid should it decide to let the option expire unexercised.
U.S.
Treasury Obligations Risk
Investments
in debt securities are generally affected by changes in prevailing interest
rates and the creditworthiness of the issuer. Prices of U.S. Treasury securities
fall when prevailing interest rates rise. Price fluctuations of longer-term U.S.
Treasury securities are greater than price fluctuations of shorter-term U.S.
Treasury securities and may be as great as price fluctuations of common stock.
The Fund’s yield on investments in U.S. Treasury securities will fluctuate as
the Fund is invested in U.S. Treasury securities with different interest
rates.
Counterparty
Risk
Counterparty
risk is the risk that a counterparty to a derivative such as a swap contract or
other similar investment instrument may default on its payment obligation to the
Fund. Such a default may cause the value of an investment in the Fund to
decrease.
Geographic
Risk
Geographic
risk is the risk that the Fund’s assets may be concentrated in countries located
in the same geographic region. This concentration will subject the Fund to risks
associated with that particular region, or a region economically tied to that
particular region, such as a natural, biological or other disaster. Outbreaks of
contagious viruses and diseases may reduce business activity or disrupt market
activity, and have the potential to exacerbate market risks in the countries and
regions in which they occur. The securities in which the Fund invests and,
consequently, the Fund are also subject to specific risks as a result of their
business operations, including, but not limited to:
Risk
of Investing in the United States
A
decrease in imports or exports, changes in trade regulations and/or an economic
recession in the U.S. may have a material adverse effect on the U.S. economy and
the securities listed on U.S. exchanges. Proposed and adopted policy and
legislative changes in the U.S. are changing many aspects of financial and other
regulation and may have a significant effect on the U.S. markets generally, as
well as on the value of certain securities. In addition, a continued rise in the
U.S. public debt level or the imposition of U.S. austerity measures may
adversely affect U.S. economic growth and the securities to which the Fund has
exposure. The U.S. has developed increasingly strained relations with a number
of foreign countries. If these relations continue to worsen, it could adversely
affect U.S. issuers as well as non-U.S. issuers that rely on the U.S. for trade.
The U.S. has also experienced increased internal unrest and discord. If this
trend were to continue, it may have an adverse impact on the U.S. economy and
the issuers in which the Fund invests.
Investment
in Investment Companies Risk
When
the Fund invests in other investment companies (or funds), it will indirectly be
exposed to the risks of such funds’ investments. Moreover, the Fund will incur
its pro rata share of such funds’ expenses. Additionally, investments in ETFs
are subject to ETF Risk.
Market
Risk
Market
risk is the risk that the value of the securities in which the Fund invests may
go up or down in response to the prospects of individual issuers and/or general
economic conditions. Turbulence in the financial markets and reduced liquidity
may negatively affect issuers, which could have an adverse effect on the Fund.
If the securities held by the Fund experience poor liquidity, the Fund may be
unable to transact at advantageous times or prices, which may decrease the
Fund’s returns. In addition, there is a risk that policy changes by central
governments and governmental agencies, including the Federal Reserve or the
European Central Bank, which could include increasing interest rates, could
cause increased volatility in financial markets and lead to higher levels of
Fund redemptions from Authorized Participants, which could have a negative
impact on the Fund. Furthermore, local, regional or global events such as war,
acts of terrorism, the spread of infectious illness or other public health
issues, recessions, or other events could have a significant impact on the Fund
and its investments and trading of its Shares. For example, at the start of
2022, expectations for higher policy interest rates and the removal of monetary
policy support resulted in elevated market volatility and a weak start to
January as markets rotated away from companies with weaker fundamentals and/or
higher valuations. Sustained elevated inflation, global supply chain bottlenecks
and labor shortages encouraged a U.S. Federal Reserve policy shift to increase
interest rates. With central bankers needing to reflect that they remain ahead
of the curve on inflation, there are concerns that monetary policy may provide
less support should economic growth slow. The slowing growth of gross domestic
product in China may weigh on global economic growth, while the COVID-19
pandemic remains a risk to both global economic growth and supply chain
normalization. Market risk factors may result in increased volatility and/or
decreased liquidity in the securities markets. The Fund’s NAV could decline over
short periods due to short-term market movements and over longer periods during
market downturns.
New
Fund Risk
The
Fund is a new fund, with no operating history, which may result in additional
risks for investors in the Fund. There can be no assurance that the Fund will
grow to or maintain an economically viable size, in which case the Board of
Trustees may determine to liquidate the Fund. While shareholder interests will
be the paramount consideration, the timing of any liquidation may not be
favorable to certain individual shareholders. From time to time an Authorized
Participant, a third-party investor, the Adviser or another affiliate of the
Adviser or the Fund may invest in the Fund and hold its investment for a
specific period of time in order to facilitate commencement of the Fund’s
operations or for the Fund to achieve size or scale. There can be no
assurance
that any such entity would not redeem its investment or that the size of the
Fund would be maintained at such levels which could negatively impact the
Fund.
Non-Diversification
Risk
The
Fund is classified as a “non-diversified” investment company under the 1940 Act.
This means that the Fund may invest most of its assets in securities issued by
or representing a small number of companies. As a result, the Fund may be more
susceptible to the risks associated with these particular companies, or to a
single economic, political or regulatory occurrence affecting these companies.
Operational
Risk
The
Fund is exposed to operational risk arising from a number of factors, including
but not limited to human error, processing and communication errors, errors of
the Fund's service providers, counterparties or other third-parties, failed or
inadequate processes and technology or systems failures.
With
the increased use of technologies such as the internet to conduct business, the
Fund, Authorized Participants, service providers and the relevant listing
exchange are susceptible to operational, information security and related
“cyber” risks both directly and through their service providers. Similar types
of cyber security risks are also present for issuers of securities in which the
Fund invests, which could result in material adverse consequences for such
issuers and may cause the Fund’s investment in such portfolio companies to lose
value. Unlike many other types of risks faced by the Fund, these risks typically
are not covered by insurance. In general, cyber incidents can result from
deliberate attacks or unintentional events. Cyber incidents include, but are not
limited to, gaining unauthorized access to digital systems (e.g., through
“hacking” or malicious software coding) for purposes of misappropriating assets
or sensitive information, corrupting data, or causing operational disruption.
Cyber-attacks may also be carried out in a manner that does not require gaining
unauthorized access, such as causing denial-of-service attacks on websites
(i.e., efforts to make network services unavailable to intended users).
Recently, geopolitical tensions may have increased the scale and sophistication
of deliberate attacks, particularly those from nation-states or from entities
with nation-state backing. Cyber security failures by or breaches of the systems
of the Adviser and the Fund’s distributor and other service providers
(including, but not limited to, fund accountants, custodians, transfer agents
and administrators), market makers, Authorized Participants, or the issuers of
securities in which the Fund invests, have the ability to cause disruptions and
impact business operations, potentially resulting in: financial losses,
interference with the Fund’s ability to calculate its NAV, disclosure of
confidential trading information, impediments to trading, submission of
erroneous trades or erroneous creation or redemption orders, the inability of
the Fund or its service providers to transact business, violations of applicable
privacy and other laws, regulatory fines, penalties, reputational damage,
reimbursement or other compensation costs, or additional compliance costs. In
addition, cyber-attacks may render records of Fund assets and transactions,
shareholder ownership of Fund Shares, and other data integral to the functioning
of the Fund inaccessible or inaccurate or incomplete. Substantial costs may be
incurred by the Fund in order to resolve or prevent cyber incidents in the
future. While the Fund has established business continuity plans in the event
of, and risk management systems to prevent, such cyber-attacks, there are
inherent limitations in such plans and systems, including the possibility that
certain risks have not been identified and that prevention and remediation
efforts will not be successful. Furthermore, the Fund cannot control the cyber
security plans and systems put in place by service providers to the Fund,
issuers in which the Fund invests, market makers or Authorized Participants. The
Fund and its shareholders could be negatively impacted as a result.
The
Fund and the Adviser seek to reduce these operational risks through controls and
procedures. However, these measures do not address every possible risk and may
be inadequate for those risks that they are intended to address.
Over-the-Counter
Market Risk
Securities
and options traded in over-the-counter markets may trade less frequently and in
limited volumes and thus exhibit more volatility and liquidity risk, and the
prices paid by the Fund in over-the-counter transactions may include an
undisclosed dealer markup. The Fund is also exposed to default by the
over-the-counter option writer who may be unwilling or unable to perform its
contractual obligations to the Fund.
Risks
Associated with Exchange-Traded Funds
As
an ETF, the Fund is subject to the following risks:
Authorized
Participants Concentration Risk
The
Fund has a limited number of financial institutions that may act as Authorized
Participants. Only Authorized Participants who have entered into agreements with
the Fund's distributor may engage in creation or redemption transactions
directly with the Fund, and none of those Authorized Participants is obligated
to engage in creation and/or redemption transactions. To the extent that those
Authorized Participants exit the business or are unable to process creation
and/or redemption orders, and no other Authorized Participant is able to step
forward to create and redeem in either of those cases, Shares may trade like
closed-end fund shares at a discount to NAV, and may possibly face trading halts
and/or delisting from the Exchange.
Large
Shareholder Risk
Certain
shareholders, including an Authorized Participant, the Adviser or an affiliate
of the Adviser, may own a substantial amount of the Fund’s Shares. Additionally,
from time to time an Authorized Participant, a third-party investor, the
Adviser, or an affiliate of the Adviser may invest in the Fund and hold its
investment for a specific period of time in order to facilitate commencement of
the Fund’s operations or to allow the Fund to achieve size or scale.
Redemptions by large shareholders could have a significant negative impact on
the Fund. If a large shareholder were to redeem all, or a large portion, of its
Shares, there is no guarantee that the Fund will be able to maintain sufficient
assets to continue operations in which case the Board of Trustees may determine
to liquidate the Fund. In addition, transactions by large shareholders may
account for a large percentage of the trading volume on the Exchange and may,
therefore, have a material upward or downward effect on the market price of the
Shares.
Listing
Standards Risk
The
Fund is required to comply with listing requirements adopted by the listing
exchange. Non-compliance with such requirements may result in the Fund's shares
being delisted by the listing exchange. Any resulting liquidation of the Fund
could cause the Fund to incur elevated transaction costs and could result in
negative tax consequences for its shareholders.
Market
Trading Risks and Premium/Discount Risks
Absence
of Active Market
Although
Shares of the Fund are or will be listed for trading on a U.S. exchange and may
be listed on certain foreign exchanges, there can be no assurance that an active
trading market for the Shares will develop or be maintained.
Risks
of Secondary Listings
The
Fund's Shares may be listed or traded on U.S. and non-U.S. exchanges other than
the U.S. exchange where the Fund’s primary listing is maintained. There can be
no assurance that the Fund’s Shares will continue to trade on any such exchange
or in any market or that the Fund's Shares will continue to meet the
requirements for listing or trading on any exchange or in any market. The Fund's
Shares may be less actively traded in certain markets than others, and investors
are subject to the execution and settlement risks and market standards of the
market where they or their brokers direct their trades for execution. Certain
information available to investors who trade Shares on a U.S. exchange during
regular U.S. market hours may not be available to investors who trade in other
markets, which may result in secondary market prices in such markets being less
efficient.
Secondary
Market Trading Risk
Shares
of the Fund may trade in the secondary market on days when the Fund does not
accept orders to purchase or redeem Shares. On such days, Shares may trade in
the secondary market with more significant premiums or discounts than might be
experienced on days when the Fund accepts purchase and redemption orders.
Secondary
market trading in Fund Shares may be halted by a stock exchange because of
market conditions or other reasons. In addition, trading in Fund Shares on a
stock exchange or in any market may be subject to trading halts caused by
extraordinary market volatility pursuant to "circuit breaker" rules on the stock
exchange or market. There can be no assurance that the requirements necessary to
maintain the listing or trading of Fund Shares will continue to be met or will
remain unchanged.
Shares
of the Fund May Trade at Prices Other Than NAV
Shares
of the Fund may trade at, above or below NAV. The per share NAV of the Fund will
fluctuate with changes in the market value of the Fund’s holdings. The trading
prices of Shares will fluctuate in accordance with changes in the Fund's NAV as
well as market supply and demand. The trading prices of the Fund's Shares may
deviate significantly from NAV during periods of market volatility or when the
Fund has relatively few assets or experiences a lower trading volume. Any of
these factors may lead to the Fund's Shares trading at a premium or discount to
NAV. While the creation/redemption feature is designed to make it likely that
Shares normally will trade close to the Fund’s NAV, market prices are not
expected to correlate exactly with the Fund's NAV due to timing reasons as well
as market supply and demand factors. In addition, disruptions to creations and
redemptions or the existence of extreme market volatility may result in trading
prices that differ significantly from NAV. If a shareholder purchases at a time
when the market price is at a premium to the NAV or sells at a time when the
market price is at a discount to the NAV, the shareholder may sustain losses.
Since
foreign exchanges may be open on days when the Fund does not price Shares, the
value of the securities in the Fund’s portfolio may change on days when
shareholders will not be able to purchase or sell Shares.
Costs
of Buying or Selling Fund Shares
Buying
or selling Fund Shares involves two types of costs that apply to all securities
transactions. When buying or selling Shares of the Fund through a broker, you
will likely incur a brokerage commission or other charges imposed by brokers as
determined by that broker. In addition, you may incur the cost of the "spread" -
that is, the difference between what professional investors are willing to pay
for Fund Shares (the "bid" price) and the market price at which they are willing
to sell Fund Shares (the "ask" price). Because of the costs inherent in buying
or selling Fund Shares, frequent trading may detract significantly from
investment results and an investment in Fund Shares may not be advisable for
investors who anticipate regularly making small investments.
Trading
Halt Risk
An
exchange or market may close or issue trading halts on specific securities, or
the ability to buy or sell certain securities or financial instruments may be
restricted, which may result in the Fund being unable to buy or sell certain
securities or financial instruments. In such circumstances, the Fund may be
unable to rebalance its portfolio, may be unable to accurately price its
investments and/or may incur substantial trading losses.
Turnover
Risk
The
Fund may engage in frequent and active trading, which may significantly increase
the Fund’s portfolio turnover rate. At times, the Fund may have a portfolio
turnover rate substantially greater than 100%. For example, a portfolio turnover
rate of 300% is equivalent to the Fund buying and selling all of its securities
three times during the course of a year. A high portfolio turnover rate would
result in high brokerage costs for the Fund, may result in higher taxes when
shares are held in a taxable account and lower Fund performance.
Valuation
Risk
The
sales price the Fund could receive for a security may differ from the Fund’s
valuation of the security, particularly for securities that trade in low value
or volatile markets or that are valued using a fair value methodology (such as
during trading halts). Because non-U.S. exchanges may be open on days when the
Fund does not price its Shares, the value of the securities in the Fund's
portfolio may change on days when shareholders will not be able to purchase or
sell the Fund's Shares.
A
FURTHER DISCUSSION OF OTHER RISKS
The
Fund may also be subject to certain other risks associated with its investments
and investment strategies.
Leverage
Risk
Under
the 1940 Act, the Fund is permitted to borrow from a bank up to 33 1/3% of its
net assets for short term or emergency purposes. The Fund may borrow money at
fiscal quarter end to maintain the required level of diversification to qualify
as a regulated investment company ("RIC") for purposes of the Internal Revenue
Code of 1986, as amended (the "Code"). As a result, the Fund may be exposed to
the risks of leverage, which may be considered a speculative investment
technique. Leverage magnifies the potential for gain and loss on amounts
invested and therefore increases the risks associated with
investing
in the Fund. If the value of the Fund's assets increases, then leveraging would
cause the Fund's NAV to increase more sharply than it would have had the Fund
not leveraged. Conversely, if the value of the Fund's assets decreases,
leveraging would cause the Fund's NAV to decline more sharply than it otherwise
would have had the Fund not leveraged. The Fund may incur additional expenses in
connection with borrowings.
Qualification
as a Regulated Investment Company Risk
The
Fund must meet a number of diversification requirements to qualify as a RIC
under Section 851 of the Code and, if qualified, to continue to qualify. If the
Fund experiences difficulty in meeting those requirements for any fiscal
quarter, it might enter into borrowings in order to increase the portion of the
Fund’s total assets represented by cash, cash items, and U.S. government
securities shortly thereafter and, as of the close of the following fiscal
quarter, to attempt to meet the requirements. However, the Fund may incur
additional expenses in connection with any such borrowings, and increased
investments by the Fund in cash, cash items, and U.S. government securities
(whether the Fund makes such investments from borrowings) are likely to reduce
the Fund’s return to investors.
Tax
Treaty Reclaims Uncertainty
When
the Fund receives dividend and interest income (if any) from issuers in certain
countries, such distributions may be subject to partial withholding by local tax
authorities in order to satisfy potential local tax obligations. The Fund may
file claims to recover such withholding tax in jurisdictions where withholding
tax reclaim is possible, which may be the case as a result of bilateral treaties
between the United States and local governments. Whether or when the Fund will
receive a withholding tax refund in the future is within the control of the tax
authorities in such countries. Where the Fund expects to recover withholding tax
based on a continuous assessment of probability of recovery, the NAV of the Fund
generally includes accruals for such tax refunds. The Fund continues to evaluate
tax developments for potential impact to the probability of recovery. If the
likelihood of receiving refunds materially decreases, for example due to a
change in tax regulation or approach, accruals in the Fund’s NAV for such
refunds may need to be written down partially or in full, which will adversely
affect that Fund’s NAV. Investors in the Fund at the time an accrual is written
down will bear the impact of any resulting reduction in NAV regardless of
whether they were investors during the accrual period. Conversely, if the Fund
receives a tax refund that has not been previously accrued, investors in the
Fund at the time the claim is successful will benefit from any resulting
increase in the Fund’s NAV. Investors who sold their shares prior to such time
will not benefit from such NAV increase.
PORTFOLIO
HOLDINGS INFORMATION
A
description of the policies and procedures of Global X Funds®
(the “Trust”) with respect to the disclosure of the Fund's portfolio securities
is available in the Fund's Statement of Additional Information (“SAI”). The top
holdings of the Fund and Fund Fact Sheets providing information regarding the
Fund’s top holdings can be found at www.globalxetfs.com/explore/(click on the
name of your Fund) and may be requested by calling 1-888-493-8631.
FUND
MANAGEMENT
Investment
Adviser
Global
X Management Company LLC (the “Adviser”) serves as the investment adviser and
the administrator for the Fund. Subject to the supervision of the Trust’s Board
of Trustees, the Adviser is responsible for managing the investment activities
of the Fund and the Fund's business affairs and other administrative matters.
The Adviser has been a registered investment adviser since 2008. The Adviser is
a Delaware limited liability company with its principal offices located at 605
Third Avenue, 43rd Floor, New York, New York 10158. As of May 10, 2022 the
Adviser provided investment advisory services for assets of approximately $39
billion.
Pursuant
to a Supervision and Administration Agreement and subject to the general
supervision of the Board of Trustees, the Adviser provides, or causes to be
furnished, all supervisory, administrative and other services reasonably
necessary for the operation of the Fund and also bears the costs of various
third-party services required by the Fund, including audit, certain custody,
portfolio accounting, legal, transfer agency and printing costs. The Supervision
and Administration Agreement also requires the Adviser to provide investment
advisory services to the Fund pursuant to an Investment Advisory
Agreement.
The
Fund pays the Adviser a fee (“Management Fee”) in return for providing
investment advisory, supervisory and administrative services under an all-in fee
structure. The Fund will pay a monthly Management Fee to the Adviser at the
annual rate set forth in the table below (stated as a percentage of the Fund’s
average daily net assets).
|
|
|
|
|
|
Fund |
Management
Fee |
Global
X Interest Rate Hedge ETF |
0.45% |
In
addition, the Fund bears other fees and expenses that are not covered by the
Supervision and Administration Agreement, which may vary and will affect the
total expense ratio of the Fund, such as taxes, brokerage fees, commissions and
other transaction expenses, interest and extraordinary expenses (such as
litigation and indemnification expenses). The Adviser may earn a profit on the
Management Fee paid by the Fund. Also, the Adviser, and not the shareholders of
the Fund, would benefit from any price decreases in third-party services,
including decreases resulting from an increase in net assets.
The
Adviser or its affiliates may pay compensation out of profits derived from the
Adviser’s Management Fee or other resources and not as an additional charge to
the Fund, to certain financial institutions (which may include banks, securities
dealers and other industry professionals) for the sale and/or distribution of
Fund Shares or the retention and/or servicing of Fund investors and Fund Shares
(“revenue sharing”). These payments are in addition to any other fees described
in the fee table or elsewhere in the Prospectus or SAI. Examples of “revenue
sharing” payments include, but are not limited to, payments to financial
institutions for “shelf space” or access to a third party platform or fund
offering list or other marketing programs, including, but not limited to,
inclusion of the Fund on preferred or recommended sales lists, mutual fund
“supermarket” platforms and other formal sales programs; granting the Adviser
access to the financial institution’s sales force; granting the Adviser access
to the financial institution’s conferences and meetings; assistance in training
and educating the financial institution’s personnel; and obtaining other forms
of marketing support. The level of revenue sharing payments made to financial
institutions may be a fixed fee or based upon one or more of the following
factors: gross sales, current assets and/or number of accounts of the Fund
attributable to the financial institution, or other factors as agreed to by the
Adviser and the financial institution or any combination thereof. The amount of
these revenue sharing payments is determined at the discretion of the Adviser,
from time to time, may be substantial, and may be different for different
financial institutions depending upon the services provided by the financial
institution. Such payments may provide an incentive for the financial
institution to make Shares of the Fund available to its customers and may allow
the Fund greater access to the financial institution’s customers.
Approval
of Advisory Agreement
Discussions
regarding the basis for the Board of Trustees' approval of the Supervision and
Administration Agreement and the related Investment Advisory Agreement for the
Fund will be available in the Fund’s first shareholder report, either the
Semi-Annual Report or Annual Report to shareholders for the period ended May 31
or November 30, respectively.
Portfolio
Management
The
Portfolio Managers who are currently responsible for the day-to-day management
of the Fund’s portfolio are Nam To, Wayne Xie, Kimberly Chan, Vanessa Yang,
William Helm and Sandy Lu.
Nam
To:
Nam To, CFA, Portfolio Manager, joined the Adviser in July 2017. Prior to that,
Mr. To was a Global Economics Research Analyst at Bunge Limited from 2014 to
2017. Mr. To received his Bachelor of Arts in Philosophy and Economics from
Cornell University in 2014.
Wayne
Xie:
Wayne Xie, Director of Portfolio Management, joined the Adviser in July 2018 as
a Portfolio Management Associate. Previously, Mr. Xie was an Analyst at VanEck
Associates on the Equity ETF Investment Management team from 2010 to 2018 and a
Portfolio Administrator at VanEck Associates from 2007 to 2010. Mr. Xie received
his Bachelor of Science from the State University of New York at Buffalo in
2002.
Kimberly
Chan:
Kimberly Chan, Portfolio Manager, joined the Adviser in June 2018 and is a
Portfolio Management Associate. Previously, Ms. Chan was a U.S. Associate Trader
at Credit Agricole from 2016 to 2018, and an Investment Analyst at MetLife
Investments from 2015 to 2016. Ms. Chan received her Bachelor of Science from
New York University in 2015.
Vanessa
Yang:
Vanessa Yang, Portfolio Manager, joined the Adviser in 2016 as a Portfolio
Administrator. She was appointed to the portfolio management team in June 2019.
Previously, Ms. Yang was a Portfolio Administrator at VanEck Associates from
2011 to 2014. Ms. Yang received her MS in Financial Engineering from Drucker
School of Management in 2010 and her BS in Economics from Guangdong University
of Foreign Studies in 2008.
William
Helm:
William Helm, CFA, Portfolio Manager, joined the Adviser in September 2021.
Previously, Mr. Helm spent 14 years at Vanguard where he most recently served as
an Equity Portfolio Manager and Trader. Previously, he held roles in
Portfolio
Review, Corporate Strategy and Corporate Finance. Mr. Helm received his BBA in
Economics from Belmont University in 2007 and his MBA from Columbia Business
School in 2020.
Sandy
Lu:
Sandy Lu, CFA, Portfolio Manager, joined the Adviser in September 2021.
Previously, Mr. Lu worked at PGIM Fixed Income from 2014 to 2021, where he led
the portfolio analyst team covering Emerging Markets Debt. He began his career
in 2010 as an Investment Analyst at Lincoln Financial Group. Mr. Lu graduated
with a B.S. in Economics from the Wharton School of the University of
Pennsylvania. He earned his CFA designation in September 2015, and holds the
Series 3 license.
The
SAI provides additional information about the Portfolio Managers' compensation
structure, other accounts managed by the Portfolio Managers, and the Portfolio
Managers' ownership of Shares of the Fund.
DISTRIBUTOR
SEI
Investments Distribution Co. (“Distributor”) distributes Creation Units for the
Fund on an agency basis. The Distributor does not maintain a secondary market in
Shares. The Distributor has no role in determining the policies of the Fund or
the securities that are purchased or sold by the Fund. The Distributor’s
principal address is One Freedom Valley Drive, Oaks, PA 19456. The Distributor
is not affiliated with the Adviser.
BUYING
AND SELLING FUND SHARES
Shares
of the Fund trade on a national securities exchange and in the secondary market
during the trading day. Shares can be bought and sold throughout the trading day
like other shares of publicly-traded securities. There is no minimum investment
for purchases made on a national securities exchange. When buying or selling
Shares through a broker, you will incur customary brokerage commissions and
charges. In addition, you will also incur the cost of the “spread,” which is the
difference between what professional investors are willing to pay for Shares
(the “bid” price) and the price at which they are willing to sell Shares (the
“ask” price). The commission is frequently a fixed amount and may be a
significant proportional cost for investors seeking to buy or sell small amounts
of Shares. The spread with respect to Shares varies over time based on the
Fund‘s trading volume and market liquidity, and is generally lower if the Fund
has significant trading volume and market liquidity and higher if the Fund has
little trading volume and market liquidity. Because of the costs of buying and
selling Shares, frequent trading may reduce investment return.
Shares
of the Fund may be acquired or redeemed directly from the Fund only by
Authorized Participants (as defined in the SAI) and only in Creation Units or
multiples thereof, as discussed in the “Creations and Redemptions” section in
the SAI.
Shares
generally trade in the secondary market in amounts less than a Creation Unit.
Shares of the Fund trade under the trading symbol listed for the Fund in the
Fund Summary section of this Prospectus.
The
Fund is listed on a national securities exchange, which is open for trading
Monday through Friday and is closed on weekends and the following holidays, as
observed: New Year’s Day, Martin Luther King, Jr. Day, Presidents’ Day, Good
Friday, Memorial Day, Juneteenth National Independence Day, Independence Day,
Labor Day, Thanksgiving Day and Christmas Day.
Book
Entry
Shares
of the Fund 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 and is recognized as the owner of all Shares for
all purposes. 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. Participants include DTC, 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 rights 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 securities that you hold in
book entry or “street name” form.
FREQUENT
TRADING
Unlike
frequent trading of shares of a traditional open-end mutual fund (i.e., not
exchange-traded shares), frequent trading of Shares on the secondary market does
not disrupt portfolio management, increase the Fund‘s trading costs, lead to
realization of
capital
gains, or otherwise harm Fund shareholders because these trades do not involve
the Fund directly. A few institutional investors are authorized to purchase and
redeem the Fund's Shares directly with the Fund. When these trades are effected
in-kind (i.e., for securities, and not for cash), they do not cause any of the
harmful effects (noted above) that may result from frequent cash trades.
Moreover, the Fund imposes transaction fees on in-kind purchases and redemptions
of the Fund intended to cover the custodial and other costs incurred by the Fund
in effecting in-kind trades. These fees increase if an investor substitutes cash
in part or in whole for securities, reflecting the fact that the Fund’s trading
costs increase in those circumstances, although transaction fees are subject to
certain limits and therefore may not cover all related costs incurred by the
Fund. For these reasons, the Board of Trustees has determined that it is not
necessary to adopt policies and procedures to detect and deter frequent trading
and market-timing in Shares of the Fund.
DISTRIBUTION
AND SERVICE PLAN
The
Board of Trustees of the Trust has adopted a Distribution and Services Plan
(“Plan”) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund is
authorized to pay distribution fees in connection with the sale and distribution
of its Shares and pay service fees in connection with the provision of ongoing
services to shareholders of each class and the maintenance of shareholder
accounts in an amount up to 0.25% of its average daily net assets each
year.
No
Rule 12b-1 fees are currently paid by the Fund, and there are no current plans
to impose these fees. However, in the event Rule 12b-1 fees are charged in the
future, because these fees are paid out of the Fund‘s assets on an ongoing
basis, these fees will increase the cost of your investment in the Fund. By
purchasing Shares subject to distribution fees and service fees, you may pay
more over time than you would by purchasing Shares with other types of sales
charge arrangements. Long-term shareholders may pay more than the economic
equivalent of the maximum front-end sales charge permitted by the rules of
FINRA. The net income attributable to Shares will be reduced by the amount of
distribution fees and service fees and other expenses of the Fund.
DIVIDENDS
AND DISTRIBUTIONS
Dividends
from net investment income, including any net foreign currency gains, generally
are declared and paid at least annually and any net realized capital gains are
distributed at least annually. In order to comply with the distribution
requirements of the Internal Revenue Code of 1986, as amended (the “Code”),
dividends may be declared and paid more frequently than annually for the
Fund.
Dividends
and other distributions on Shares are distributed on a pro rata basis to
beneficial owners of such Shares. Dividend payments are made through DTC
participants to beneficial owners then of record with proceeds received from the
Fund. Dividends and security gain distributions are distributed in U.S. dollars
and cannot be automatically reinvested in additional Shares.
No
dividend reinvestment service is provided by the Trust. Broker-dealers may make
available the DTC book-entry Dividend Reinvestment Service for use by beneficial
owners of the Fund for reinvestment of their dividend distributions. Beneficial
owners should contact their broker to determine the availability and costs of
the service and the details of participation therein. Brokers may require
beneficial owners to adhere to specific procedures and timetables. If this
service is available and used, dividend distributions of both income and
realized gains will be automatically reinvested in additional whole Shares
purchased in the secondary market.
TAXES
The
following is a summary of certain tax considerations that may be relevant to an
investor in the Fund. Except where otherwise indicated, the discussion relates
to investors who are individual United States citizens or residents and is based
on current tax law. You should consult your tax advisor for further information
regarding federal, state, local and/or foreign tax consequences relevant to your
specific situation.
Distributions.
The Fund receives income and gains on its investments. The income, less expenses
incurred in the operation of the Fund, constitutes the Fund’s net investment
income from which dividends may be paid to you. The Fund intends to qualify as a
RIC under the Code for federal tax purposes and to distribute to shareholders
substantially all of its net investment income and net capital gain each year.
Except as otherwise noted below, you will generally be subject to federal income
tax on the Fund‘s distributions to you. For federal income tax purposes, Fund
distributions attributable to short-term capital gains and net investment income
are taxable to you as ordinary income. Distributions attributable to net capital
gains (the excess of net long-term capital gains over net short-term capital
losses) of the Fund generally are taxable to you as long-term capital gains.
This is
true
no matter how long you own your Shares or whether you take distributions in cash
or additional Shares. The maximum long-term capital gain rate applicable to
individuals is 20%.
Distributions
of “qualifying dividends” will also generally be taxable to you at long-term
capital gain rates as long as certain requirements are met. In general, if 95%
or more of the gross income of the Fund (other than net capital gain) consists
of dividends received from domestic corporations or “qualified” foreign
corporations (“qualifying dividends”), then all distributions received by
individual shareholders of the Fund will be treated as qualifying dividends. But
if less than 95% of the gross income of the Fund (other than net capital gain)
consists of qualifying dividends, then distributions received by individual
shareholders of the Fund will be qualifying dividends only to the extent they
are derived from qualifying dividends earned by the Fund. For the lower rates to
apply, you must have owned your Shares for at least 61 days during the 121-day
period beginning on the date that is 60 days before the Fund’s ex-dividend date
(and the Fund will need to have met a similar holding period requirement with
respect to the Shares of the corporation paying the qualifying dividend). The
amount of the Fund‘s distributions that qualify for this favorable treatment may
be reduced as a result of the Fund‘s securities lending activities (if any), a
high portfolio turnover rate or investments in debt securities or
“non-qualified” foreign corporations. In addition, whether distributions
received from foreign corporations are qualifying dividends will depend on
several factors including the country of residence of the corporation making the
distribution. Accordingly, distributions from many of the Fund's holdings may
not be qualifying dividends.
A
portion of distributions paid to shareholders that are corporations may also
qualify for the dividends-received deduction for corporations, subject to
certain holding period requirements and debt financing limitations. The amount
of the dividends qualifying for this deduction may, however, be reduced as a
result of the Fund‘s securities lending activities, by a high portfolio turnover
rate or by investments in debt securities or foreign corporations.
Distributions
from the Fund will generally be taxable to you in the year in which they are
paid, with one exception. Dividends and distributions declared by the Fund in
October, November or December and paid in January of the following year are
taxed as though they were paid on December 31.
You
should note that if you buy Shares of the Fund shortly before it makes a
distribution, the distribution will be fully taxable to you even though, as an
economic matter, it simply represents a return of a portion of your investment.
This adverse tax result is known as “buying into a dividend.”
You
will be informed of the amount of your ordinary income dividends, qualifying
dividend income, and capital gain distributions at the time they are paid, and
you will be advised of the tax status for federal income tax purposes shortly
after the close of each calendar year. If you have not held Shares for a full
year, the Fund may designate and distribute to you, as ordinary income or
capital gain, a percentage of income that is not equal to the actual amount of
such income earned during the period of your investment in the
Fund.
Tax
Structure of ETFs.
In a conventional mutual fund and exchange-traded funds that do not effect
transactions principally in-kind, like the Fund, redemptions can have an adverse
tax impact on taxable shareholders because the fund may need to sell portfolio
securities to obtain cash to meet such redemptions. These sales may generate
taxable gains that must be distributed to the shareholders of the mutual fund,
whereas an in-kind redemption mechanism may reduce the effect of a tax event for
the Fund (to the extent it uses in-kind redemptions) or its shareholders.
However, the tax advantages of investing in Shares may be less pronounced than
passive ETFs because the Funds are actively managed and, therefore, may have
greater turnover in their portfolio securities, which could result in less tax
efficiency than an investment in a fund that is not actively
managed.
Excise
Tax Distribution Requirements.
Under the Code, a nondeductible excise tax of 4% is imposed on the excess of a
RIC’s “required distribution” for the calendar year ending within the RIC’s
taxable year over the “distributed amount” for such calendar year. The term
“required distribution” means the sum of (a) 98% of ordinary income (generally
net investment income) for the calendar year, (b) 98.2% of capital gain (both
long-term and short-term) for the one-year period ending on October 31 (or
December 31, if the Fund so elects), and (c) the sum of any untaxed,
undistributed net investment income and net capital gains of the RIC for prior
periods. The term “distributed amount” generally means the sum of (a) amounts
actually distributed by the Fund from its current year’s ordinary income and
capital gain net income and (b) any amount on which the Fund pays income tax for
the taxable year ending in the calendar year. Although the Fund intends to
distribute its net investment income and net capital gains so as to avoid excise
tax liability, the Fund may determine that it is in the interest of shareholders
to distribute a lesser amount. The Fund intends to declare and pay these amounts
in December (or in January, which must be treated by you as received in
December) to avoid these excise taxes, but can give no assurances that its
distributions will be sufficient to eliminate all such taxes.
Foreign
Currencies.
Under the Code, gains or losses attributable to fluctuations in exchange rates
which occur between the time the Fund accrues interest or other receivables or
accrues expenses or other liabilities denominated in a foreign currency, and the
time the Fund actually collects such receivables or pays such liabilities, are
treated as ordinary income or ordinary loss. Similarly, gains or losses from the
disposition of foreign currencies, from the disposition of debt securities
denominated in a foreign currency, or from the disposition of a forward foreign
currency contract which are attributable to fluctuations in the value of the
foreign currency between the date of acquisition of the asset and the date of
disposition also are treated as ordinary income or loss. These gains or losses,
referred to under the Code as “section 988” gains or losses, increase or
decrease the amount of the Fund‘s investment company taxable income available to
be distributed to its shareholders as ordinary income, rather than increasing or
decreasing the amount of the Fund‘s net capital gain.
Foreign
Taxes.
The Fund will be subject to foreign withholding taxes with respect to certain
payments received from sources in foreign countries. If at the close of the
taxable year more than 50% in value of the Fund’s assets consists of stock in
foreign corporations, the Fund will be eligible to make an election to treat a
proportionate amount of those taxes as constituting a distribution to each
shareholder, which would allow you either (subject to certain limitations) (1)
to credit that proportionate amount of taxes against your U.S. Federal income
tax liability as a foreign tax credit or (2) to take that amount as an itemized
deduction. If the Fund is not eligible or chooses not to make this election, it
will be entitled to deduct such taxes in computing the amounts it is required to
distribute.
Sales
and Exchanges.
The sale of Shares is a taxable event on which a gain or loss is recognized. The
amount of gain or loss is based on the difference between your tax basis in
Shares and the amount you receive for them upon disposition. Generally, you will
recognize long-term capital gain or loss if you have held your Shares for over
one year at the time you sell or exchange them. Gains and losses on Shares held
for one year or less will generally constitute short-term capital gains, except
that a loss on Shares held six months or less will be re-characterized as a
long-term capital loss to the extent of any long-term capital gain distributions
that you have received on the Shares. A loss realized on a sale or exchange of
Shares may be disallowed under the so-called “wash sale” rules to the extent the
Shares disposed of are replaced with other Shares of that same Fund within a
period of 61 days beginning 30 days before and ending 30 days after the Shares
are disposed of, such as pursuant to a dividend reinvestment in Shares of the
Fund. If disallowed, the loss will be reflected in an adjustment to the basis of
the Shares acquired.
Taxes
on Purchase and Redemption of Creation Units.
An Authorized Participant who exchanges equity securities for Creation Units
generally will recognize a gain or a loss. The gain or loss will be equal to the
difference between the market value of the Creation Units at the time of
purchase (plus any cash received by the Authorized Participant as part of the
issue) and the Authorized Participant’s aggregate basis in the securities
surrendered (plus any cash paid by the Authorized Participant as part of the
issue). An Authorized Participant who exchanges Creation Units for equity
securities generally will recognize a gain or loss equal to the difference
between the Authorized Participant’s basis in the Creation Units (plus any cash
paid by the Authorized Participant as part of the redemption) and the aggregate
market value of the securities received (plus any cash received by the
Authorized Participant as part of the redemption). The Internal Revenue Service
(the “IRS”), however, may assert that a loss realized upon an exchange of
securities for Creation Units cannot be deducted currently under the rules
governing “wash sales,” or on the basis that there has been no significant
change in economic position. Persons exchanging securities should consult their
own tax advisor with respect to whether the wash sale rules apply and when a
loss might be deductible.
IRAs
and Other Tax-Qualified Plans.
The one major exception to the preceding tax principles is that distributions
on, and sales, exchanges and redemptions of, Shares held in an IRA or other
tax-qualified plan are not currently taxable but may be taxable when funds are
withdrawn from the tax qualified plan unless the Shares were purchased with
borrowed funds.
Medicare
Tax. An
additional 3.8% Medicare tax is imposed on certain net investment income
(including ordinary dividends and capital gain distributions received from the
Fund and net gains from redemptions or other taxable dispositions of Fund
Shares) of U.S. individuals, estates and trusts to the extent that such person’s
“modified adjusted gross income” (in the case of an individual) or “adjusted
gross income” (in the case of an estate or trust) exceeds a threshold amount.
This Medicare tax, if applicable, is reported by you on, and paid with, your
federal income tax return.
Backup
Withholding.
The Fund will be required in certain cases to withhold and remit to the U.S.
Treasury backup withholding at the applicable rate on dividends and gross sales
proceeds paid to any shareholder (i) who has either provided an incorrect tax
identification number or no number at all, (ii) who is subject to backup
withholding by the IRS, or (iii) who has failed to certify to the Fund, when
required to do so, that he or she is not subject to backup withholding or is an
“exempt recipient.”
Cost
Basis Reporting. Federal
law requires that shareholders’ cost basis, gain/loss, and holding period be
reported to the IRS and to shareholders on the Consolidated Form 1099s when
“covered” securities are sold. Covered securities are any RIC and/or dividend
reinvestment plan shares acquired on or after January 1, 2012.
For
those securities defined as “covered” under current IRS cost basis tax reporting
regulations, accurate cost basis and tax lot information must be maintained for
tax reporting purposes. This information is not required for Shares that are not
“covered.” The Fund and its service providers do not provide tax advice. You
should consult independent sources, which may include a tax professional, with
respect to any decisions you may make with respect to choosing a tax lot
identification method. Shareholders should contact their financial
intermediaries with respect to reporting of cost basis and available elections
for their accounts.
State
and Local Taxes.
You may also be subject to state and local taxes on income and gain attributable
to your ownership of Shares. You should consult your tax advisor regarding the
tax status of distributions in your state and locality.
U.S.
Tax Treatment of Foreign Shareholders.
A non-U.S. shareholder generally will not be subject to U.S. withholding tax on
gain from the redemption of Shares or on capital gain dividends (i.e., dividends
attributable to long-term capital gains of the Fund) unless, in the case of a
shareholder who is a non-resident alien individual, the shareholder is present
in the United States for 183 days or more during the taxable year and certain
other conditions are met. Non-U.S. shareholders generally will be subject to
U.S. withholding tax at a rate of 30% (or a lower treaty rate, if applicable) on
distributions by the Fund of net investment income, other ordinary income, and
the excess, if any, of net short-term capital gain over net long-term capital
loss for the year, unless the distributions are effectively connected with a
U.S. trade or business of the shareholder. Exemptions from U.S. withholding tax
are provided for certain capital gain dividends paid by the Fund from net
long-term capital gains, if any, interest-related dividends paid by the Fund
from its qualified net interest income from U.S. sources and short-term capital
gain dividends if such amounts are reported by the Fund. Non-U.S. shareholders
are subject to special U.S. tax certification requirements to avoid backup
withholding and claim any treaty benefits. Non-U.S. shareholders should consult
their tax advisors regarding the U.S. and foreign tax consequences of investing
in the Fund.
Other
Reporting and Withholding Requirements. Under
the Foreign Account Tax Compliance Act (“FATCA”), a 30% withholding tax is
imposed on income dividends paid by the Fund to certain foreign entities,
referred to as foreign financial institutions or nonfinancial foreign entities,
that fail to comply (or be deemed compliant) with extensive reporting and
withholding requirements designed to inform the U.S. Department of the Treasury
of U.S.-owned foreign investment accounts. After December 31, 2018, FATCA
withholding also would have applied to certain capital gain distributions,
return of capital distributions and the proceeds arising from the sale of Fund
Shares, however based on proposed regulations issued by the IRS, which may be
relied upon currently, such withholding is no longer required unless final
regulations provide otherwise (which is not expected). Information about a
shareholder in the Fund may be disclosed to the IRS, non-U.S. taxing authorities
or other parties as necessary to comply with FATCA. Withholding also may be
required if a foreign entity that is a shareholder of the Fund fails to provide
the appropriate certifications or other documentation concerning its status
under FATCA.
Consult
Your Tax Professional.
Your investment in the Fund could have additional tax consequences. You should
consult your tax professional for information regarding all tax consequences
applicable to your investments in the Fund. More tax information relating to the
Fund is also provided in the SAI. This short summary is not intended as a
substitute for careful tax planning.
DETERMINATION
OF NET ASSET VALUE
The
Fund calculates its NAV as of the regularly scheduled close of business of the
Exchange (normally 4:00 p.m. Eastern time) on each day that the Exchange is open
for business, based on prices at the time of closing, provided that any assets
or liabilities denominated in currencies other than the U.S. dollar shall be
translated into U.S. dollars at the prevailing market rates on the date of
valuation as quoted by one or more major banks or dealers that make a two-way
market in such currencies (or a data service provider based on quotations
received from such banks or dealers). The NAV of the Fund is calculated by
dividing the value of the net assets of the Fund (i.e., the value of its total
assets less total liabilities) by the total number of outstanding Shares,
generally rounded to the nearest cent. The price of Fund Shares is based on
market price, and because ETF shares trade at market prices rather than NAV,
Shares may trade at a price greater than NAV (a premium) or less than NAV (a
discount).
In
calculating the Fund’s NAV, the Fund’s investments are generally valued using
market valuations. A market valuation generally means a valuation (i) obtained
from an exchange or a major market maker (or dealer), (ii) based on a price
quotation or other equivalent indication of value supplied by an exchange, a
pricing service, or a major market maker (or dealer), or (iii) based on
amortized cost, provided the amortized cost is approximately the value on
current sale of the security. In the case of shares of funds that are not traded
on an exchange, a market valuation means such fund’s published NAV per share.
The Fund may use various pricing services or discontinue the use of any pricing
service.
In
the event that current market valuations are not readily available or such
valuations do not reflect current market values, the affected investments will
be valued using fair value pricing pursuant to the pricing policy and procedures
approved by the
Board
of Trustees. A price obtained from a pricing service based on such pricing
service’s valuation matrix may be used to fair value a security. The frequency
with which the Fund’s investments are valued using fair value pricing is
primarily a function of the types of securities and other assets in which the
Fund invests pursuant to its investment objective, strategies and
limitations.
Investments
that may be valued using fair value pricing include, but are not limited to: (i)
an unlisted security related to corporate actions; (ii) a restricted security
(i.e., one that may not be publicly sold without registration under the
Securities Act of 1933, as amended (the “Securities Act”)); (iii) a security
whose trading has been suspended or which has been de-listed from its primary
trading exchange; (iv) a security that is thinly traded; (v) a security in
default or bankruptcy proceedings for which there is no current market
quotation; (vi) a security affected by currency controls or restrictions; and
(vii) a security affected by a significant event (i.e., an event that occurs
after the close of the markets on which the security is traded but before the
time as of which the Fund’s NAV is computed and that may materially affect the
value of the Fund’s investments). Examples of events that may be “significant
events” are government actions, natural disasters, armed conflict, acts of
terrorism, and significant market fluctuations.
Valuing
the Fund‘s investments using fair value pricing will result in using prices for
those investments that may differ from current market valuations.
Because
foreign markets may be open on different days than the days during which a
shareholder may purchase Shares, the value of the Fund’s investments may change
on days when shareholders are not able to purchase Shares. Additionally, due to
varying holiday schedules, redemption requests made on certain dates may result
in a settlement period exceeding seven calendar days.
The
value of assets denominated in foreign currencies is converted into U.S. dollars
using exchange rates deemed appropriate by the Adviser.
The
right of redemption may be suspended or the date of payment postponed with
respect to the Fund (1) for any period during which the NYSE Arca or listing
exchange is closed (other than customary weekend and holiday closings), (2) for
any period during which trading on the NYSE Arca or listing exchange is
suspended or restricted, (3) for any period during which an emergency exists as
a result of which disposal of the Fund’s portfolio securities or determination
of its NAV is not reasonably practicable, or (4) in such other circumstances as
the SEC permits.
In
December 2020, the SEC adopted Rule 2a-5 under the 1940 Act (“Rule 2a-5”), which
is intended to address valuation practices and the role of a registered
investment company’s board of trustees with respect to the fair value of the
investments of the registered investment company or business development
company. Among other things, Rule 2a-5 will permit a fund’s board to designate
the fund’s primary investment adviser to perform the fund’s fair value
determinations, which will be subject to board oversight and certain reporting
and other requirements intended to ensure that the registered investment
company’s board receives the information it needs to oversee the investment
adviser’s fair value determinations. The Funds and the Adviser must comply with
Rule 2a-5 by September 8, 2022. The Adviser continues to review Rule 2a-5 and
its impact on the Adviser’s and the Funds’ valuation policies and related
practices.
PREMIUM/DISCOUNT
AND SHARE INFORMATION
Once
available, information regarding how often the Shares of the Fund traded on a
national securities exchange at a price above (i.e., at a premium to) or below
(i.e., at a discount to) the NAV of the Fund, the Fund’s per share NAV, and the
median bid-ask spread of Shares can be found at
www.globalxetfs.com.
OTHER
SERVICE PROVIDERS
SEI
Investments Global Funds Services is the sub-administrator for the
Fund.
Brown
Brothers Harriman & Co. is the custodian and transfer agent for the
Fund.
Stradley
Ronon Stevens & Young, LLP serves as counsel for the Trust and the Trust’s
Independent Trustees.
PricewaterhouseCoopers
LLP will serve as the Fund’s independent registered public accounting firm for
the fiscal year ending November 30, 2022.
ADDITIONAL
INFORMATION
The
Trust enters into contractual arrangements with various parties, including among
others, the Funds’ Adviser, sub-adviser(s) (as applicable), custodian, and
transfer agent who provide services to the Funds. Shareholders are not parties
to any such contractual arrangements and are not intended beneficiaries of those
contractual arrangements, and those contractual arrangements are not intended to
create in any shareholder any right to enforce them against the service
providers or to seek any remedy under them against the service providers, either
directly or on behalf of the Trust.
This
Prospectus provides information concerning the Funds that investors should
consider in determining whether to purchase Fund Shares. Neither this Prospectus
nor the SAI is intended, or should be read, to be or give rise to an agreement
or contract between the Trust or the Funds and any investor, or to give rise to
any rights in any shareholder or other person other than any rights under
federal or state law that may not be waived.
FINANCIAL
HIGHLIGHTS
Because
the Fund had not commenced operations as of the November 30, 2021 fiscal
year end, financial highlights are not yet available.
OTHER
INFORMATION
The
Fund is not sponsored, endorsed, sold or promoted by any national securities
exchange. No national securities exchange makes any representation or warranty,
express or implied, to the owners of Shares or any member of the public
regarding the advisability of investing in securities generally or in the Fund
particularly or the ability of the Fund to achieve its objective. No national
securities exchange has any obligation or liability in connection with the
administration, marketing or trading of the Fund.
For
purposes of the 1940 Act, shares that are issued by a registered investment
company and purchases of such shares by investment companies and companies
relying on Sections 3(c)(1) or 3(c)(7) of the 1940 Act are subject to the
restrictions set forth in Section 12(d)(1) of the 1940 Act.
The
method by which Creation Units are created and traded may raise certain issues
under applicable securities laws. Because new Creation Units are issued and sold
by the Fund on an ongoing basis, a “distribution,” as such term is used in the
Securities Act, may occur at any point. Broker-dealers and other persons are
cautioned that some activities on their part may, depending on the
circumstances, result in their being deemed participants in a distribution in a
manner which could render them statutory underwriters and subject them to the
prospectus delivery and liability provisions of the Securities Act.
For
example, a broker-dealer firm or its client may be deemed a statutory
underwriter if it takes Creation Units after placing an order with the
Distributor, breaks them down into constituent Shares, and sells such Shares
directly to customers, or if it chooses to couple the creation of a supply of
new Shares with an active selling effort involving solicitation of secondary
market demand for Shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a categorization
as an underwriter.
Broker-dealers
who are not “underwriters” but are participating in a distribution (as
contrasted with ordinary secondary trading transactions), and thus dealing with
Shares that are part of an “unsold allotment” within the meaning of Section
4(a)(3)(C) of the Securities Act, would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
This is because the prospectus delivery exemption in Section 4(a)(3) of the
Securities Act is not available in respect of such transactions as a result of
Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note that
dealers who are not underwriters but are participating in a distribution (as
contrasted with ordinary secondary market transactions) and thus dealing with
the Shares that are part of an overallotment within the meaning of Section
4(a)(3)(A) of the Securities Act would be unable to take advantage of the
prospectus delivery exemption provided by Section 4(a)(3) of the Securities Act.
Firms that incur a prospectus delivery obligation with respect to Shares are
reminded that, under Rule 153 of the Securities Act, a prospectus delivery
obligation under Section 5(b)(2) of the Securities Act owed to an exchange
member in connection with a sale on NYSE Arca is satisfied by the fact that the
prospectus is available at NYSE Arca upon request. The prospectus delivery
mechanism provided in Rule 153 is only available with respect to transactions on
an exchange.
For
more information visit our website at
www.globalxetfs.com
or
call 1-888-493-8631
|
|
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Investment
Adviser and Administrator
Global
X Management Company LLC
605
Third Avenue, 43rd Floor
New
York, NY 10158
|
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Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
|
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Custodian
and Transfer Agent
Brown
Brothers Harriman & Co.
50
Post Office Square
Boston,
MA 02110
|
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Sub-Administrator
SEI
Investments Global Funds Services
One
Freedom Valley Drive
Oaks,
PA 19456
|
|
Legal
Counsel to the Global X Funds®
and Independent Trustees
Stradley
Ronon Stevens & Young, LLP
2000
K Street N.W., Suite 700
Washington,
DC 20006
|
|
Independent
Registered Public Accounting Firm
PricewaterhouseCoopers
LLP
Two
Commerce Square, Suite 1800
2001
Market Street
Philadelphia,
PA 19103 |
|
A
Statement of Additional Information dated May 20, 2022, as revised on June
22, 2022, which contains more details about the Fund, is incorporated by
reference in its entirety into this Prospectus, which means that it is legally
part of this Prospectus.
Additional
information about the Fund and its investments is available in its annual and
semi-annual reports to shareholders. The annual report explains the market
conditions and investment strategies affecting the Fund’s performance during its
last fiscal year.
You
can ask questions or obtain a free copy of the Fund’s semi-annual and annual
report or the Statement of Additional Information by calling 1-888-493-8631.
Free copies of the Fund’s semi-annual and annual report and the Statement of
Additional Information are available from our website at
www.globalxetfs.com.
Information
about the Fund, including its semi-annual and annual reports and the Statement
of Additional Information, has been You can also request copies of these
materials, upon payment of a duplicating fee, by electronic request at the SEC’s
e-mail address ([email protected]).
PROSPECTUS
Distributor
SEI
Investments Distribution Co.
One
Freedom Valley Drive
Oaks,
PA 19456
May 20,
2022, as revised on June 22, 2022
Investment
Company Act File No.: 811-22209